We at KResearch expect that net profit of Thai private hospitals (listed on the Stock Exchange of Thailand) will grow 3-6 percent in 2020, declining from the 6-9 percent pace projected for 2019. Private hospitals targeting high- to medium-income patients, in particular, will likely see their profit declining due primarily to heightened competition as a resulting growing number of rivals on contrary to declining number of potential customers. As a result, their income growth will be pressured by rising costs resulting from adjustments, such as medical personnel, investment in technologies and specialized services, with aim of creating differentiation, or even discounts given to several patient segments. Other factors that may inhibit their profit include control measures on drug, medical supply and service prices, though the impact may vary depending on their pricing strategies. Based on our preliminary assessment, drug price controls may crimp profit of private hospitals by approximately 1.0-2.0 percent compared to the case that there are no drug price controls.
However, some private hospitals may continue to enjoy higher profit in 2020, especially those located in areas where there are no rivals and focus on patients who are entitled to state medical benefits. Amid the sluggish economy and consumer purchasing power, it is expected that patients, who do not have private health insurance and have to pay medical expenses by cash, may opt to use more medical services via the state health care scheme. If medical costs per head under the social security program increase in 2020, it is expected that income and profit of such hospitals will increase.
Looking ahead, to diversify risks, KResearch views that aside from using technologies in reducing costs and maintaining service quality, private hospitals may consider adjusting their business strategies by seeking to generate income from non-hospital businesses, namely nursing homes and pharmacy. They may also collaborate with other health care service providers in penetrating the health conscious segment or join hands with food producers in providing nutritional care services in hospitals.