Hospitals expected to witness continued drop in patients

An analyst from Trinity Securities said last week that there was a signal of a decline in foreign patients caused by the global economic slowdown since the first quarter of last year and then, dramatically, by the airport closures at the end of the year. The numbers of foreign patients of both Bumrungrad Hospital and Bangkok Dusit Medical Services (BDMS) in the first three months of the year dropped by 4 per cent. BDMS comprises Bangkok Hospital, BNH Hospital and Samitivej Hospital.

The number of foreign patients flying to Thailand for complex-disease treatment or surgery also declined. The global economic crisis has forced some foreign patients to switch to lower-cost hospitals in India and elsewhere, the Trinity analyst said.

"This factor will have a direct impact on the hospitals' gross profit margins. If the first-half performances of Bumrungrad and hospitals under BDMS's umbrella are hit continuously by the economic downturn, we may consider revising our expectations on both companies," the analyst said.

Trinity forecasts Bumrungrad's net profit in the first quarter of this year to show flat growth from a year earlier, while that of BDMS is expected to drop drastically from its historic record of Bt700 million in the first quarter of 2008 to Bt350 million.

The Trinity analyst said he expected the A-H1N1 influenza would affect only the country's big hospitals, and only in the short term, because the virus was less severe than the Sars virus. The new influenza's death rate is only 6 per cent, while that of Sars was 60 per cent. The broker expects the new virus to be controlled within two months.

KGI Securities (Thailand) said in its research that the number of Bumrungrad's foreign patients in the first quarter this year dropped by 5.1 per cent year on year but increased by 10.1 per cent if compared with the fourth quarter of 2008, to 105,000. Patients from the US have gradually declined. But those from the Middle East are growing.

A 5.1 per-cent drop in Bumrungrad's foreign patients was better than KGI's 2009 full-year expected drop of 14 per cent. Meanwhile, the hospital's total patients in the first three months of 2009 dropped by 2-3 per cent from the first quarter of last year.

The broker forecasts Bumrungrad's first-quarter revenue to grow by 1.7 per cent year on year and 5.1 per cent quarter on quarter. The average revenue per patient is expected to increase by 11 per cent for inpatient and 12 per cent for outpatient. The key drivers are the room-price adjustment after renovations and the increase in complex disease treatment and surgery.

KGI expects the hospital's net profit in the first quarter this year to be Bt305 million, down by 3 per cent year on year.

Although the decline in foreign patients was less severe than the broker's expectation, the country's political turmoil and concerns about the influenza outbreak are the major factors keeping foreign patients away.

Meanwhile, medium-sized hospital operators such as Bangkok Chain Hospital, the operator of Kasemrad Hospital, are forecast to see higher revenues in the first quarter of this year thanks to the increase in medical benefits for members members of the Social Security Fund.

Ayudhya Securities forecasted in its research that Kasemrad's first-quarter net profit would grow by 16 per cent from the fourth quarter last year and 19 per cent year on year. The hospital's operating result during 2009-2010 will continuously increase, against the economic trend. Besides the increase from the Social Security Fund, the growth of specialised-disease services have boosted Kasemrad. Analysts say its gross profit margin is expected to grow from 20-25 per cent to 30 per cent this year.

The government increased its allowance for medical expenses for Social Security Fund members by 23 per cent from last year, higher than the normal increase of 3-5 per cent per annum. The government has already adjusted those medical expenses upwards by 9 per cent for 2010, better than Ayudhya's expectation of a rise of 5 per cent.