Indonesia Writes Script for Medical Sector

Jakarta — When Jakarta resident Julia Pang found out she had colon cancer, her doctors here made her wait hours for an appointment. When they finally sat down with her, they took little time to explain what lay ahead.

So Ms. Pang flew for a second opinion to Singapore, where the 51-year-old homemaker also had an operation. “The waiting times are ridiculously long in Indonesia,” while in Singapore, patients get an appointment and it starts on time, she says. “Singapore also has much more advanced medical equipment.”

Her operation in Singapore saved her life, removing the cancer. Every few months she still flies to Singapore for a checkup.

Ms. Pang’s experience is typical in this country, where hundreds of thousands of residents go overseas for medical care.

But now the government is acting to halt that exodus. The world’s fourth most-populous country is in the midst of its biggest hospital-building boom ever. And that has created a crucial new market for the global medical-care industry.

Indonesia’s government is backing a multibillion-dollar plan to give its 240 million citizens universal health care by 2014. Meanwhile, rising incomes are bolstering the middle class’s demand for better health care in a country that long has been criticized by citizens and expatriates for having some of the worst health services in Asia.

The rapid rollout has triggered an unprecedented surge in demand for X-ray machines, CT scanners, MRI machines, defibrillators, baby warmers and even gamma knives used for incision-free brain surgery, along with drugs, from diabetes treatments to cholesterol-lowering statins.

All of that is leading to significantly improved care for some Indonesians.

It also is generating opportunities for high-tech medical-equipment makers, including Philips Electronics NV and General Electric Co., and drug companies such as Pfizer Inc. The new opportunity is welcome as the companies face weak growth in the developed world and even in the emerging, though slowing, economies of India and China. Billions of additional dollars in medical-equipment orders are expected over the next five years.

“We expect [sales] to more than quadruple over the next three years and anticipate our growth in Indonesia to continue through to 2020 as Indonesia looks to bring its health-care infrastructure up to standard,” says Wayne Spittle, senior vice president and commercial leader for Philips Healthcare Asia Pacific.

Indonesia has been due for an upgrade of its hospital network for years. The country has only six hospital beds per 10,000 people, according to the World Health Organization, compared with 42 per 10,000 people in China and 30 in the U.S. Indonesia also has just under three physicians per 10,000 people, the WHO says, versus 14 in China and 24 in the U.S.

Most Indonesian residents who can afford it—and many Western business executives—pop over to Singapore, Malaysia or Thailand when they are seriously ill. Indonesia’s health ministry estimates that this patient diaspora comes to hundreds of thousands of people, who spend hundreds of millions of dollars abroad each year.

The Siloam Hospitals Group unit of Indonesia’s Lippo Group is one of the companies trying to stop the hemorrhaging by building more than 50 hospitals across the Indonesian archipelago. Its plans over the next five years will cost more than $2.5 billion, with around a third of that spent on equipment.

One of its newest hospitals looks like a Philips showroom, with the latest equipment on each floor and stunning views of the sprawling city of Jakarta from the hospital’s 30th floor intensive-care unit. Lippo Group also is talking with international private-equity funds about possibly investing in Lippo’s health-care business to power its expansion, according to people familiar with its plans.

“More money means more doctors, and more doctors means more business for GE Healthcare,” says Handry Satriago, president and chief executive of GE Indonesia.

Hospitals are growing so quickly that they are having trouble finding enough doctors, nurses and engineers to manage their new machines and wards. Siloam alone estimates it will need 3,500 doctors, 2,800 technicians and 15,000 nurses as it grows.

“The hardest people to get are the nurses,” says Gershu Paul, Siloam Hospitals’ president director. He says Siloam is opening its own schools and bringing in planeloads of trainers to teach employees how to use new machines.

Philips, meanwhile, has set up a training school in Singapore to help its customers and is working closely with buyers in Indonesia to ensure that each hospital has enough qualified people and trainers to manage its high-tech equipment.

Much of the hospital investment is powered by optimism that Indonesia will go through with its plans to provide universal health care by 2014, an election year. Close to 40% of the country has some sort of coverage from government plans that cover state employees and the poor, but the country plans to ratchet up spending to ensure that everyone is insured, says Nafsiah Mboi, the country’s health minister.

In the next couple of years, Indonesia hopes to add hundreds of hospitals with a total of 100,000 new beds, she says. The expansion is expected to nearly double the size of the health-care industry in the archipelago over the next eight years to around $50 billion. The expansion will come from the public and private sectors, including companies such as Siloam.

Some industry analysts warn that government plans in Indonesia often are delayed, however. And implementing universal health care is difficult in any country, especially one made up of more than 17,000 islands.

But Indonesia’s boom in recent years and rising incomes after several years of strong growth mean there is more money for health care than before. Even if the goal of universal coverage isn’t achieved, companies still expect government outlays to surge.

Siloam plans to target Indonesians with rising incomes as well as those benefiting from existing and future government programs. It has built a basic low-cost hospital in a northern Jakarta suburb, where patients have access to the same MRI machines used by affluent patients at Siloam’s high-end hospital next door. Siloam staff are on hand to help patients with the paperwork needed to get government reimbursement.

Pfizer also has expanded its presence across the archipelago, beefing up its distribution network to get to far-flung clinics.

“Indonesia represents one of the biggest growth opportunities for us in Asia,” says Theresa Firestone, regional president of Pfizer’s emerging-markets business. “Now is a very exciting time to be working alongside the government and the industry to establish how we can all work together to best meet the country’s unmet medical needs.”

The Wall Street Journal

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