KPJ Healthcare Berhad has established itself as Malaysia’s preeminent healthcare player, and its exploits with the REIT model have been a game changer for the industry.
Three decades of experience in Malaysia’s growing healthcare industry; a market cap of RM2.1 billion; a network of 20 hospitals in Malaysia and 2 in Indonesia; a staff comprising more than 8,000 personnel and 760 medical consultants; over 2,600 beds; 2.2 million outpatients and 220,000 inpatients in 2010—KPJ Healthcare Berhad’s statistics speak louder than words. Having redefined the concept of private healthcare in Malaysia, the company is now scaling new heights following its service-based, REIT-driven, ‘asset light’ philosophy.
BANKING ON CHANGE
A member of Johor Corporation Group, KPJ Healthcare started its journey in 1974, but its business really took off in 1981. In the initial days, the organisation defined itself as the “owner and manager of hospitals.” In more recent times though, the company has successfully shifted its focus to the real estate investment trust (REIT) model, and, since 2005, it has been unlocking the value of its assets in order to operate fully as managers.
In 4 injections since 2006, KPJ Healthcare has channelled over RM1 billion into the world’s first Islamic healthcare REIT, which currently pays a very favourable annual dividend of 8 %. The REIT itself is insulated from the risks of the construction business, taking charge of the hospitals only when they are fully constructed.
A great indicator of the distance KPJ Healthcare has traversed lies in the fact that when it started, it employed management service consultants from UK and US, whereas now it is in a position to offer the same services, and a lot more, to its own clients. In fact, over the past 5 years, KPJ Healthcare has provided hospital management services to clients in Jeddah, Saudi Arabia and Dhaka, Bangladesh.
KPJ Healthcare’s surge to the top has been driven by the core values of:
- Ensuring SAFETY
- Delivering service with COURTESY
- Performing duties with INTEGRITY
- Exercising PROFESSIONALISM at all times
- Striving for CONTINUOUS IMPROVEMENT
Guided by these values as well as the leadership of a visionary management team including the MD, Datin Paduka Siti Sa’diah Sheikh Bakir—who has been at the helm of affairs for an astonishing 30 years in KPJ—the company is helping corporatise the Malaysian healthcare sector at a fast clip. The company itself continued to delight stakeholders when it claimed a position in the top 100 on Bursa Malaysia by market capitalisation, its share price ending 2010 at a historic high and its market cap has reached an imposing RM2 billion. KPJ now aims to breach the RM5 billion mark by 2020. This is no mean feat for a team that once drew criticism for not trying to grow exponentially.
KPJ hospitals have also won wide acclaim for their adherence to best practices. Several of them have been accredited by the Malaysian Society for Quality in Health (MSQH), and they have also been certified in the areas of quality management (MS ISO 9001:2000), environment management (MS ISO 14001:2004) and occupational safety and health (OSHA S 18001:1999), making them the preferred name in the Malaysian healthcare sector.
In addition to running a successful business enterprise, KPJ Healthcare has registered a well-recognised presence in the field of corporate social responsibility (CSR). The company’s most significant CSR vehicle is the Klinik Waqaf An-Nur (KWAN) programme. Through KWAN, the company gives back to the less fortunate by providing medical and clinic management services. The programme currently runs 13 outpatient charity clinics with dialysis centres, and its success—as well as the increasing need for such services—prompted KPJ Healthcare to establish the first Hospital Waqaf An-Nur in Pasir Gudang, in April 2006. In addition, KPJ Healthcare has managed several community outreach programmes, including one at Pulau Bluit, a very remote island in East Malaysia. The programme enlisted support from KPJ Healthcare’s Kuching Specialist Hospital (KcSH), in addition to the government and other partners, reaching out to 6,000 residents of 16 remote villages.
KPJ Healthcare has also associated itself with the television programme ‘At-Tijarah Ramadan’, which was aired during the Ramadan fasting month and was specially designed to help the underprivileged section of the community. Through the programme, KPJ sponsored the medical treatment of selected needy patients and also contributed to a fund managed by Johor Corporation meant to assist similar patients. KPJ Healthcare also organised a special medical camp in a village in Pontian, Johor, conducting health talks and creating health awareness among the people.
MAINTAINING THE EDGE
The management at KPJ Healthcare echoes the Malaysia Healthcare Travel Council (MHTC) in its view that the industry in Malaysia is still in capacity-building mode. They stress that the path to fast growth will have to be lined by continuous capacity building and ignited by innovation. Equally important would be to inculcate a mindset that resists complacency and maintains relentless focus on growth.
Accordingly, KPJ Healthcare has identified 10 sites in Malaysia to build new hospitals. This is a highly capital-intensive agenda, and it is here that the company will benefit the most from its REIT approach. Not only will it save the company from the hassles of having to convince multiple stakeholders, it will also open up the field for streamlined investor participation.
KPJ Healthcare’s extensive experience in the field gives it yet another competitive edge difficult to beat. The management is confident that it can generate returns on investment from any hospital—depending on the location and logistics—in as little time as 2 years from the end of the construction period. They maintain that with cutting-edge branding and international marketing exercises, the business can enter a whole new level of profitability. Yet another critical area where KPJ Healthcare scores highly is in its approach to risk management, which is a sensitive subject for a healthcare organisation. The company has established a Clinical Governance Committee with the objective of ensuring the highest standards of safety and appropriate patient care in all its hospitals. The Committee has chalked out clearly defined responsibilities and also oversees the hospitals’ accountability for the overall quality of clinical care. Other innovations include a comprehensive programme for quality improvement, policies aimed at planning for and managing risks and guidelines to identify and rectify poor performance. The Committee has produced a Clinical Risk Management Framework, which stipulates a coordinated approach for the management of clinical risks.
Rising on such strong foundations, the company is confident about tackling competition from other healthcare tourism destinations, such as Thailand, Singapore and India. “If you want to be healed, be looked after and receive value-for-money service,” it says, “then we promise you will find it here.” And the world is listening, as evidenced by KPJ Healthcare’s growing international footprint.
KPJ Healthcare’s fundamental strengths, and its success with the REIT route in particular, make it a great ally for international players. The company sees a lot of potential in working with the Middle East, especially in the area of training healthcare personnel. The training function in this industry is typically quite expensive, and getting doctors, nurses or administration staff with high standards is often a major constraint for new entrants. KPJ Healthcare can play the role of an enabling partner-cum-mentor for such players, and its success in running its own 2,500-student-strong nursing and health science college, KPJ International College (KPJIC) offers ample proof of its capabilities. The company is also upbeat about the numerous opportunities to co-develop greenfield projects in the healthcare training space in Malaysia, which promise healthy returns on investment after the initial gestation period. Such projects can be specially packaged for Middle Eastern partners, who can rest easy in the knowledge that KPJ Healthcare’s much awarded, pioneering REIT model ensures immediate rewards.
With unflinching emphasis on “the continuous development and nurturing of its human and intellectual capital”, KPJ Healthcare Berhad is excellently placed to deliver long-term value, and its domestic as well international aspirations look set to gain a lot of momentum in the foreseeable future.