Private hospitals may provide Covid-19 service at breakeven costs
KUALA LUMPUR: Private hospitals are likely to provide services to treat Covid-19 patients at above breakeven costs with pricing framework to be similar to other respiratory illness, and with additional costs for medications and consumables, said Affin Hwang Capital.
Its analyst Isaac Chow said the insurance associations were still in discussions with the government to explore an avenue where insurers can ease some of the expenses of patients.
“Currently, different insurance policies may have different clauses for the treatment of Covid-19 at private hospitals.
“Overall, we do not expect the private hospitals to be any worse off under the current arrangements,” Chow said in a report today.
The firm has maintained price targets and earnings forecasts for all healthcare companies under its coverage but upgrade IHH Healthcare Bhd to “Buy” from “Hold” on price weakness.
Notwithstanding a challenging 2021 business outlook due to the Covid-19 pandemic and lockdowns, Affin Hwang remained positive on IHH’s long-term business prospects and recommended that investors look beyond the uninspiring 2021 earnings.
“Key risks to our ‘Buy’ call are negative development in private hospitals involvement in the treatment of Covid-19 patients including pressured to treat at loss and weaker-than- expected earnings.
“We also upgrade the healthcare sector to ‘Overweight’from ‘Neutral’,” he said, adding that profit margin for private hospitals is expected to stay above breakeven level.
“We expect the pricing framework for the Covid-19 and the charging mechanism to be similar to other respiratory illness. But, there could be additional costs for Covid-19 medications which are not widely available and higher usage of consumables.
“Overall, we expect the private hospitals to price in a minimum margin to ensure these services are provided at above breakeven costs.”
He said there was growing pressure on insurers to cover Covid-19 treatment at private hospitals.
The Life Insurance Association of Malaysia, The General Insurance Association of Malaysia and the Malaysian Takaful Association recently said the industry was working with the Health Ministry and Bank Negara Malaysia to “explore avenues where insurers and takaful operators can ease some of the expenses of patients whose conditions are required to be treated in private hospitals”.
Source: NST
