Last month, my wife and I were shocked to be turned away from one of Singapore’s finest medical establishments. The reason? Lack of beds.
“Come back tomorrow,” her obstetrician’s assistant suggested. “There might be an opening if you come early.”
Whether it’s for-profit hospitals, health insurance providers or pharmaceutical manufacturers, business is good almost everywhere you go in Asia.
In 2016, the Asian healthcare industry generated US$1.8 trillion in revenue, and that’s expected to reach US$2.7 trillion in 2020. The industry is growing nearly 10 percent a year.
That’s more than double the expected 4.3 percent growth rate of the global healthcare industry during the same period.
By 2020, Asia will account for 31 percent of the global healthcare market, compared to 23 percent three years ago.
Why healthcare is growing so fast in Asia
I was in hospitals a lot when I was a kid. Not because I was sick, but because my parents were doctors, and helped launch one of the first full-service hospitals in the Philippines’ capital of Manila.
Hospitals were boring to me then. The dimly-lit hallways were spooky. Going upstairs took forever because the hospital had only three elevators (just two of which were working at any given time).
It was one of the few hospitals in the country back then with an X-ray machine and ultrasound. And most of the well-known surgeons in the country had an office there.
Back then, around 6 million people lived in Metro Manila. The country’s annual GDP, at US$33 billion, was as much as Sudan’s economy today.
But it’s an entirely different picture today. Close to 20 million people live in Metro Manila. The nation’s GDP is 10 times bigger.
There are now five world-class hospitals within 30 minutes from where I live – each with a full range of basic and advance services, complete with modern MRIs, CT scans, 3D-imaging and linear accelerators (for radiation therapy). Any one of them can give western hospitals Cedars-Sinai Medical Center and UCLA Medical Center a run for their money.
As the people living in the Philippines grew wealthier, they wanted better healthcare – and they can now afford it. But it’s not just the Philippines. This is happening throughout Asia.
Asia healthcare spending is growing five times faster than the U.S.
The U.S. is the world’s biggest healthcare market. The rising cost of healthcare has been a major problem plaguing the country.
A household of four living in San Francisco, for instance, spends about US$18,000 a year on health insurance premiums alone. That’s a big slice of disposable income.
U.S. spending on healthcare is already taking such a big slice out of people’s wallets that there’s little room for growth. Today, U.S. per capita healthcare spending is 17.1 percent compared with 10 percent globally.
From 2004 to 2014, per capita spending on healthcare in the U.S. grew 48 percent. That was below the global per capita growth of 60 percent.
Meanwhile, Asia’s rising economies have seen per capita healthcare spending grow up to five times faster than that of the U.S.
As the graph above shows, Asian countries saw per capita healthcare spending surge 277 percent over the 10-year period from 2004 to 2014.
Of these countries, the fastest growth was seen in China (492 percent), the Philippines (286 percent), Indonesia (267 percent), Vietnam (373 percent) and Myanmar (300 percent).
Except for China, these countries have a young demographic that supports a growing economy and increasing demand for healthcare.
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More room for growth
Healthcare expenditures amount to 4.7 percent of GDP in Asia. That’s just under half the global average of 10 percent. So Asia’s healthcare industry has a long way to grow.
But Asia is already home to some of the world’s best hospitals that offer world class service at a fraction of what it would normally cost in the U.S., Europe and Japan.
For example, annual physicals in the Philippines or Bangkok cost just US$300 instead of US$1,000 or more in places like the U.S. A heart bypass procedure with a two-week stay in the hospital and doctor’s fees cost US$15,000 instead of US$40,000 to US$70,000 in the U.S. And other common medical procedures are up to 90 percent cheaper than places like the U.S., based on data from MedicalTourism.com.
Some of Asia’s best hospitals include Bumrungrad and Bangkok Dusit Medical in Thailand, St. Luke’s Medical Center and Makati Medical Center in the Philippines, and the Prince Court Medical Center in Malaysia.
And there are dozens more hospitals under construction and in the planning stage. Singapore’s Raffles Medical Center is opening two new world-class hospitals in China. Bangkok Dusit Medical has plans for five new hospitals in Thailand in the next two years.
Asian hospitals’ world-class care and cheaper prices have spawned a multi-billion-dollar medical tourism industry – the practice of individuals traveling outside their home country to find better or more affordable healthcare.
With six of the world’s top 10 medical tourism destinations, Asia Pacific will be the fastest-growing region for medical tourism in 2018, with growth rates exceeding 15 percent.
If you want to profit from Asia’s massive healthcare spending in the years ahead, one way to invest is through the KraneShares MSCI All China Health Care Index ETF (Exchange: New York; ticker: KURE).
It gives shareholders exposure to Chinese companies listed in China, Hong Kong and the United States that are involved in the healthcare industry, including hospital administration, medical equipment production, healthcare technology, as well as traditional Chinese medicine.
Editor, Stansberry Pacific Research