Supplying adequate healthcare is a key challenge in Southeast Asia. The region is diverse and places like Singapore and Bangkok are home to world-class hospitals. But the reality for many of the region’s 650 million people is crowded medical facilities and high out-of-pocket treatment costs. The problem is only going to get worse as ageing societies increase the need for the long-term care of chronic conditions. For many patients, the typical experience is three minutes of care after a three-hour wait.
At Monk’s Hill Ventures, we believe that technology is key to maximizing the use of limited resources so that the burgeoning demand for quality healthcare in Southeast Asia is met. In particular, we are confident that innovative business models combined with the right technologies are essential to efficiently deliver treatment in a cost-effective manner. It is a key investment opportunity that has the potential to improve the lives of many millions of people.
In this whitepaper, we highlight how a confluence of factors puts Southeast Asia at the forefront of global healthcare innovation, as the region’s growing demand for medical services comes at a time of economic development and technological innovation. By understanding each of these factors, investors will be well-equipped to participate in a market where healthcare expenditure is expected to hit US$740 billion by 2025¹.
Evolving healthcare needs
Southeast Asia’s evolving medical needs are a function of its geography and economic development, as many of the countries in the region are affected by infectious tropical diseases, as well as a growing range of chronic ailments. People are also living longer lives. Increased life expectancy is an economic development worthy of celebration, but when combined with the prevalence of long-term conditions such as diabetes and Alzheimer’s, it creates a heavy burden on the existing health infrastructure.
The region is behind the global average, according to a number of important metrics. ASEAN’s five most populous countries have an average of 0.8 doctors per 1,000 people, which is much lower than the world average of 1.5 per 1,000, and far behind Singapore, which has 2.3 per 1,000². With so few doctors, it should be no surprise that the typical patient experience in many Southeast Asian countries is one of long waiting times and low levels of personal care.
At the same time, Southeast Asian patients are required to contribute more to their healthcare costs than people in other parts of the world. Out of pocket costs for the same five countries account for 44% of current health expenditure, compared with the global average of 19%³. As the cost of treating chronic conditions is likely to outpace the growth in public healthcare spending, patients will become even more responsible for a larger proportion of their medical bills.
On the plus side, strong economic growth has boosted the size and the wealth of the middle class, putting them in a better position to pay for their own health care. Bain and Co. predicts that the middle class in Southeast Asia will grow to 350 million people by 2022, this increasingly affluent section of society will enjoy a disposable income of US$300 billion. With the demand for healthcare expected to grow rapidly over the coming decade, the benefits of rising income will be offset by higher costs.
As outlined, healthcare is going to become a significant issue in Southeast Asia. Its existing infrastructure is not prepared for a major shift towards widespread chronic diseases, and its population will be spending more of their own money for treatment. Transformative solutions will be needed to address the growing problem, and we believe that technology will play an important role in ensuring that the region gets the care that it requires.
A growing emphasis on technology
In the past, investors looking to participate in Southeast Asia’s healthcare sector faced limited options – primarily multinationals with exposure to the region, or local healthcare groups that operate brick-and-mortar hospitals. The rise of technological solutions has helped make the market more diverse, with so-called HealthTech companies proliferating across the region. In 2018, Southeast Asia accounted for just under half the 78 healthtech funding deals in Asia (excluding China and India)⁴
These include AI-driven medical imaging companies, apps promoting a healthy lifestyle, and platforms that allow patients to remotely communicate with doctors. Finding the right investment target can be a challenge.
We see healthcare through the lens of a broader investment philosophy that favors companies capable of rethinking every link of the value chain and packaging it into a single end-to-end solution. These full-stack solutions can address the full range of a customer’s needs, which means that the company can capture all the business that would have traditionally gone to multiple vendors.
The full-stack model is highly appropriate for the healthcare sector in Southeast Asia, as even a simple disease can require encounters with several professionals – visiting a general practitioner will likely be followed by a trip to a pharmacist. A serious ailment will require a long process comprised of many stages – the referral from GP to specialist, blood tests and other scans, along with multiple trips to a hospital. The existing procedures are a prime target for increased efficiencies.
A successful solution will address the healthcare issues faced by different parts of society. People on a lower income for example, are often not able to get access to the kind of care that they need. The waiting times that are associated with visiting a doctor often so long that a worker might have to forego a day of paid work. The costs of healthcare are so high for a low-income family that healthcare costs can become a serious financial burden.
Middle class patients face different issues. Many people are concerned by the quality of local healthcare to the extent that they will go abroad for treatment – not just for serious illnesses like cancer and heart disease, but also for routine check-ups. This has created a sizeable intra-regional medical tourism industry in Southeast Asia, but it is far from being optimal. The best situation would be one where the sick enjoy a local healthcare system that meets their needs.
The role of technology will therefore be to bring improvements to every aspect of the medical system – quality, accessibility and cost. Reimagining the established healthcare industry, with its reliance on brick-and-mortar hospitals, will be tough. But there are signs that regional governments see “eHealth” as an important tool for meeting the medical needs of their citizens. Both the Philippines⁵ and Thailand⁶ for example, seek to incorporate technology into its healthcare system.
Southeast Asia is well placed to implement digital healthcare strategies, due to the uniquely high levels of engagement that its population has with the Internet. Thais and Filipinos spend more time online than anyone else in the world, while Indonesians rank fifth⁷. Many people have skipped the desktop computer and leapfrogged into the smartphone. The result is that the region is home to hundreds of millions of digital natives who expect goods and services to be available on their mobile device.
This all bodes well for the healthcare industry, as businesses in Southeast Asia can take advantage of technology and data to deliver the same convenience and cost savings found in other parts of the online economy, such as ecommerce. Instead of visiting a clinic, a patient can talk to their doctor via a smartphone app or be able to consult and view the results from an X-ray directly on their mobile device.
Case study – Jio Health
Perhaps the best way to grasp the potential of tech-driven medical care is by considering a company that has already implemented a new healthcare delivery model in Southeast Asia’s third-most populous country. Jio Health is a Vietnamese technology company that is able to serve a patient from initial diagnosis to recovery.
Its end-to-end service starts with an app, where a patient can input their symptoms and order a consultation with a doctor. But instead of the customer going to the clinic, the physician comes to the patient, with a one-on-one consultation completed in the patient’s home. If the diagnosis is not complicated, drugs can be prescribed directly and delivered immediately. And if further investigation is necessary, simple test samples can be taken onsite, while any trip to a hospital will be organised by Jio - from booking an appointment with a specialist, ensuring a bed in a ward, and even arranging the transportation to and from the facility.
An end-to-end solution like Jio’s stands in stark contrast to the typical patient journey in Vietnam, where a stretched healthcare system leads to long commutes to crowded clinics, with doctors only having a few minutes to spend with each patient. Local doctors also describe the situation as three hours wait for three minutes of care. These problems are exacerbated if a specialist needs to be consulted, as the specialist might be located even further away and have larger number of patients to see.
Vietnam’s medical system is still very reliant on paper. Patient records are physical documents that are often destroyed after a period of time has elapsed, and easily lost when transferred between medical facilities. If a doctor lacks sufficient knowledge of a patient’s medical history, they are more likely to misdiagnose or order tests that have been completed before.
Jio addresses all these issues. It reverses the direction of travel, by bringing high-quality treatment to the patient. It keeps medical records in a digital format. And it ensures a standardized level of services for all of its customers.
By combining the convenience of an app with the cost savings that come from a more efficient delivery service, Jio is able to serve the entire social spectrum. Low-income patients, who might skip treatment due to cost or the need to take time off work, are able to take advantage of more affordable treatment that is delivered to them at a time and place that is right for them. Middle-class patients, who might have gone abroad for treatment, can use the app to enjoy a convenient service that comes from a trustworthy brand.
Furthermore, Jio’s electronic health record allows the company to apply artificial intelligence to patient information to engage in preventative healthcare, which will extend lives, while reducing treatment costs over the patient’s lifetime. The company is still in the early stages of using AI to forecast ailments before they occur, but as its medical records expand with its business, it will be an increasingly important part of its offering.
From an investment point of view, companies like Jio are attractive because it uses technology to satisfy serve a customer at every stage of their medical journey. Businesses that are able to rethink that established healthcare industry into a full-stack, mobile-centric operating model. And each time a company like this succeeds, it will be an important development in the people of Southeast Asia getting the treatment that they require.
 World Bank data, using the most recent year available for each country (2016, 2017, or 2010 in the case of the Philippines). The five countries are Indonesia, Myanmar, the Philippines, Thailand and Vietnam.
 World Bank data.
 Galen Growth Asia
 Healthcare IT News
 Thailand Ministry of Public Health
 Hootsuite, slide 40