The prospect of hospital business in Indonesia is still very promising in the midst of a pandemic. In the midst of the being busy of caring for patients who had flooded when Covid-19 cases increased, hospital services companies still continue to carry out business expansion agenda throughout the year.
According to the Indonesian Private Hospital Association (ARSSI), business expansion activities such as the addition of new hospitals are not affected by the Covid-19 pandemic. Instead, the existence of pandemics makes the need for health facilities or facilities increase. Hospitals management see the demographic condition of the Indonesian population as an opportunity for expansion. The growth in the number of new hospitals in 2021 can be in the range of 3%-5%. The number of hospitals throughout Indonesia reached around 3,000 units of which 65% were private hospitals.
The demographics of Indonesian population are amongst one of the main important considerations for expansion. Population growth will demand the addition of health care facilities. Based on data from the Central Statistics Agency, the population of Indonesia is projected to continue to increase, from 271 million people in 2020 to 294 million people in 2030. Along with the increasing population in Indonesia, additional health care facilities are needed at the same time with strengthening the National Health Insurance (JKN) program to support the health of the people.
The productive population (15 – 64 years) in Indonesia represents about 71% of Indonesia’s current population. Moreover, according to the World Bank, the population growth of the middle class is high, at least as many as 52 million people or about 1 in 5 Indonesians where the middle class tends to have a high health awareness.
Another aspect is related to the potential increase in Indonesia’s per capita health expenditure and the effect of the government’s JKN program on private hospitals. According to the World Bank, Indonesia’s per capita health expenditure in 2018 recorded at US$112, relatively low compared to neighboring countries such as Malaysia, the Philippines, Singapore and Thailand valued at US$427, US$137, US$2,823 and US$276, respectively. Per capita health spending in Indonesia is predicted to reach US$269 by 2027.
Another source of opportunity is related to the availability of health infrastructure in Indonesia, which is still concentrated on the island of Java. The ratio of the number of beds in Indonesia ranges from 1.07 to 1.21 per 1,000 residents, with the highest bed ratio in Jakarta Special Region of 2.24 beds and North Sulawesi at 2.15 beds. This figure is still below the World Health Organization’s (WHO) universal standard of 3.0 beds per 1,000 population. According to World Bank data, the ratio of doctors for every 1000 residents is just 0.4. This number is lower than other countries.
The potential growth of telemedicine in Indonesia is also quite large. According to a McKinsey survey of more than 700 Indonesian customers, the growth in telemedicine usage increased 67% in the last six months of 2020. It is expected that there will be a synergy between online and offline health systems, where more telemedicine users can be referred to hospitals or clinics, as many diagnoses still require [conventional] brick and mortar medical care. According to Frost &Sullivan, digital health revenue in the country is expected to increase from US$85 million in 2017 to US$973 million by 2022 at a CAGR (Compounded Average Growth Rate) of more than 60%.