Still Standing Tall

MALAYSIA’S private hospitals are well-positioned to handle the new sales and service tax (SST) on medical tourists, thanks to their strong standing in the regional healthcare market.

Unique competitive advantages make the country a top choice for medical tourists in Asean.

These advantages include the wide use of English among the local populace, high road and rail connectivity, and a thriving mall culture.

Beginning July 1, private healthcare operators with annual revenue of over RM1.5mil must pay a levy of 6% for services to non-citizens.

Citizens are exempted, including for traditional and allied health services.

The treatment costs for medical tourists will remain competitive even after adding the SST compared to hospitals in the region, according to industry players.

One factor could be the undervalued ringgit, although it has appreciated against the US dollar in recent times.

Healthcare costs in Malaysia tend to be lower by 30% to 50% than Thailand and Singapore, CGS International (CGSI) Research says in its recent strategy report.

In addition, CGSI Research points out that foreign patients account for less than 10% of revenue at Malaysia’s two largest private hospitals, IHH Healthcare Bhd and KPJ Healthcare Bhd.

The private hospital industry is thriving locally, with new players like Radium Healthcare, a subsidiary of listed property developer Radium Development Bhd, gearing up to join the scene.

Existing players are also seeing healthy growth. These include IHH which reported hospital inpatient admissions increasing in the first quarter ended March 31, 2025.

IHH’s revenue per inpatient admission also increased 6% to RM11,334 in the quarter.

KPJ, meanwhile, recorded more patient visits and an increase in bed capacity in the same quarter, resulting in a 9% year-on-year growth in earnings before interest, taxes, depreciation and amortisation and a 16% increase in pre-tax profits.

The growth of inbound medical tourists is expected to be shaped by the development gap of private hospitals between Malaysia and its Asean neighbours.

Notably, a significant number of these tourists, or over half, come from Indonesia.

Many Indonesians choose Malaysia for its infrastructure, cultural and language similarities besides the easy availability of halal food.

States like Penang and Kuala Lumpur are seeing a significant number of Indonesian medical tourists, while Johor and Malacca experience this to a lesser extent.

Analysts suggest that the gap in healthcare development between Malaysia and its neighbours may shrink over time, possibly closing altogether.

If this happens, these medical tourists might no longer need to travel abroad for treatment.

Private hospital treatments and services that are popular among medical tourists include cardiology, oncology, neurology and general health screening.

The Indonesian government is aware of the influx of medical tourists to Malaysia and is trying to improve its healthcare infrastructure.

Business advisory firm Alvarez & Marsal (A&M), in its report published last year, says Indonesia’s efforts include initiatives like partnering Mayo Clinic to develop medical facilities, expanding the range of treatments offered, increasing the number of hospitals, and relaxing regulations on foreign specialists working in the country.

About two million Indonesians go for medical checkups and treatment abroad, cumulatively spending about US$9bil a year.

However, the advisory firm also notes that the Indonesian government’s efforts are unlikely to deter its citizens from seeking health treatment overseas in the medium term.

“Indonesia still has some way to go before it can come up to par with regional and global standards,” it says.

Affluent, high-income Indonesians generally prefer to seek treatment overseas due to a lack of trust in the local system and infrastructure, it notes.

“There is a strong perception that its healthcare system lacks quality doctors, infrastructure and facilities.

“It will take time for this perception to change,” A&M says.

Thailand is also another medical tourism hub in Asean, although it is more popular for dentistry, fertility and aesthetic treatments.

It mainly attracts medical tourists from the Middle East, Europe and Australia, while Malaysia’s medical tourists come from Indonesia, China and India.

Malaysia’s inbound medical tourism figures will be significantly shaped by developments in the Indonesian segment, given its substantial contribution to the total numbers.

This implies that an improvement in healthcare facilities in Indonesia could see inbound medical tourism soften in the medium to longer term.