Newer hospitals, cost optimisation to bolster KPJ

PETALING JAYA: While KPJ Healthcare Bhd continues to see payor pressure impacting its profitability, CGSI Research says the pressure remains “benign for now”, as current agreements with payors should pave the way for more amicable discussions surrounding diagnosis related groups (DRG) measures.

Payor pressure in healthcare refers to the influence that health insurance companies and other payers have on healthcare providers and the healthcare system as a whole.

KPJ reported record revenues of RM1.12bil in the third quarter of this year (3Q25), driven by higher outpatient volumes and surgeries.

However, the group’s 3Q25 earnings before interest, taxes, depreciation, and amortisation dipped 0.2 percentage point year-on-year, due to payor pressure.

CGSI Research said, according to KPJ’s management, negotiations between KPJ and its payors to reduce insurance claims have led to higher discount rates for payors, as well as restricting claim eligibility for certain procedures.

The Malaysian government’s plan to introduce DRG payment rules – meant to regulate hospital reimbursements and control insurance costs – has been postponed to 2027.

CGSI Research said the healthcare group will slow the pace of its organic bed-capacity expansion to ensure additional beds are only added to hospitals that are operating at optimal bed occupancy rates of about 75%.

The research house said continued growth in KPJ’s newer hospitals and cost optimisation will support its earnings growth in 2026 and 2027.

CGSI Research reiterated its “add” call on KPJ but trimmed its 2025 to 2027 earnings per share forecast by between 1.5% and 4.9%.