Changing demography, digital adoption push more Vietnamese private hospitals into investors’ radar

In Vietnam, where state-owned hospitals dominate the healthcare industry, investments in private hospitals have generally been muted. Only one investment was made in a private hospital or clinic chain in each of the years between 2017 and 2019, for instance.

However, as public hospitals struggle to meet the increasing demands of the country’s burgeoning middle-class and an ageing population, more investment opportunities are emerging for private hospitals and clinic chains.

Also catalysing the shift is the rapid digitalisation being adopted by VC-backed private players, who have left their public sector peers behind in terms of modernisation.

In 2020, three private healthcare players — Vingroup’s hospital chain Vinmec, Thu Cuc Hospital, and Hong Anh Medical — secured capital from investors, who now see more patients shifting to the private sector. In the first quarter of 2021, there have been two transactions already, according to data compiled by DealStreetAsia.

Vietnam might soon witness yet another healthcare investment, with VinaCapital’s Vietnam Opportunity Fund (VOF) planning a major investment in what it called “the largest retail healthcare system in Vietnam”. This is part of the fund’s current $200 million private equity pipeline, according to its 2020 financial report.

VOF, which invested in the Hanoi-based Thu Cuc Hospital recently, had earlier invested in Tam Tri Medical and Thai Hoa Hospital as well. The fund has also clocked an exit from Hoan My Medical Corporation.

“Affordable, high-quality healthcare remains out of reach for many in Southeast Asia. Fixing this will require a crop of bold, innovative companies that dare to re-think and re-imagine what a digital-first, consumer-centric healthcare system should look like,” said Justin Nguyen, a partner at Monk’s Hill Ventures, an investor in the Vietnamese healthcare startup Jio Health.

Expand Table

Investments into Vietnam-based hospitals

CompanyFunding sizeInvestorsInvestment year
Kim Dental$24MABC World Asia, Aura2021
Nhi Dong 315NABDA Capital Partners2021
Vinmec$203MGIC consortium2020
Thu Cuc Hospital$26.7MVinaCapital consortium2020
Hong Anh Medical$156MReal Capital London2020
Med247NAKK Fund2019
Tam Tri Medical$25MVinaCapital2018
FV HospitalNAQuadria Capital2017
Thai Hoa Hospital$9MVinaCapital2016
Hanoi French Hospital
NANavis Capital Partners2016

Demand-driven growth

Even as public hospitals are overburdened, and the country’s rising middle-class demand alternatives, only 14% of the 1,531 hospitals in Vietnam are private, according to a 2020 report by research and advisory firm YCP Solidiance.

Meanwhile, healthcare expenditure in Vietnam is expected to clock a compounded annual growth rate (CAGR) of 12.5% between 2017 and end-2021, to reach $22.7 billion, per another paper by Spire Research.

Also adding to the prospects of the health sector is the Southeast Asian nation’s ageing population. As much as 20% of Vietnam’s population is expected to be over 60 years old by 2038, according to the United Nations Population Fund.

Moreover, low wages in public hospitals have driven staff to find careers in private players. Since 2017, local media have reported that tens of doctors and specialists in major cities have retired from public hospitals.

These have created a lot of opportunities for private players to spring up and grow over the past decade.

Take Thu Cuc International Hospital. The 10-year-old hospital chain delivered a stable performance in terms of revenue and EBITDA in 2020, VOF said. The investor saw this development as “commendable”, considering the impact of the COVID-19 pandemic on healthcare services such as social-distancing requirements and rising costs in pandemic prevention measures.

“In-patient and out-patient volumes also increased by 40% y-o-y and 13% y-o-y, respectively,” VOF said in its report.

Thu Cuc International Hospital opened its second hospital in Hanoi in early 2020 to more than double its in-patient capacity. Since VOF’s investment in August 2020, the company has added another location in March this year. The fund added that it has received a three-year growth commitment from Thu Cuc, as well as a commitment to a stock market listing from the company.

Another example is Med247, a smaller chain backed by Singapore-headquartered KK Fund, which has opened its third outlet in Nam Dinh, a tier 2 province, after operating two facilities in Hanoi.

“Tier 2 cities are where there is a huge demand for modern healthcare,” said Koichi Saito, founder and general partner of KK Fund.

Quadria Capital, which has backed FV Hospital, sees Vietnam as fertile soil for opportunities that fit its investment criteria, buoyed by the country’s growing stage of private healthcare adaptation compared to the rest of Southeast Asia.

“Vietnam is a market that will continue to grow. In five years, the same company that you’re seeing today will double in size,” commented Janice Trinh, vice president at Quadria Capital. The Singapore-headquartered PE firm typically invests at the $70 million cheque size.

Digitalisation as a secular trend

Investor interest in Vietnam’s healthcare sector will continue if the industry harmonises with the digital age.

“Digital adaptation and teleconsultation are secular trends,” Trinh said. “You’ve got to get to a point where all of the players in the market have some online presence, to be able to adapt with that new change,” she noted.

Foreign investor-backed Vietnam hospitals have invested heavily in digital platforms in technical operations such as lab information systems (LIS) and picture archiving and communication systems (PACS).

Some healthcare providers, such as the Small Enterprise Assistance Funds-backed Victoria Healthcare, have added digital tools for patients to access their personal medical records, according to YCP Solidiance.

Other brick-and-mortar players like Vinmec, Thuc Cuc and Nhi Dong 315 have even built their own apps for telehealth services.

“Our online system will effectively back up in times like the COVID-19 pandemic; bring convenience in revisits, health monitoring and diagnosis; and widen the reach in rural areas where users seek the same quality of healthcare services as in major cities,” said Vy Nguyen, founder of Nhi Dong 315.

Vietnam is witnessing an increasing convergence of online and brick-and-mortar in the healthcare sector, seen in businesses positioned as health-tech companies developing an offline presence to achieve better growth.

Jio Health, founded in 2014, launched its first clinic in Ho Chi Minh City and is in the process of opening additional locations, Nguyen revealed. In addition to providing treatments, Jio Health’s Smart Clinics are also hubs for patients to establish their health baseline with their doctors and originate a personalised care plan, he added.

Backed by a venture capital firm, a model often attached to the online play, Med247 plans to set up two to three more clinics this year, as well as expand to Da Nang and Ho Chi Minh City in 2022. Med247 was committed to the chain model since the beginning, and telehealth services were implemented as an advanced edge to provide support for its medical force, Saito said.

The company has seen online users grow 30% month-o-month, while an average of more than 1,500 patients are using its offline services every month.

“Not only do I think integrating online and offline will allow a health-tech business to scale faster, but I would also argue that it is the only way to fully solve the region’s healthcare problems,” Nguyen asserted.

“The fact remains that 70% of all medical decisions are still informed by diagnostic tests like blood tests and these need to happen face to face, clinician to patient. There’s no getting around it, but therein also lie opportunities,” he added.

And opportunities will be yielded in the light of the encouragement from the local government, which aims that by 2025, Vietnam’s healthcare space will fully integrate e-medical records, AI applications in medical analysis, treatment and prevention, and IT applications for electronic management and operation.

That being said, a challenge facing investors scouting for hospital deals in Vietnam is finding a well-managed team. “We’ve had to walk away from many opportunities in this sector when we decided that we could not rely on the founders to build a strong team of professional managers and leaders,” noted Mekong Capital’s founding partner Chris Freund.

“Many of them are still run like family companies or state-owned enterprises. This means there is a great opportunity for well-led and well-managed healthcare companies in Vietnam, as there are so few of them currently,” he added.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.