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Care, Cure, Connect

Hello there! It’s been a while since we last caught up! How was your holiday? I hope it was delightful and filled with joy.

Before we all dove into the holiday excitement, I had the opportunity to meet with three leading players in the Indonesian healthcare sector: HEAL, MIKA, and SILO. Among these encounters, HEAL particularly stood out and quickly became my top pick.

While we have briefly touched on HEAL in our previous sales notes, this time, I want to dive deeper and share why HEAL has emerged as my preferred choice over its competitors.

From their strategic business approaches and service innovations to their tangible impact on the community, HEAL offers a suite of distinct advantages that make it shine. So, let's explore what sets HEAL apart and why it deserves this special spotlight

HEAL stands out in the Indonesian healthcare market, particularly for its substantial contribution to BPJS coverage, around 75%, despite regulations suggesting a cap at 60%. HEAL's decision not to turn away patients exemplifies their commitment and solidifies their superiority in patient volume. Indeed, working with BPJS is a 'volume game,' but HEAL plays it well.

Source: Company Presentation

Hermina's strong alignment with BPJS not only taps into the vast market of insured patients but also highlights its crucial role in the Indonesian healthcare system, providing affordable and accessible care to a wide segment of the population. This approach showcases HEAL's commitment to societal welfare beyond just financial gains.

However, even though the bulk of its contributions come from BPJS, which is known for its lower margins compared to private insurance, HEAL's EBITDA margin remains impressively high at 27.7%. This is only slightly below SILO's 30% and MIKA's 35.2%

HEAL's strategic position as the healthcare provider with the highest patient traffic not only underscores its significant role in the market but also amplifies its bargaining power with suppliers. This increased leverage allows HEAL to secure better discounts, effectively applying the principles of economies of scale: as volume increases, growth follows, and costs can be efficiently managed through supplier discounts.

HEAL feels confident in its competitive edge against SILO and MIKA, particularly because its target market isn't exactly the same as SILO's. HEAL focuses predominantly on the middle-class segment, which constitutes about 60% of Indonesia's population, aiming to serve both the middle and lower tiers effectively.

Furthermore, HEAL does not view RSUD as competitors but rather as partners. This perspective stems from the belief that given a choice, people would prefer HEAL over public facilities, owing to the superior services and facilities it offers.

Expanding its reach, HEAL is also looking to cater to the upper-middle class by opening two new hospitals with international standards this year, located in IKN and PIK 2. The development in IKN is a direct mandate from the president to establish a hospital meeting international standards, positioning HEAL not just as a provider for the masses but also as a premium option capable of attracting a higher-end demographic.

Source: Company

Pak Yulisar has emphasized that the potential for domestic expansion remains substantial. When questioned about the possibility of expanding overseas, he firmly stated that there is no current interest in such moves because there are still many underserved areas within Indonesia itself. Consequently, HEAL plans to continue adding two hospitals annually to reach these regions more effectively.

Currently, HEAL is also making concerted efforts to enhance the experience for all patients, whether they are covered by BPJS or are private payers. Historically, private patients have shown a preference not to be mixed with BPJS patients.

In response to this, HEAL has strategically differentiated its services between the two groups. This includes separate entrances and, in some cases, distinct buildings for BPJS and private patients, ensuring that both groups receive care in environments tailored to their expectations and needs.

Looking forward, HEAL is setting the stage for even greater financial health and patient satisfaction through a strategic partnership with an insurance company to implement a Coordination of Benefits (CoB) system.

This innovative approach will allow BPJS class 1 holders, for example, to upgrade to VIP or deluxe room categories by paying the difference in room rates, which will be covered by the insurance. To keep premiums affordable, the system integrates the pricing of BPJS and premium services, resulting in premiums that are lower than those for private insurance alone.

This system not only enhances revenue and earnings for HEAL but also improves the service experience for insured patients, making premium facilities more accessible without a steep increase in cost. By leveraging such synergies between public health insurance and private insurance options, HEAL can provide more tailored healthcare solutions that meet diverse patient needs.

Given these strategic developments and the positive outlook for HEAL, we are confident that it is well-positioned to become a market leader among its peers.


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