RHB Investment Bank Bhd (RHB Research) maintained its OVERWEIGHT call on the healthcare sector, with KPJ Healthcare Bhd, Duopharma Biotech Bhd and LAC Med as its top picks, following developments from Bank Negara Malaysia’s Sasana Symposium that introduced a softer transition approach towards Diagnosis-Related Groups (DRG)-based pricing.
RHB Research said the introduction of a DRG-FFS hybrid adjustment mechanism would help prevent sudden margin pressure on private healthcare operators as the industry moves away from traditional fee-for-service billing. The research house noted that while DRG rates could limit revenue growth from itemised billing such as medicines, laboratory services and consumables, the near-term financial impact is expected to remain minimal.
The research house highlighted that regulators have recognised challenges faced by DRG systems globally, including risks such as upcoding, early discharges, patient selection and back-end billing practices. As a result, DRG participation will remain voluntary until the required systems and data infrastructure are fully developed.
RHB Research also pointed to progress in the Malaysia Digital Health Certification Network (MDHCN), with major hospital groups including KPJ Healthcare, IHH Healthcare, Sunway Healthcare and other operators being onboarded into the “One Person, One Record” framework.
The research house believes KPJ Healthcare is best positioned to benefit from the eventual implementation of medical and health insurance/takaful (MHIT) and DRG, supported by its broad network of secondary and community hospitals with lower operating costs and capacity for higher patient volumes.
RHB Research maintained its Buy ratings for KPJ Healthcare with a target price of RM3.77, Duopharma Biotech at RM1.56 and LAC Med at RM1.16.
