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Mitsui expands health care business in Asia

Investment in hospital operators opens doors in Southeast Asia and beyond

The Mount Elizabeth Novena Hospital in Singapore, operated by Malaysia's IHH Healthcare, offers specialized medical treatment.

TOKYO -- Japanese trading house Mitsui & Co. is extending its reach in Asia's growing health care market, from hospital management to information services for doctors.

Mitsui's traditional strengths are in natural resources, including metals and energy, but these businesses are volatile. The trading company is therefore looking to strengthen its operations in other areas, such as health care, which offer a steady revenue stream.

In 2011, Mitsui bought a stake in Malaysia-based IHH Healthcare, a big hospital operator. The lobby of the company's Mount Elizabeth Novena Hospital in central Singapore looks like a luxury hotel, complete with huge sofas and live piano performances.

IHH runs about 50 hospitals in nine countries, including India and Turkey. It is the world's third-largest hospital operator by market capitalization. Mitsui holds a stake of about 18% in the company.

IHH's hospitals focus on advanced medical care. Unlike conventional hospitals, which hire doctors directly, IHH facilities are more like medial shopping malls, leasing or selling space to doctors and helping them establish their practices within the complex. They do not have a reception desk. Instead, patients go directly to their specialist clinic.

"In Asia, private hospitals offer higher salaries than public ones, drawing in talented doctors," said Yusuke Aoi, who is on loan from Mitsui. Aoi, who serves as vice president of Parkway Pantai, which is a subsidiary of IHH, for innovation and growth, is in charge of improving the company's management efficiency. One project he oversaw was the development of a smartphone app for patients and physicians.

IHH has also invested in medical startups, including one that offers genetic tests for personalized health care. The aim is to give doctors the technology to tailor their treatments to individual patients. "We want to develop our business by incorporating new medical developments," Aoi said.

Demand for hospitals offering affordable, high-quality care is high in Southeast Asia, where the middle class is growing both larger and richer. To take advantage of this growth, Mitsui has invested in another Malaysian hospital operator, Columbia Asia.

Inside one Columbia hospital, located in a suburb of Kuala Lumpur, a sign encourages visitors to get flu vaccines. A shot costs 55 ringgit ($13), the sign says.

Columbia Asia is the biggest hospital group in Asia targeting middle-income patients and it operates around 30 hospitals in Malaysia, India, Indonesia and Vietnam. Mitsui invested in the group in 2016 and now owns about 26% of the company.

Its hospitals have major clinical departments -- including internal medicine, surgery, pediatrics, gynecology -- and can handle 80% of early-stage medical care, the company says. Although the hospitals have beds and other equipment for inpatient care, they do not offer highly specialized treatments.

Yuichiro Miki, who has been sent from Mitsui to work with Columbia Asia, described the Malaysian company's strategy as a "cookie-cutter model." Columbia Asia creates a model hospital, and all the branches copy it, Miki said. The hospitals have 150 beds, in principle. The layouts, furniture and even the artwork in patient rooms is similar.

It typically takes two and half years in Malaysia to get a large, 350-bed hospital from the drawing board to caring for patients. Doing the same for a 150-bed facility takes only 18 months. The standardized approach also reduces costs, Miki said, making it possible to turn a profit in two and half years, versus four to five years at a larger facility. The partners hope to increase the number of hospitals Colombia operates to 45 by 2025.

Miki said IHH and Columbia Asia are "equally necessary to operate a health care business across Asia."

Although there is some geographical overlap between the two hospital groups, they serve different sorts of patients. While Columbia Asia specializes in community health care, IHH provides sophisticated medical services. The companies have no direct capital ties but refer doctors and patients to each other, influenced by their mutual ties to Mitsui.

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