Healthcare
Navigating The Implementation of KRIS
- Plans to implement KRIS by Jun25 remain on-track. DJSN is finalizing new JKN Tariff, while MoH plans to change INACBG to iDRG.
- KRIS and CoB could be an opportunity to further expand hospitals’ revenue/patient yet risks loom on gov’t policy execution.
- We maintain OW rating in the sector as Indo hospitals’ profitability consistently improving in an underserved market. Top Picks MIKA.
Update on KRIS Implementation: Only 19% of National Hospitals Prepared
Recent meeting between Ministry of Health (MoH), DJSN and the House of Representatives (DPR RI) reveals that only 19% out of 3,113 hospitals in Indonesia are fully prepared for the standardized inpatient rooms (KRIS) implementation. Most of the hurdles came from bathroom accessibility for wheelchair users and other in-rooms equipment. However, plans to implement KRIS by Jun25 remain on track, based on MOH indication.
Inflation Triggers Changes from INA-CBG; DJSN Finalizing New JKN Tariff
MoH acknowledges the increases in medical costs inflation due to pricing information asymmetry, as the cost of similar treatments can vary between providers and is largely controlled by healthcare service providers as suppliers. MoH tries to uplift bargaining power to the service providers by aiming to increase contributions of JKN and Private Insurances as payor mix, thereby reducing out-of-pocket spending and medical cost inflation. For the case of JKN, MoH is planning to change the current pricing system to hospitals, INA-CBG, which is primarily adopted from Malaysian healthcare system to Indonesian Diagnosis Related Group (iDRG) by Mar25, which will provide more detailed and suitable service packages according to Indonesian patient cases and healthcare costs. Meanwhile, DJSN are currently finalizing the calculation for the new premium tariff of JKN in effort to address JKN deficit, planned to be announced by Feb25. However, on a separate interview, MoH stated that the implementation is under discussion with MoF and predicted to be fully applicable by FY26.
KRIS and CoB Managed Care Offers a Net Positive Impact in The Long-Run
While the new structure of JKN tariff remains unclear, our simulation shows that if the govt implements a new tariff in a single rate that is equal to Class II tariff, this could positively increase the output of JKN hospitals by ~8%. Nonetheless, the govt may need to add subsidy budget of up to Rp67tr/year to cover the gov’t assisted JKN members (Penerima Bantuan Iuran/PBI). The new tariff, if singular, we believe should range between the existing Class II-Class III tariffs to keep national private hospitals margin intact. The potential conversion of Class I JKN users to use the CoB scheme could also potentially improve revenue/patient by 8-15%, based on our estimation. However, the limited product offering of CoB could limit this potential to materialize.
Maintain OW in the Sector; Top Picks Switched to MIKA
We maintain our OW rating in the sector as Indo hospitals’ profitability consistently improving in an underserved market. We switched our top picks preference to MIKA> HEAL> SILO, as we saw less noises coming from unclarity in KRIS Implementation and JKN’s deficit to MIKA’s earnings, while valuation already reached -2SD of its 5-yr. average EV/EBITDA with better profitability and patient volume compared to 5-yrs. ago.
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