IHH Healthcare Berhad (IHH) Earnings Call Transcript & Summary

Ladies and gentlemen, good evening, and welcome to the First Quarter 2020 Financial Results of IHH Healthcare Berhad Analyst Briefing Conference Call. [Operator Instructions] I must advise you that this conference call is being recorded today, the 29th of June 2020. I would now like to hand the conference over to your first speaker today, Ms. Penelope Koh, from Investor Relations at IHH. Please go ahead, Ms. Koh.

Thank you. Good evening, and welcome to IHH Healthcare first quarter 2020 earnings call for the period ended 31st March 2020. I do apologize for the slight delay as we had faced some technical glitches in terms of uploading our results and the deck to the respective exchanges. So anyhow, thank you for joining us today. I'm Penelope Koh from Investor Relations. With me on the call today are Dr. Kelvin Loh, Managing Director and CEO; Mr. Low Soon Teck, our Group CFO; and we have also invited our colleague, Mr. Evren, who is the Head of Strategic Planning and Investments from Acibadem, who is also on the call today. So for those of you on webcast, you will be able to view and download our presentation slides and press release. The materials are also available for download on the IHH website. As for the sequence of event, Dr. Loh will bring us through updates on the COVID-19 situation as well as the key highlights for the first quarter of 2020. Thereafter, Soon Teck will provide the financial performance before Dr. Loh wraps up by discussing the operational performance and key takeaways for the group. We'll have a Q&A session after the presentation. So with that, I'll hand over the call to Dr. Loh. Dr. Loh, please.

Good evening, ladies and gentlemen. Thank you for joining us. Now before I go any further, I know that the question you may have now is how is IHH navigating the COVID-19 pandemic? Like most businesses worldwide, IHH will see impact from this outbreak. But our vision is fundamental to our resilience in the near term as well as to our long-term ability to create value for all stakeholders. There are 3 key areas we will focus on in navigating COVID-19. First, safety continues to be our top priority. This starts with equipping our staff with the right equipment and protective gear, protecting the frontliners so that they can protect our patients in their care. Second, while not losing sight of our long-term strategic goals, we are taking steps to maintain business resilience in these unprecedented times. And finally, we will continue to partner with governments worldwide to win this war against COVID-19. I'm sure you have more questions on this, and I'll be happy to take them on during the Q&A session. Moving to the group's financial performance for the first quarter. Our revenue and EBITDA decreased 2% and 10% year-on-year, respectively. The group saw strong January and February operational performance but it was eroded by the effects of COVID-19, which impacted China from end January onwards and in our other home markets from March onwards. Foreign patients, especially in Singapore and Malaysia, dropped sharply with the implementation of border controls. Also, local patients started to defer semi-elective and elective procedures. On a constant currency basis, revenue was flat while EBITDA decreased 7%. We registered a net loss of MYR 319.8 million in Q1 2020 as compared to a net profit of MYR 89.5 million a year ago. Having undertaken a thorough portfolio review of the non-Fortis India investments made in 2015 and earlier, we recognized an impairment loss on the remaining goodwill of about MYR 400 million from an investment we had made into Global Hospitals in India. We also made a realization of MYR 60 million foreign currency translation losses relating to Khubchandani Hospitals in India upon substantive liquidation. Soon Teck will elaborate more on these exceptional items on Slide 8. Operational PATMI was up 1% due to lower ForEx losses on Acibadem non-lira borrowings as the loss was mitigated by gains on cross-currency swaps entered by Acibadem. It also increased from a lower base last year when the group recognized higher tax expense relating to one-off dividends from RHT disposal of assets. The group's balance sheet remains strong with a cash balance of MYR 5.4 billion as at 31st March 2020. Now let me turn the call over to Soon Teck to share the financial performance on the group. Soon Teck, please.

Thank you, Kelvin. Let me start with a summary of IHH's consolidated financial performance for the first quarter on Slide 7. I wish to reiterate at the beginning that we had a resilient operational performance in Q1 2020. We had a strong year start to the year, even as we, like all companies, began to see impact from COVID-19 from March onwards. Revenue and EBITDA decreased 2% and 10%, respectively in this first quarter. On constant currency terms, revenue was flat and EBITDA declined 7%. Headline PATMI stood at a loss of MYR 319.8 million compared to MYR 89.5 million from a year ago. PATMI will be positive, if not for the impact from 2 exceptional items relating to our non-Fortis India investments undertaken in 2015 or earlier. I will elaborate more on this on the next slide. Moving to Slide 8. Looking at the exceptional items. In this quarter, we recognized an FX loss of about MYR 134 million from the translation of the non-Turkish lira borrowings, but a fair value gain of MYR 53 million on its cross-currency interest rate swaps in relation to such non-lira borrowings. The net loss of MYR 80.8 million is lower than the MYR 127.2 million exchange loss recognized in Q1 2019. Let me come back to the exceptional items relating to our non-Fortis India investment. As you know, management has conducted a thorough review of our entire IHH portfolio. This included our non-Fortis India investment undertaken in 2015 and earlier. Our headline PATMI registered the loss as we recognized the impairment loss on the remaining goodwill of about MYR 400 million made into Global Hospitals in India. Since our last announcement, the COVID-19 has accentuated the impact on Global Hospital. It is also exacerbated by our local JV partner, who have taken steps to block additional equity injection, which is much needed by the company during these times. Further, he has not resolved a personal matter, which has led to the current status quo ordered by the courts on the company. As a result, we find it more prudent to proactively write-down the goodwill of Global Hospital to 0. We are reviewing all options with regards to Global Hospital. With regards to Khubchandani, we have realized MYR 60 million foreign currency translation reserves upon substantive liquidations. As we are determined that the company is now in substantive liquidation, the accounting treatment requires us to transfer the difference in foreign currency since the time of the transaction in 2006 from the equity reserves to the P&L. Moving on to Slide 9. The group remains in a strong financial position to weather the crisis created by the COVID-19 pandemic. Our balance sheet remains strong, and our funding and liquidity are well positioned. As at 31st March 2020, net debt-to-EBITDA stands at 1.5x. Net debt-to-EBITDA increased on higher loans and borrowings taken to finance working capital and capital expenditure. Our balance sheet showed a cash position of MYR 5.4 billion, which includes the MYR 2 billion placed in escrow for the pending open offer for Fortis. If you could please turn to Slide 10 on the CapEx. Our CapEx is planned along a 3-year horizon, and our financial position enables us to more than meet our obligations on our strong operating cash flows and cash position. Our cash flow is now focused on clinical operations given the current COVID situation. Where the long-term trajectory remains intact, we are reviewing the CapEx plans and will defer noncritical investments appropriately. On Slide 11, I would like to share on what we have done to further deleverage our non-lira debt for the Turkish operations per the plan we outlined a year ago. We have significantly reduced the non-lira gross debt to EUR 267 million as at December 2019. Since the beginning of this year, Acibadem has refinanced another EUR 37 million debt into lira-denominated debt and repaid EUR 3 million. Today, excluding the European operations, the total non-lira debt stands at EUR 180 million. This amount also includes medical equipment leases and the financial leases of about EUR 82 million. As Acibadem continues to drive its operation, it will utilize its cash flow to pay down its foreign debt further, thereby reducing its FX exposure. From March onwards, Acibadem had accumulated more foreign currency receipts from its operation. As a result, it has reduced its non-lira exposure to about EUR 160 million. I shall now pass the call back to Kelvin to share the operational updates and forecast for the group.

Moving to Slide 13. As with all markets and sectors, we will inevitably see impact on admissions. However, revenue intensity remains healthy across most of the markets. Singapore's inpatient volumes decreased 9.6%, while revenue intensity grew 10.9%. Foreign patients accounted for about 21% of the Singapore revenues in the first quarter. Malaysia's inpatient volumes decreased 3.6%, while revenue intensity grew 4.2% year-on-year, respectively. Foreign patients accounted for about 5% of the Malaysian revenue in the first quarter. In India, inpatient admissions decreased 3%, while revenue intensity remained flat. Acibadem's inpatient volumes decreased 4.4%. Revenue intensity increased by 14.8%. Foreign patients now constitute about 14% of Turkey's revenue. In Gleneagles Hong Kong, we saw only a slight increase in losses, even though we had higher operating and staff costs as we continue to ramp up. This is because Gleneagles Hong Kong did not see any decline in inpatient volumes. We are now running at an average occupancy rate of 55% in the first quarter based on about 200 operational beds. We expect the COVID-19 outbreak to have an impact on the markets that we operate in. However, with the easing of restrictions and the gradual reopening of economies, we expect a strong recovery of demand for semi-elective and elective procedures, which have been deferred and translation volumes progressively return in the second half of 2020. Turning to Slide 14. The COVID-19 outbreak has affected China the most since the start of January this year. As for Parkway Shanghai Hospital, formerly known as Gleneagles Shanghai, the construction was halted as instructed by the Central Chinese government as part of the measures to control the virus spread in the beginning of this year. To date, opening of the hospitals has been postponed to 2021. Nonetheless, we remain positive on the long-term fundamentals for China. On Slide 16, we are stepping up efforts as health care providers to partner the public health care sector and always stand ready to do more. For example, we are taking COVID-19 patients in Singapore, Turkey, India and Hong Kong. We are operating community care facilities in Singapore. We're supporting testing services in Malaysia, Singapore, Turkey, India and Hong Kong. In Singapore, we took on border screening as well. In Malaysia, we loan ventilators to public hospitals. And across all our markets, we have ramped up our ability to serve patients remotely through telemedicine and online diagnostic platforms. On Slide 18, in terms of outlook, most businesses inevitably will see impact. However, IHH is in a resilient position against these headwinds because of our refreshed strategy built on trust, our track record of execution and strong capital structure. We are providing a safe environment for patients to continue to come to our facilities because we continue to see a steady flow of urgent cases. We are leveraging technology and telemedicine so patients can seek doctor consultations online at their convenience and safety of their homes. And again, IHH will do the needful to support government in the global fight against COVID-19. We expect patients' volumes to recover as government begin to loosen lockdown measures. We will prioritize cash flow and liquidity, including deferring all noncritical CapEx. Finally, the group will execute on our refreshed strategy to continue to drive efficient growth and low intrinsic value and drive cost savings through global shared services and procurement. To summarize the key takeaways, please turn with me to Slide 20. We are facing a very difficult environment due to COVID-19 and will continue to be impacted by it as the situation unfolds. We felt the worst impact in April and May. I'm confident that we will weather this impact in the short term as the long-term fundamentals of our business remains sound. Our confidence comes from our differentiated strength, which we continue to hone, including access to quality, exemplary care and outcomes, which remains our calling card across our network of leading brands globally. We will leverage on our reach and scale to build a stronger IHH ecosystem, one that balances transparency, outcomes, convenience of care and value for our patients. A prolonged fallout from COVID-19, a subsequent ways of COVID-19 outbreak and renewed lockdowns may further dampen the group's performance. However, with a gradual easing of movement restrictions from June onwards, the group has started to see local patient volumes recover strongly. And thus, we expect overall patients to recover progressively. With that, I shall now hand the call back to Penelope. Thank you.

Thank you, Dr. Loh. We will now take your questions. Just a quick note before we start. We will first take questions from the participants on the conference call before moving to those on from our webcast participants. [Operator Instructions] With that, operator, please proceed with the Q&A. Thank you.

[Operator Instructions] We have a question coming in from the line of Divya Gangahar from Morgan Stanley.

I just had one question on the trends that you're seeing across the key countries in terms of the second quarter, and also, if you could give us a quick update on what proportion of your electives do you see coming back in the last 2, 3 months?

Thanks, Divya, for that question. This is Kelvin here. So really, in the second quarter, the worst impact for the group as a whole was seen in April and May. And in fact, I'd say that that really seems like the worst period for the business so far. So I had mentioned earlier in my presentation that really, that you can think of the patients coming in as -- in these categories: Firstly, the foreign travel and domestic patients, right? So foreign travel, of course, severely curtail across all markets. But foreign travel makes up anywhere from 5 -- roughly about 5% to 25% of patients in different markets. Now domestic patients can be divided into the urgent semi-elective and elective, right? So the urgent cases always stay true regardless of lockdown, but the semi-elective and elective tends to be deferred during lockdown. And as I mentioned that the period that impacted us the most was April and May. Even that, we were differentially impacted, some markets were much more resilient than others, but some markets were affected, for example, to the tune of about 40% to 60%, that was in April and May. But going towards June, we have seen a strong -- we are seeing a recovery with the -- definitely the semi-electives coming back quite strongly. And then, in fact, as time passes, we are seeing more and more of the electives coming back as well.

Right. And maybe if you can just talk about your 2 key markets, Malaysia and Singapore. What would be the rough split between this elective and semi-elective, broadly speaking?

Well, it's quite hard to split that, but what I can tell you is that the lockdowns that eased, clearly, we are seeing a pretty strong rebound in the -- certainly a strong rebound in the semi-elective cases in June, for example, and we're also starting to see the electives coming back.

Right. So I mean, excluding the foreign travel part, which obviously cannot come back anytime soon, if you have to kind of benchmark your current June levels versus normalized levels for the domestic markets, where would you say you are? Like are you probably 80% of normal, 90% of normal? Excluding the foreign part, of course.

Yes. It's quite hard to give all these follow-up projections. But if you really wanted a generalization, you could say that the urgent-type cases maybe make up, order of magnitude, 40%. And then the other semi-elective, 30% and elective, 30%, right? So it has a very rough sense.

Right. And you're seeing the semi-elective come back now in June pretty nicely?

That's right.

Okay. Got it. And the other question just that I had was on discounts and margins. Like, could you give us an update on -- in the current environment, are you pushing in -- pushing through more discounts and packages and promotions? Or have you limited any of those and focused more in margins and tax for whatever you're doing?

Well, we always price appropriately for the services that we provide. So we continue to -- we continue our business in its usual ways. There are some situations, for example, where, because we are helping the governments fight a pandemic war, of course, naturally, there are specific package, as we call it, of price schemes for COVID-related work.

We have our next question from the line of Shyam Srinivasan from Goldman Sachs.

My first one, given that in the month of the second quarter we have seen declines or fall in occupancy, can you outline some of the cost measures that you may have taken to kind of -- otherwise, it looks like it could be another negative EBITDA quarter. So just trying to understand what are some of the cost measures that, as a group, we have actually tried implementing or started implementing?

So definitely, with regards to capital expenditure, we have taken a very hard -- diligent low. We have deferred all noncritical CapEx expenditure to focus only on the clinical operating needs. In terms of other corporate -- general corporate expenses, again, projects which we can reasonably defer in terms of corporate OpEx projects, we have deferred those. I mean for example, in terms of marketing spend, branding assets and so on. In terms of staff costs, we have put a freeze on staff hires, particularly on all corporate staff hires. And some -- as you can imagine, we are continuing our clinical operations. So selectively, of course, we will replace our clinical staff headcount that's needed. Furthermore, in general, we have held back any -- the usual cycle of promotions that would typically happen in July for the company. So we have done a lot. And again, the direction and emphasis being that we focus on keeping our staff and patients safe during this time to continue to keep our clinical business going but deferring the nonessential OpEx and CapEx as best as we can.

Are you quantifying any of these numbers, Dr. Kelvin, you know?

Sorry, Shyam, we didn't catch your question.

So are you quantifying saying we have cut costs by so much percentage or something, any of those numbers during the interim because...

So Shyam, for Q2, I can't give you, but I think they are significant. And in addition to that, don't forget that in some of the markets, we're also getting government grants and relief as well for the things that we do. I think it's not just the cost. I think we're also taking steps to mitigate the revenue shortfall due to the patients not coming in. So we have rolled out several initiatives with -- Dr. Loh has highlighted in the presentation. So we have taken in, for example, cash-paying COVID patients. We have taken on more testing work. We have taken on, at one stage, also the managing of the additional facilities here in Singapore. So there are a number of these things that we're doing across the board in all the different markets as well.

Got it. My second question is on realization. And COVID, like you said, has been part of volumes across your region. When you talk about, say, something you just said about cash-paying COVID patient, is the realization very similar to your regular patients? Or become a little lower...

It depends on different markets, yes. So I would say, in general, in Singapore and Malaysia, they are not far off what a normal patient would be paying. In Singapore case, the government is actually paying for those patients, but that number has now come down. I think we are -- at one stage, we are close to 300 patients. Today, it's probably now we have in our system probably about 20. In Malaysia, India, those were pocket -- cash-paying patients, who are paying out of their own pockets.

Yes, I think that's right, Soon Teck. I would add on and clarify. I mean it really depends on what your benchmark is. If you are benchmarking a COVID patient against a elective surgical patient, then naturally it's at a lower intensity. So if you are looking for -- if indeed, our base were used to take many COVID patients as compared to surgical elective patients with the revenue intensity bill at -- I think you would argue, I would say, yes. But a point that Soon Teck was making, giving Singapore as an example is that we, of course, we're pleased and we are doing our part to help the countries that are in during the peak of the health care crisis, where we take in COVID patients in markets where the government has asked us to help or allowed us to help. But as the situation has improved and lockdowns begin to be lifted and the health care -- the infection curve has come down, then the number of COVID patients in our facilities has rapidly reduced as well.

Got it. And my last question is on the legal update on the Fortis side, if you can help us. And also understand a minority shareholder has raised questions around 10% interest payment, so if you can give your views on that?

Okay. So first of all, Shyam and for clarification, everybody, the money that's placed in escrow account is not earning interest. We have clarified that. I think there was a misunderstanding of the shareholder who is following the application. I think now that SEBI has also intervened, as you know, from our last update, it's a positive sign. There have been -- substantially, there has been no further update from the Supreme Court because of the lockdown in India. We have tried to put in an urgent application to the Supreme Court, both at Fortis and at our level. But unfortunately, there are other priorities in the Supreme Court calendar that they have to deal with in India, so they have set the next hearing in July. 6th July.

We have the next question coming from the line of Rachel Tan from DBS.

My first question is on -- I think -- I noticed that your revenue inpatient for Singapore and Acibadem jumped quite a bit in the first quarter. Just wondering whether there's any specific reasons. And I think Acibadem probably has some increase in prices. Would you be able to give us the quantum of increase in prices?

I'll deal with the Singapore one first. It's really the case mix. In fact, for across the group, our Jan, Feb were very strong numbers. And that's why that really helped our Q1 to mitigate the operating performance. Across all the markets, we actually were recording much better EBITDA compared to 2019. And the global and continental hospitals were even EBITDA-positive, until the COVID-19 hit up. Now in the case of Acibadem, I got everyone on the line holding to provide more color, but it's really the case mix, Rachel. Evren, do you want to add to that?

Yes, sure, Soon Teck. As Soon Teck mentioned, Acibadem's first quarter performance, mainly January and February, was very strong. We had significant growth in terms of volume, also growth in number of foreign patients coming to Acibadem hospitals for treatment as well as the local patient increase. I think there was a question around the price increase. Just to give you information, there are different price increases imposed on different patient segment coming to our hospitals. The private insurance price increases are set by a certain association. We set our foreign patient price increases. And then there is the local insurance part of it, which we call it the SGK. So there was all increases in different categories, but the blended amount, it was around 13%, which is imposed typically in January of the year.

Okay. Our blended -- the blended amount is 13, 1-3? Is that right?

13.1%.

13.1%. Okay. Got it.

So we have different increases for different buckets, but the blended mix is 13.1%.

Okay. Understand. And my second question is would you give us the EBITDA losses for Gleneagles Hong Kong and also Q2?

Suffice to say that Hong Kong actually is very interesting, the EBITDA losses are more or less in line with the last year. The slight increase is because of the additional staff that we had hired prior to the opening. We have opened more beds in Hong Kong. So we are now close to 180 beds. So just as we hired those, then the COVID-19 hit Hong Kong, right? So they are counted. But it's interesting that in Hong Kong, we -- while the outpatient volumes were affected, the inpatient volume has actually increased slightly versus pre COVID-19. So the growth is still there. It's just not at steep trajectory.

Okay. Is there a number to share on because I normally can find it in the financial statements, but I think this quarter I don't see it in the financial statements.

It's there somewhere, Rachel.

You can actually refer -- so I think you can refer to Slide 28, the EBITDA. But of course, it's under the North Asia, but North Asia now comprises of Gleneagles Hong Kong and plus our -- the Chinese clinics, these are all lumped together.

Yes. I'll give you the number, Rachel. It's about MYR 40 million.

MYR 40 million. Okay.

So it's roughly -- it's a little bit more than last year, which was about, I believe, about MYR 35 million. So -- and like I said, it was really due to the nurses that we had hired as part of our ramp-up of our additional beds.

Okay. Okay. And it's like second quarter looking -- like, improving better for Gleneagles Hong Kong?

Okay. You're asking us to give forward guidance again. But okay...

Really in terms of recovery...

Without going to numbers, I think the trajectory that we saw at the end of Q1 continues. So as you know, the unrest in Hong Kong has gone away mainly because of COVID-19. But we're not seeing any decline in inpatient volume compared to all the other markets. In fact, they continue to grow in Hong Kong. The outpatient volumes are coming back.

Okay. Okay. And how about Chengdu? Is that -- are the patients coming in already?

It's very small. No, there was impact there because at one stage, there was a very strict lockdown and government regulations regarding the kind of patients that the hospital and clinics would take in. But the -- in Chengdu, unlike in Hong Kong, we are starting very small. So the impact, I would say, is not big.

Okay. Understand. Kevin, my third question is probably on the Global Hospital. Just wondering, given that the JV partner has not been cooperating, I'm just wondering, what are your thoughts on divesting the Global Hospital or even sending it back to the JV partner?

We're looking at all options at this moment. But because as long as that -- it's unrelated to us, right? He has a court issue, his own personal issue that he has to resolve. But because of that, that's blocking our ability to inject further equity into the company. Like I said, actually, the Q1 Global was actually achieved EBITDA breakeven. So it's just holding it up. But we're looking at all options. We're not ruling anything out at this moment.

Okay. I'm just curious that why the impairment was taken in this quarter? I think this issue has been ongoing for a while now.

Yes. So the reality is there was a particular option, which I think is now close to us. So as a matter of prudence, we have decided that, look, we should take out the -- write-down the entire goodwill. As of last quarter, there were some promising signs that we were able to resolve the issue, but there's been development since, and we do not think that that scenario is now likely.

We have the next question coming from the line of Swati Chopra from Bank of America.

Can I check what was the occupancy in the first quarter for Singapore, Malaysia and Turkey? And second, what is the breakeven occupancy level? And maybe how much of the total cost in the operating expense is fixed or semi-fixed in nature?

Okay. The occupancy as said, March, because that was just before the -- as Kelvin said, the bottomed out in April. So I think it is not reflected, but generally, it was -- and SOD was below 60, just below. MOD was about 50. You asked about Turkey, right? Turkey was still quite high. Turkey was still in the mid-60s.

And what is -- sorry, go ahead.

Yes. Sorry, there was a second part to your question, right?

Yes. What is the typical breakeven occupancy level for Singapore, Malaysia and Turkey?

I think generally -- it's hard to generalize on each of the market because the model is slightly different. In Turkey, we employ the doctors. In Singapore and Malaysia, we don't. But as a rough benchmark, if you look globally, most hospital, mature hospitals, your breakeven point is roughly between the low 40s to mid-40s, depending on how well you run. But if you obviously employ the doctors, so I would say that you can even go up to even 50%. But I would say that we are generally on the lower end of the band.

Okay. And what -- how much of the total operating expense is largely fixed or semi-fixed in nature?

It's always a bit difficult to break out. I always get asked this question. I try to exercise in the time here to break the fix and the controllable and control. It's very difficult. Suffice to say that the bulk of our cost is still salary and wages. So that makes up roughly about 36% of our total revenue in normal time.

We have the next question coming from the line of Stephanie Cheah from CLSA.

Just 2 simple questions on here. Firstly, I think I missed it a bit earlier, but could I get your foreign patients in each of the market again, please? And secondly, on your comment earlier on the recovery of semi-elective, I just want to check if this recovery is more pronounced in Malaysia and Singapore, say, versus India and Turkey as well? Typically, say, how long that is?

So I'll do the -- So thank you. I'll do the first one and Kelvin will do the second one. So let me give you the figure. For Turkey, our foreign patients was about 13% to 16% of our total revenue. Malaysia is roughly about 6%. Singapore is about 25%.

Pre-COVID.

Pre-COVID. And then India was roughly about 10%, yes, 10%.

Sorry, these are pre-COVID levels you have for the first quarter?

No. I -- no, the first quarter numbers are a bit distorted. I would say that January, February, we were running close to that kind of numbers, but in March, the numbers started dropping off. And in terms of latest because of the restriction quite dramatically.

Yes.

Okay. So you would have a blended figure for the first quarter?

Yes, yes, but it's not meaningful if you ask me because -- yes. Yes. And then second question?

On recovery, yes. So -- Kelvin here. So yes, the recovery is generally in tandem in most of the markets. And it follows the degree by which the economies are opening up and confidence that they have that the epidemic curve, indeed, has been flattened. So definitely, for Malaysia, Singapore, Turkey, even we are seeing a pretty good recovery. In India, there is recovery. However, as you know, in India, the epidemic curve is still at its peak or maybe hasn't reached the peak yet, so we're a bit more cautious about what we expect of the recovery in India. You would note that -- just to point out, in Turkey, in fact, not only we see the recovery of the domestic patients, but in fact, they have -- the government has reopened the country to foreign medical. They have opened a country to about 40 other countries to take in the medical travel from those countries as of June.

We have our next question, and this one is coming from Nico Yosman from Morgan Stanley.

Can I just clarify one thing on the average revenue per inpatients on -- from Singapore? I understand that you mentioned it's case mix earlier, but the increase of 11% year-on-year in first quarter is extremely high given that you mentioned there is no price hike in Singapore. I just want to understand the sustainability of this increase. How did the case mix improvement is also partly driven because your admission have come down and the patients that come -- that still come in is only the high-intensity patients, but -- and then whether we should expect this to think of as your patient volume conduct again in the next few quarters?

So in Q1, Soon Teck had mentioned the bulk of the increase in revenue intensity is due to the increase in case mix. Remember that the reduction in foreign -- even the reduction in foreign medical travel and foreign patients tend to have a higher revenue intensity, that was only in the latter part of March.

Actually, April, we started the...

That's right. So the April 2 was later on, right? It wasn't even affecting at that time. So that's really in Singapore. Do we expect to have continued high revenue intensity in Singapore and increase in revenue intensity as time passes? The answer is, yes. I mean COVID, of course, is an exceptional short-term impact but barring that, if you take the mid- to longer-term trajectory, definitely because Singapore remains a center of excellence for the entire region, we already has a strong track record of doing complex cases. And we are continuing, in fact, doubling down in that direction, both for local patients as well as foreign patients.

And just to add, I think we have always said that the aging population and demographics in Singapore continues to help us as the patients that come in tend to be -- tend to have multiple illnesses versus the simple illness that they have. So with that, we think that price intensity, as long as we are able to keep our edge in offering the services that the patients want, is sustainable. So it also beholds us to up our game to make sure that we are offering that service that the client needs.

I appreciate the long-term trends that the intensity should go up because of the aging population and they tend to increase. But I'm just asking whether the first quarter jump, which is quite a significant jump from MYR 33,000 ramp per patient to MYR 35,000. That seems very soft for a linked quarter jump. Now whether MYR 35,000 per patient should be the new base? Or this can be soft in the next few quarters?

No. Definitely for Q2 because of that impact, this number is going to come down.

As I explained earlier, if we take in many more medical patients, for example, COVID-type patients, then, of course, that number will come down as compared to with many more surgical cases.

[Operator Instructions] We have our next question from Rachel Tan from DBS.

Just another follow-up question. I was just wondering, given now that we are entering Phase 2 and some of the countries are starting to ease the restrictions, any chance the government would allow specific cases for foreign patients to travel to Singapore for treatment?

Wow, Rachel. I'm not standing for election. I mean joke aside, I mean, of course, I think it is important that the countries have -- or respective countries you operate in have taken the measures to flatten the epidemic curve. So that is the most important thing because they cannot let the country's health care systems get overwhelmed. As you can see what the countries are all doing is to progressively lift measures in a stepwise fashion, instead of jumping and taking specifically both steps all in one go. So when would borders reopen for most of us? I don't know. But definitely, yes, as respective countries gain more and more confidence that things are under control, then I imagine that that should unfold over the next few months. I mentioned, in Turkey, for example, the government has really allowed 40 countries to fly in for medical care. And as you know, some of our -- some of the countries we operate, like Malaysia, Singapore are in various stages of discussions with regards to opening up lanes of travel between certain countries.

Okay. Yes. I'm just wondering whether there has been talk that the government engaged whether to think about this kind of travel bubble for specifically for medical treatment, and yes, I suppose they are.

Well, Rachel, you might get us into trouble. We might be stepping on [ court ] order.

[Operator Instructions] We have a question coming from the line of Nico Yosman from Morgan Stanley.

Sorry just one follow-up question from me on the operating expenses disclosures. There's this line the core operating expenses, it has been quite high at about 700 million to 900 million in the last 2 quarters, but I can't find the detail of the breakdown. May I know what is this recurring? Or there's one-offs in there as well?

Sorry, Nico, which?

I'm talking about your financial statement -- it's a statement question, there is this line called operating expenses.

Yes. So that includes the impairment.

Okay. So the run rate should be closer to 400 million, 500 million.

Yes correct. Closer to the 450 million to 500 million.

We have the next question coming from Shyam Srinivasan from Goldman Sachs.

Just one, saw headline that said that IHH would like to diversify into diagnostic labs. Just a comment, if you can highlight what you're trying to say there, diagnostics lab testing, telemedicine. I thought we were doing all of those already in terms of...

Yes, maybe we should -- thanks for that, Shyam. Just to clarify, we are already in the diagnostics business, of course. But I think what we meant by that is that during this time, there are opportunities for actually pockets of diagnostic services that increased. So for example, COVID testing as of date we probably have done order of magnitude about 300,000 COVID tests across the group. Telemedicine, it's really interesting. We were already, as part of our refresh strategy, pushing towards delivering health care in a more convenient way, that is through digital means, if possible. Because we recognize that the patients not only want good clinical quality care, but they also want it in as convenient a way as possible. So that need, we already recognized. We were already making steps. COVID-19 just accelerated that need and therefore, within May, we had launched telemedicine across all our countries. That has seen a progressive pick up, particularly for outpatient care. When we say we launched telematic and pushing in telemedicine, we don't mean to say that it replaces our bricks-and-mortar business. It doesn't because given the fact we're in acute hospital business, patients will still have to come for their cancer treatment, come for surgery, if they have a bleed in the brain, they have to come for procedures and so on and so forth, that won't change. But we are taking the leadership to connect with our patients in a much more convenient way of our telemedicine and particularly in the COVID times, consultation, which can deliver information, which -- that can be delivered via a tele or digital means we should do so. So that's been very helpful.

And how does this tie in with your picking up a stake in Doctor Anywhere. I'm just -- is there any synergies there in terms of telemedicine?

Yes, absolutely, absolutely. In fact, I would say the other way around, our investment in Doctor Anywhere was a strategic investment precisely. And in fact, that was pre-COVID, precisely because we -- as I said, we recognize the need to expand our services via digital means. And the strategic partnership with Doctor Anywhere was to have that digital ecosystem complement what we already have. Now when we say we are pushing into the digital space, some things we have built ourselves because that makes sense. But in some cases, when we have -- when there are partners out there who have already a platform that can complement our services, then it will make sense to do a strategic partnership. And Doctor Anywhere was just one of that example.

[Operator Instructions] We have the next question from Rachel Tan from DBS.

Sorry, it's me again. I just want to follow-up on the telemedicine question that we had just now. Just -- I remember, you have a platform for telemedicine and the practitioners. Just wondering how different was this Doctor Anywhere? And how do you plan to integrate with practitioners?

Yes. So you're right. That's what I meant when I said earlier that some things we build ourselves, some things we would find partnerships. I will qualify that as we move forward, it's -- we -- there will be continuous -- it's a continuous improvement journey and we will take steps along the way. That which was working from before, we will continue. If there are new technologies and new partners, we adopt them, bring them on board our ecosystem, and then that helps to expand our capabilities. At this point in time, there isn't actually a conflict. In fact, it's complementary. Doctor Anywhere, as you know, it's an e-marketplace more than just telemedicine per se. So in that sense, it's still complementary. As time pass, of course, then we will see across all our operating geographies how we can bring about synergies or converge the technologies so that we start to also bring standardization. But as a start, there isn't a need for us to enforce an absolute standardization across all that we do as we adopt new technologies. It's important to remain agile so that we allow for some experimentation and continuous improvement of the group that keeps us innovating quickly and agile so that we can meet the new needs of welfare consumer faster.

Okay. So Doctor Anywhere is not exclusive to only IHH doctors. It's an open platform, is it?

Yes, it is an open platform.

Okay. Okay. And any transaction that you can share, like how has the transaction picked up since COVID from the usage of telemedicine?

I see. Okay. Well, different markets is different. I suppose it's just a cultural matter. But during the COVID times, I'd say that rough order of magnitude, some of our markets have reached up to about 7%, 10% of the outpatient volumes by telemedicine. How would this trend change over time? I'm not sure, but as the regulations start to evolve, perhaps accelerated by COVID, we believe that that need will be there. And we'll continue to write that way. That's why we wanted to take leadership to be very early off the block to do this.

Thank you. We have no further questions at this moment. I would like to hand the conference back to Penelope Koh.

Thank you. If there are no further questions, we will now conclude the IHH Healthcare First Quarter 2020 Financial Results Briefing. Thank you for joining us today. And if you have any questions, feel free to contact me via e-mail at [email protected]. With that, operator, you may disconnect.

Thank you. Ladies and gentlemen, that concludes our conference for today. Thank you all for your participation. You may disconnect now. Thank you.