How can private investments unlock Vietnam’s healthcare?

Health outcomes improved dramatically over the past two decades, notably reducing maternal and infant mortality by 36 per cent and 30.5 per cent respectively. Medical infrastructure expanded, with 1,100 public hospitals and 11,000 health stations, of which are 300 private hospitals and 35,000 clinics.

Matthieu Francois, partner, Delta West (left) and Valerie Van Tran, partner, Delta West

However, Vietnam faces a demographic shift that requires a reassessment of how the healthcare system is organised. By 2050, over one-fifth of the population will be aged 65 or older. In addition, urbanisation and lifestyle changes contribute to a shift in the disease landscape, with cardiovascular diseases, diabetes, and cancer becoming more prevalent. In 2023, Vietnam recorded 180,000 new cancer cases and 120,000 cancer-related deaths. This rising burden of chronic diseases is placing pressure on the system.

Despite notable achievements, Vietnam’s healthcare system faces three key challenges. First, primary care is underutilised while hospitals are overcrowded. Commune health stations are designed to serve as the first point of contact for patients; yet they often lack the necessary resources, equipment, and trained medical staff to serve patients effectively. As a result, many patients bypass these stations and seek care at central or provincial general hospitals, which are overcrowded and can operate at over 100 per cent capacity.

The lack of preventive care is also a concern, with only 20-24 per cent of provincial health budgets allocated to preventive measures, far below the mandated 30 per cent. This exacerbates the problem of undiagnosed chronic diseases, such as a significant proportion of cancer cases only discovered at late stages.

Second, there exists a shortage of medical professionals. Vietnam continues to grapple with a shortage of healthcare professionals, particularly nurses. In 2020, the country had only around 11 nurses per 10,000 population, trailing behind neighbouring countries such as Thailand (31) and Singapore (74).

The addition of a larger workforce needs to go hand in hand with the upskilling of nurses and doctors, given only 5 out of 32 medical programmes have received quality accreditation and over 75 per cent of nurses do not meet the standard qualifications set by the World Health Organization and ASEAN.

Finally, there are enduring funding gaps that contribute to significant out-of-pocket spending for patients. Despite high social health insurance coverage, out-of-pocket spending remains over 40 per cent of total expenditures, placing a significant financial burden on patients. The social health insurance fund has encountered budget deficits in recent years due to rising healthcare demand and stagnant contribution rates. Furthermore, private insurance coverage remains limited, with less than 1 per cent of the population holding a policy.

With these challenges in mind, there are four immediate investment opportunities that the private sector can play in transforming Vietnam’s healthcare system while generating sizable returns.

Firstly, investment in primary care networks, particularly in second-tier cities, can help ease the burden on overcrowded public hospitals. Affordable screening services, early-stage treatments, and preventive care packages are areas ripe for development, offering both social impact and financial returns.

The second aspect is catering to the growing middle-class for services not covered by social health insurance. Vietnam’s growing middle-class presents opportunities for private healthcare providers to offer services not covered, such as IVF, Lasik, and specialised treatments. A roll-up strategy focusing on acquiring and expanding existing healthcare providers could yield significant returns.

Third involves addressing non-communicable diseases by bringing in more specialised know-how. Private investments in specialised healthcare services, such as oncology, cardiovascular, or orthopaedics, could help relieve pressure on public hospitals. Success factors for such investments will require strategic investors with operational excellence and medical expertise to accelerate the scale up of these services.

Finally, developing pharmaceutical manufacturing is critical. Vietnam’s reliance on expensive imported specialised drugs presents a challenge for the country to manage the healthcare budget. The government has expressed strong support for investment in local drugs manufacturing, particularly for chronic disease medications and high-cost brand-name drugs. This will be a golden opportunity for investors who can the operational know how to upgrade the manufacturing standards such as EU or Japan GMP standards.

As Vietnam’s healthcare sector faces challenges, it also presents significant opportunities for investment. Strategic investments in these areas could help Vietnam build a more resilient, efficient, and inclusive healthcare system that meets the needs of its rapidly ageing population.

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