More Hospitals for Mothers and Children

Mothers' and Children's Health

The World Health Organization estimates that, in 2015, Indonesia’s maternal mortality ratio was 126 per 100,000 live births, while infant mortality was 23 per 1,000 live births—among the highest in Asia. The United Nations Sustainable Development Goal 3 on Health and Well-Being targets a reduction in global infant mortality rate to less than 12 per 1,000 live births and global maternal mortality ratio to less than 70 per 100,000 live births by 2030.

Indonesia has been keen on addressing these concerns by achieving universal health coverage for its 279 million residents. The Jaminan Kesehatan Nasional (JKN), the country’s mandatory universal health insurance program launched in 2014, aims to increase access to high-quality, affordable hospital and healthcare services. The JKN is open to private sector partners interested in joining as service providers. PT Medikaloka Hermina Tbk was among the first private hospitals registered under the JKN.

Hermina, founded by Hermina Sulaiman in 1967, began as a small maternity clinic of seven beds. In 1985, It became a full-fledged maternity hospital in the Jatinegara district, East Jakarta. Three decades of expansion later, Hermina has become one of the biggest hospital chains in Indonesia, with 28 hospitals and about 2,780 hospital beds by 2017. But the hospital chain has an even bigger plan—to go public on the Indonesian Stock Market to further expand its operations and provide health care services to more mothers and children across Indonesia.

Private Hospital Partner

In March 2018, Hermina sought ADB’s participation as an anchor investor in Hermina’s planned initial public offering (IPO) on the Indonesia Stock Exchange. The proceeds from the IPO would help Hermina expand its operations. ADB’s participation could entice other investors. In April, ADB approved the Indonesia: Maternity and Child Care Hospital Project to provide an equity investment of up to $10 million in rupiah equivalent to Hermina. The Leading Asia Private Infrastructure Fund (LEAP) cofinanced the project by providing an equity investment of the same value.

Hermina is playing a key role in saving the lives of mothers and newborn babies in Indonesia. It’s very exciting that ADB was able to join as an early investor to Hermina, helping pave the way for more investors to come in and support Hermina’s plans to expand maternity hospitals.

– Aniruddha Patil, ADB project officer and unit head, Health and Education Investments

The project aimed to develop 12 new hospitals and add 1,220 hospital beds to expand Hermina’s medical facilities to 40 hospitals with 4,000 beds from 2018 to 2020. The project also aimed to promote the use of electronic health and medical records to support quality care management and generate 4,281 jobs within the same period. Hermina’s business strategy has three key elements: a doctor partnership model, phased hospital expansion, and early adoption of the JKN.

Doctor partnership model

In opening new hospitals, Hermina partners with established local specialist doctors already familiar with the local community and licensing process. The doctors provide services at the new hospitals and are offered to invest in them by buying minority equity stakes. Hermina retains a majority stake in the hospitals and maintains operational control. Doctors become eligible to receive dividend payments based on their equity ownership in that hospital. This model helps Hermina attract reputable and qualified doctors to open new hospitals. It also creates a strong alignment of interests between Hermina and the doctors, who have incentives to ensure efficient start-up and value important long-term objectives, such as maintaining operational excellence.

Phased capacity expansion

A new Hermina Hospital typically has a minimum of 50 beds in a structure that can hold two additional floors. Hermina does not expand until the hospital reaches certain occupancy benchmarks. This phased expansion approach and the equity contribution received from the doctor partnership model reduce Hermina’s initial capital expenditure as it develops hospitals. About 30% of all staff (excluding specialist doctors) at the new hospitals are transferred from existing hospitals to ensure new hospitals are launched rapidly and operated efficiently. This core staff group is familiar with Hermina’s policies and procedures and helps integrate new staff into Hermina’s operational approach.

Early adoption of the Jaminan Kesehatan Nasional

As an early JKN adopter, Hermina has gained valuable experience in optimizing the operational aspects of its business—such as patient traffic management, efficient hospital design, administrative efficiency, and familiarity with the reimbursement process—enabling it to serve JKN patients efficiently. In addition, Hermina has a dedicated team focusing on JKN-related activities, including monitoring JKN progress, maintaining regulatory relationships, and managing JKN receivables. Early adoption has also positioned Hermina well for long-term growth, given the expectation that the JKN will cover all Indonesians.

Going Public

Hermina’s partnership with ADB and LEAP paved the way for a successful IPO. Herminia made its trading debut on the Indonesia Stock Exchange on 16 May 2018, offering 351.4 million new shares to investors for 3,700 Indonesian rupiah (Rp) per share. The company raised Rp1.3 trillion (about $93 million) from the IPO. Part of the proceeds was used to fast-track the development of hospitals across Indonesia.

As of November 2021, Hermina has 3,800 partner doctors and specialists stationed in 42 general hospitals with a total of 5,627 beds across 26 cities in Indonesia. The partnership between Hermina and JKN has led to an increase in people’s health spending. In 2019, the hospital chain serviced around 6.1 million outpatients and admitted 375,000 patients.

While every Hermina Hospital offers a wide variety of specialist and subspecialist care, the hospital chain has become known for its excellent obstetrics, gynecology, and pediatrics departments. In 2019, Hermina successfully delivered around 55,000 babies.

“Hermina is playing a key role in saving the lives of mothers and newborn babies in Indonesia. It’s very exciting that ADB was able to join as an early investor to Hermina, helping pave the way for more investors to come in and support Hermina’s plans to expand maternity hospitals,” said Aniruddha Patil, unit head, Health and Education Investments, and project officer, ADB.