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COVID-19: A look at challenges and growth drivers in healthcare

Article-COVID-19: A look at challenges and growth drivers in healthcare

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The region’s healthcare sector is in a strong position to respond to medical crises as they emerge.

The healthcare sector is transforming at a substantial pace, and there are several major trends that we are witnessing in the region. However, it is no secret that challenging macroeconomic and geopolitical factors have resulted in liquidity pressures within GCC economies over the past few years. While the healthcare sector has continued to register a healthy yet normalised growth rate, it was not immune.

That being said, healthcare has been active in the region in terms of mergers and acquisitions activity. In my opinion, this will continue, albeit at a different scale, as larger more established, players seek to consolidate and diversify by acquiring smaller operators. It also makes sense for the latter, who in turn wish to monetise and exit.

However, the expected acquisitions will be smaller and would be mainly directed towards niche businesses such as homecare, long term care (LTC), dental and cosmetic surgery, which can be margin accretive and also cash-based. Naturally, this will provide relief from stretching insurance receivables and stress on working capital.

The region’s healthcare sector is also in a strong position to respond to medical crises as they emerge. Take the UAE’s response to the outbreak of the Coronavirus. The UAE Ministry of Health and Prevention is aligned with World Health Organization’s (WHO) scientific recommendations on the preventive measures and precautions that are already implemented across the country’s health facilities to prevent any outbreak of the disease. This is especially true at airports where thermal screening is now mandatory for all passengers. As announced by the UAE Health Minister Abdul Rahman bin Nasser Al Owais, the country was amongst the first to provide state-of-the-art equipment for detecting the Coronavirus.

Impact of technology

As with every aspect of our lives today, the healthcare sector is also benefitting from technology. For instance, mHealth technologies leverage smartphones to make a substantial impact in providing care access to various underserved regions of Africa. Several GCC countries already have a digital transformation framework for healthcare, while the UAE and KSA have already an AI strategy in place for healthcare. In contrast to American and European populations, 67 per cent of patients in the GCC prefer AI-enabled healthcare delivery.

Access to financing

However, the big question is: how do healthcare providers create profitable, sustainable financing structures? The answer is diversification of income and funding sources. For instance, over the past two years, several providers have leaned toward debt capital markets (DCM). While this could be more expensive, it offers longer average life and more back-ended repayment terms to allow greater flexibility for investment.

Other healthcare providers are accessing the equity capital markets (ECM) in the medium term. In my opinion, providers with access to multiple sources of long-term funding via the DCM and ECM will have an edge in sustainable financing.


As we head into 2020, there will still be questions around how the sector will tackle key challenges. Nevertheless, most studies indicate that the sector will continue to grow, anywhere between 5 to 8 per cent this year.  Furthermore, given the GCC has an insurance-driven healthcare model, the incentive to control costs will drive payers to put the onus of managing patients’ health better on providers, as well as by controlling reimbursement.

Given the issue of chronic health conditions of GCC citizens, and an ageing population, which suffers from co-morbidities, the focus will be on two fronts for care delivery – prevention before hospitalisation, and post-acute-care in a step-down manner to ensure monitored recovery in cheaper settings, outside of hospitals.

Medical Tourism

Medical tourism is also a key area of focus on the UAE’s agenda. This is reflected in the fact that medical tourism in the country increased 5.5 per cent year-on-year to reach Dh12.1 billion in 2018, with growth supported by government initiatives and the rising number of medical tourists, according to a new analysis by Dubai Chamber of Commerce and Industry. Currently, orthopaedics, sports medicine, dermatology, dentistry and fertility treatment are among the top specialities for medical tourism in Dubai, and the emirate aims to attract 500,000 medical tourists by 2020.

Then, there is specialisation, and centres of excellence. Given the previous supply gaps and anticipated growing demand for healthcare in the UAE and the GCC, there has been substantial investment in healthcare capacities in the region.

While the demand is likely to grow, supply growth has been outpacing it for the past few years, at least in terms of general hospital beds. In the UAE, there were 154 hospitals in the country in 2018, up from 107 in 2013. Based on this, providers, investors and regulators all turn towards specialisation and centres of excellence in areas like cardiology, oncology and diabetes.

However, the key challenge for the GCC is attracting and retaining highly qualified healthcare professionals that would tempt patients to pay a premium here rather than seek treatment elsewhere.

Push towards local pharmaceutical manufacturing

A key element of both the cost control and growth is expected to come from the continuous push towards local pharmaceutical manufacturing. Expectedly, the medical technologies sector is likely to see the highest growth, thanks to increasing demand for new equipment from hospitals, along with digital health, which is witnessing rising adoption from health IT solutions providers and patients for virtual care solutions.

On the pharmaceutical production front, it is expected that the trend of localisation of pharma manufacturing will continue to accelerate. With only 20-30 per cent of products being manufactured domestically, the sector is attractive for local manufacturing.

Saudi Arabia and the UAE have undertaken several local manufacturing initiatives and are likely to continue to invest. Government policies for local manufacturing of branded generics, biosimilars’ for arthritis and cancer drugs are also supportive of this trend.

Overall, if we take all of the above into consideration, it is no exaggeration to state that the healthcare sector in the region, and globally, remains to be amongst the most dynamic sectors. The vital signs are promising and provided the sector continues on its current trajectory, it continues to show a lot of promise.

Karim Amer, Senior Director - Head of Healthcare and Education, Corporate and Investment Banking Group, Mashreq 2.jpg

Karim Amer

OH mag issue 3_small.jpgThis article appears in the March/April edition of Omnia Health Magazine. Other topics include AI in healthcare, patient safety, mobile healthcare and further updates around on COVID-19 from the healthcare industry.

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