According to human data science company IQVIA, the compound annual growth rate (CAGR) for the total healthcare market in the Kingdom of Saudi Arabia (KSA) for 2018/2019 is expected to be 3%. So with the KSA market expected to continue growing in the coming years (Saudi Arabia represented 58.5% of the region’s healthcare market with current healthcare expenditure of US$ 37.7 billion in 2015), primarily driven by diversified investments towards healthcare, new private hospitals entering the market set up and chain pharmacies increasing in numbers, the many new facilities and healthcare initiatives provided by the government is encouraging investment and improvement in quality of healthcare system in the Kingdom.
The plans outlined in the country’s Vision 2030 identify healthcare as one of its main focus areas and, as such, the target objective of the national transformation programme is to increase private healthcare expenditure from the current 25% to 35% of total expenditure by 2020 through alternative financing methods and service providers. In order to successfully meet this target, the Ministry of Health has embarked on reforms and restructuring of primary healthcare in the country, public-private partnerships through the privatisation of medical cities and localisation of the pharmaceutical industry, increasing the capacity and quality of healthcare education, health insurance & medical services purchase schemes, and increasing the number of trained health practitioners and improving their training, amongst other initiatives.
Partnering for growth
Mohamed Mostafa, who is a senior director and general manager for Egypt and Upper Gulf at IQVIA explains that there is a lot of interest and traction in public-private partnerships in the Kingdom. “We have seen many big multinational companies signing memorandums of understanding with public universities to encourage training, for example. And we also see a trend of localisation in manufacturing where many private companies are partnering with local companies to produce locally.”
As reducing the financial burden in KSA becomes a priority, private-public partnerships are increasingly being utilised for cost-savings and improving operational efficiencies. The recent announcement of the formation of a joint venture healthcare platform with Hassana Investment, a unit of pension fund General Organisation for Social Insurance (GOSI) in KSA, and UAE-based NMC Health, a large private healthcare operator, would see the creation one of the largest private healthcare platforms operating in KSA today.
According to a statement from NMC Health, the joint venture would have a strategically unique position in the country, with a strong foothold in Riyadh, the single largest healthcare market in Saudi Arabia, as well as in multiple smaller, underserved cities. The enlarged organisation is expected to benefit from economies of scale, allowing more efficient deployment of capital, increasing patient choice and optimising returns across multiple assets. Furthermore, in-line with NMC’s existing strategy, the proposed joint venture platform would continue to build a strong pan-Saudi Arabia presence, unlocking considerable synergies across its facilities in the process. These are expected to cover business segments such as revenue cycle management, procurement, HR and IT systems among others.
NMC CEO Prasanth Manghat said, “The Saudi government’s forward-looking and investor-friendly policies make the Kingdom one of the most attractive destinations in the region for investment in the healthcare sector. Moreover, Hassana’s strong commitment to the sector, particularly in the form of strategic investments, remains a vital means of attracting and developing healthcare expertise in the country.
“NMC has been the most progressive foreign entrant in the Saudi healthcare market, and the proposed partnership with Hassana would accelerate the process of bringing international best practices to Saudi Arabia,” he added.
Commenting on the joint venture, Saad bin Abdulmohsen Al-Fadly, CEO of Hassana, said: “The proposed partnership between Hassana and NMC is driven by our view that healthcare in Saudi Arabia is one of the most attractive markets for strong long-term growth. The proposed joint venture has ambitious growth plans across different healthcare sub-sectors, with both partners committed to compounding returns over the long term, whilst providing best-of-class services to patients. Benefiting from Hassana’s role as a strong long term financial and strategic investor and NMC’s expertise as a sophisticated and successful healthcare expert in the region, the joint venture platform would be well-positioned to become one of the most dominant healthcare players in Saudi Arabia and is ideally positioned to capitalise on the health care privatisation programme in Saudi Arabia in line with the country’s Vision 2030 initiatives.”
Digitising the marketplace
As is the case in many healthcare systems around the world, and as it is in the GCC’s hospitals, up to half of annual operating costs go to third parties. According to Federico Mariscotti, who is a vice president in A.T. Kearney’s Procurement & Analytic Solutions Practice in the Middle East, although governments and private companies have spent billions of dollars to expand the region’s healthcare facilities, increasing capacity and improving outcomes, healthcare systems in the Gulf have yet to tap into a powerful way to make hospitals more efficient: optimising the way goods and services are selected and sourced.
“An advanced approach can reduce a hospital’s external costs by 20% and cut waste in half, whilst improving the quality of care,” Mariscotti says. “By making sustainable cost reduction, reinvesting these sums into healthcare priorities creates huge possibility.”
Indeed, Emdadat, a Saudi national company specialised in innovating the integrated services and solutions in KSA, has done just that with the launch of a new digital marketplace for healthcare on SAP Ariba. The procurement and business technology specialist has created a digital marketplace through which medical providers and suppliers can connect and collaborate across the entire procurement process to increase their efficiency and improve quality of care.
The platform is intended to create an online sourcing process through which buyers including hospitals, pharmacies and doctors, can connect with suppliers who can deliver the right goods and services at the right prices to meet their customers' needs. The platform will also ensure that goods are delivered to the right places at the right times under the right conditions and support healthcare entities to manage their capacity, demand, and medical equipment utilisation by integrating with supply chain and sourcing activities in real-time. Using the network, buyers can manage the entire purchasing process from end-to-end, while controlling spending, finding new sources of savings and building a healthy supply chain.
Emdadat CEO Abdullah Alfifi said about the new platform: "At Emdadat, we have successfully integrated healthcare stakeholders into a sustainable ecosystem where they can communicate and trade with greater insight, transparency, efficiency and speed, and in doing so, we are transforming the health sector in the KSA into one of the finest systems globally and setting a new standard for the way healthcare is sourced and delivered around the world."
Investing in Infrastructure
KSA has made significant investments to build hospitals, clinics, research centres and huge medical cities and complexes. According to an Alpen Capital GCC Healthcare Industry report for 2018, the Kingdom is likely to witness the largest bed requirement in the region at over 7,500 new beds to cater to its large and expanding base of population - the country’s General Authority for Statistics (GaStat) recently reported that KSA’s population registered an annual growth rate of 2.52% in 2017. In fact, Knight Frank has estimated that in order to keep pace with population growth, the Kingdom would require an additional 20,000 beds by 2035 (based on the current density of beds) and, based on the global average of bed density, KSA will face a gap of 40,000 beds by 2035.
There are a number of ongoing healthcare infrastructure projects in the Kingdom including the King Abdullah Bin Abdulaziz project for the development of Security Forces Medical Complexes which the largest healthcare project in KSA, and also the largest medical project in the GCC. Two separate medical cities for security forces are being developed in Riyadh and Jeddah on behalf of the Kingdom’s Interior Ministry adding an extra 2,000 beds to the country’s bed capacity.
Meanwhile, the US$1.27 billion King Khaled Medical City in Dammam is scheduled for completion in 2020. The 1500-bed hospital project, managed by the King Khaled Mega Project Management Office (PMO) on behalf of the Ministry of Health will include many centres of excellence, a research centre, staff accommodation, conference centre, mosque, administrative building, car parking structures and community centre.
Another mega project is the King Faisal Medical City in Asir. With an estimated project cost of US$1.06 billion, the 262,836 sqm., 1,350-bed mega hospital complex will comprise of a 500-bed main hospital and another 850 beds distributed across five speciality hospitals: cardiology, oncology, ophthalmology, neurology and rehabilitation.
Also, the Mouwasat Hospital in Al Khobar has an expected capacity of 220 beds, 60 out-patient clinics, a substation building and staff accommodation, and will be established on a 53,000 square metre land plot.