A recent report titled Healthcare in Saudi Arabia Opportunities in the Sector by Knight Frank highlighted that the prevailing picture in the country is one that offers several prospects to existing operators/investors and new entrants, hence there is a possibility to unlock a significant growth potential by fulfilling existing and future gaps. In an interview with Arab Health Magazine, Shehzad Jamal, Partner, Healthcare and Education, Knight Frank, underlined that in the context of the growing healthcare demand in the Kingdom of Saudi Arabia (KSA), government initiatives call for greater participation of the private sector in healthcare as emphasised in the National Transformation Plan (NTP). He also shed light on the technological transformations changing the industry. Excerpts:
What do you think is driving the healthcare industry forward in Saudi Arabia? Are there any current trends you would like to highlight?
The healthcare sector in KSA is undergoing continuous changes and in the right direction. In my opinion, the top three factors that will drive the sector forward are:
Demographic profile: This factor is often overlooked, because of the general perception that KSA is a country with a young demographic profile. However, in the next decade, the country will see a structural shift in its population composition resulting in a significant increase in the population above the ages of 40 and 60. This will drive demand for healthcare services, and the nature of services, spend per patient, duration of care and type of specialisations will significantly change compared to what the industry is seeing today.
Government initiatives and policies: This includes factors such as the National Transformation Programme 2020, including the mandatory health insurance for private sector employees and planned coverage of public sector employees that will improve the overall propensity to spend on healthcare. This will tilt the scale towards the private sector as patients increasingly prefer the private sector on account of the quality of care, efficiency and reduced lead times for appointments. The private sector will gain more prominence and have more opportunities for investment, as the government sector moves away from being a healthcare service provider to a regulator.
Tech: Technology, in general, has helped improve the service delivery of healthcare. However, there are some technologies that are disrupters, and will change how healthcare can be delivered. For example, the use of telemedicine and wearable health monitors; if these are allowed to be more mainstream it will change how business is conducted. The healthcare operators will need to reconsider how to reconfigure their hospitals and other outpatient facilities as the volume of patients coming to hospitals with minor conditions or follow up visits may reduce. In addition to the reconfiguration of their healthcare facilities, the healthcare operators will also need to consider the investment in IT infrastructure to support these platforms.
Could you share some key insights from Knight Frank’s Healthcare in Saudi Arabia Opportunities in the Sector report?
The healthcare sector in KSA is poised for growth on account of the demographic shift and increased insurance coverage. The population dynamic alone shows that there can be an expected increase in the burden of lifestyle diseases and associated comorbidities that would result in a demand for specialised medical and surgical care.
There is a visible gap in the infrastructure available versus what is required in the healthcare sector, which is a sufficient business case for investment in healthcare. Primary research conducted by our team revealed the following:
– Healthcare services in high demand include orthopaedics, obstetrics and gynaecology, IVF, ENT, gastroenterology, cardiology/cardio surgery and ophthalmology.
– Healthcare services with capacity constraints: rehabilitation, oncology, orthopaedics and cosmetic surgery – there is significant outbound medical tourism for these services.
What are the major healthcare market segments that are likely to expand in the coming year, and why is this so?
I see two segments within the healthcare sector that are likely to expand multi-fold:
a) preventive care (wellness driven) and
b) medical care (long term care, rehabilitation and geriatric care).
The population of KSA is susceptible to non-communicable diseases (diabetes and obesity) due to sedentary lifestyle and unhealthy food choices, which unfortunately are more accessible in terms of cost and availability. In developed countries as well as the GCC, the wellness concepts of nutrition management, active lifestyle, healthy living etc., are catching up. We are observing the increasing interest of investors in this sphere, and believe it is a very promising segment.
In a similar vein, the anticipated demographic changes with the population between 40-59 years and above 60 years is set to increase by almost 1.5 and 3 times respectively. We expect an increase of interest from government authorities, operators and investors alike in niche segments such as long-term care, rehabilitation and geriatric care. For European and North American countries, which have stepped in the era where healthcare sector concerns skewed towards the ageing population, these concepts are widely spread and are implemented as successful business models.
What are some of the current issues the GCC’s healthcare industry faces and what are the possible solutions?
The issues faced by the healthcare sector is broadly similar across the GCC, such as reliance on foreign qualified healthcare resources, lack of certain specialised healthcare services (forcing people to travel abroad for treatment), lifestyle diseases, lack of a quality primary care facilities especially in rural areas, which leaves tertiary care overburdened with patients.
To ensure steady improvement in the health sector, it is imperative to encourage private sector investment. This will create competition, which in turn improves quality of services, efficiency in the system etc. However, there needs to be a strong mechanism in place that should ensure an oversupply situation will not arise as that would be detrimental. The government must analyse the sector and identify gaps within the different healthcare specialties. This will allow the private sector to channel their investment to serve these segments. This will not only reduce the investment risk within the healthcare sector but also build the overall healthcare capacity of these countries holistically.
To draw private sector interest, further concentration is required on the following:
Investor friendly legislation and schemes: Increased private sector participation by the introduction of PPP schemes (with clear structures), tax holidays, low-cost credit etc.
Foreign Investment: Expedite company formation process for foreign firms, permit repatriation of profits, assist visas for specialist staff to overcome human capital issues etc. We understand that the Saudi Arabian General Investment Authority (SAGIA) is playing a promising role in this.
Capacity to spend: Expedite the implementation of mandatory insurance for Saudi nationals employed in the public sector. This will shift the quantum of care towards the private sector and help reduce the burden of healthcare from the shoulders of the government. These matters need to be addressed now because as the population starts ageing, the cost of care will increase and then implementation and shifting of care to the private sector may become challenging.
Healthy lifestyle awareness campaigns: Although GCC governments have been professing this for some time, a concentrated initiative is required, targeting all age groups and society at large to promote a healthy lifestyle as the way of life.
Increased use of technology:
Telehealth: The potential in this area is immense and can pave the way for collaboration of domestic healthcare operators with other internationally renowned healthcare providers. The practical advantage of this method of care is that it provides immediate access to healthcare professionals, restricts travel to a healthcare service provider on a need basis and reduces the burden in the outpatient department of healthcare facilities. In critical cases, the use of telehealth may also result in the saving of lives as real-time specialist guidance can be provided to stabilise a patient in healthcare facilities, which do not have adequate specialists
Technology wearables: These instruments can constantly track a person’s vitals and provide complete data allowing physicians to provide holistically proactive care rather than reactive treatment. This is more cost-effective and better for the entire system.
Is Saudi Arabia emphasising prevention?
Several government-driven initiatives are already changing the dynamics of the sector and contributing to reshaping the healthcare landscape in the Kingdom. What is important is to understand how the general public is responding to such ideas and how that is resulting in opportunities for investment.
Our research highlights that growing general public awareness of healthcare shows an increasing inclination of the population seeking preventive care and for reactive measures, they are preferring centres of excellence over general hospitals.
This trend presents an opportunity for existing and new market participants to introduce:
– Windows for preventive care services such as screening programmes, genetic studies to understand the disease predisposition among others, which has proven long term health and economic benefit for patients and the overall health system of a country.
– Development of centres of excellence in areas of their core strength especially in medical conditions relating to oncology, orthopaedic and lifestyle-related diseases.
Several government-driven initiatives are already changing the dynamics of the sector and contributing to reshaping the healthcare landscape in the Kingdom.