Collaborating for change

The tilt from public towards private healthcare provision has become more marked across the region over the past decade, reflects M.V. Suresh, CEO of National Pharmaceutical Industries.

“Historically there were only government hospitals,” he reflects. “At first, private hospitals catered largely for the expatriates.

“Now with the advent of medical insurance, citizens have the choice to go to a private hospital. Growth will move towards the private sector.”

Insurance drives demand

Magda Habib, CEO of Egypt-based Dawi Clinics, certainly sees the roll-out of universal health insurance there as a trigger for market transformation.

“The Government is very clear that it cannot fulfil the entire demand on its own, and that it needs to partner with the private sector in various forms,” she notes.

In those states which have already implemented mandatory health insurance, the impact on service patterns is becoming clear.

“Since it was introduced in Abu Dhabi in 2014, the average number of times a patient visits a doctor increased from once or twice to four times a year,” says Shehzad Jamal, Partner, Healthcare & Education at Knight Frank.

“Once insurance has kicked in throughout the region, you will find the government taking the role of healthcare administrators rather than operators, giving a massive boost to private sector operators as they take a greater role.”

Squeezed margins, growing revenue

One effect of the insurance change is the erosion of margins, thanks to insurers’ negotiating power. However, the overall revenue pool is vastly expanded, with a recent analysis suggesting MENA’s healthcare market will grow from US$ 185.5 billion in 2019 to US$ 243.6 billion in 2023¹.

Governments have acted to prevent oversupply and there is collaboration between public and private healthcare providers so they're not always vying for the same business.

A highly rationalised licensing process also means there are not too many organisations competing for the same target market.

Existing players have the edge

The widespread adoption of new regulations is raising standards. Combined with the need for efficiency and specialisation, this is leading to consolidation. Smaller providers are being acquired or replaced by bigger, professionalised groups, better placed to achieve economies of scale.

In this environment, new players are finding it hard to gain a foothold, observes Mansoor Ahmed, Director Valuation & Advisory – Development Solutions, Healthcare,Education, Infrastructure & PPP at Colliers International.

“Investors are happy to finance the first two to three years of operating losses for hospital chains already in operation, on the basis of their track record of profitability. However, it is still very challenging for new players in the market: they face a lot of problems generating funds,” he says.

There are financial challenges for established players too, notably related to the current slowdown in the wider economy. A delay in payments has trickled down from insurers and governments to affect hospitals, retailers, distributors and manufacturers.

Talent is key to success

Another hurdle states must overcome is getting skilled professionals in place to meet rising demand. There has been little progress in tackling the overreliance on expatriate workers: 90% of healthcare workers in Dubai and 96% in Abu Dhabi are expats, according to recent research.

‘Workforce shortages are going to be a critical concern,” warns Andrea Tithecott, Partner and Head of Regulatory Practice at Al Tamimi & Company.

‘The UAE needs to focus on some of the key workforce issues of finding and recruiting from a diminishing talent pool. Quality is going to be king, and businesses will only deliver all the key elements through the quality of the workforce.”

Ambitions for innovation

Despite these challenges, participants are upbeat about the prospects for improving healthcare through partnership.

Dr Ibtesam Al Bastaki, Director of Investment and Public Private Partnership Department at Dubai Health Authority, says: “We anticipate greater collaboration between public and private sector across the UAE to offer value-based health services, improve delivery of specialised care, bring new and innovative models supported by technology changes, and also help address the talent needs.”

“Ours is comparatively a young health system, but if you look back 10 or 15 years, the region has come a long way.”