Features

Saudi Arabia to focus on Healthcare Sector

Shehzad Jamal who is a Partner at Knight Frank and heads the Healthcare & Education Service Lines in conversation with Vasujit Kalia and shares his expertise on the health care sector in Saudi Arabia.

Saudi Arabian government maintains its focus on the healthcare sector in line with the objectives set out in the Vision 2030, and the related interim targets for the year 2020 as defined in the National Transformation Plan (NTP).

The healthcare sector retained its position as the third largest area of spending in the 2019 fiscal budget and saw its share of total budget spend trending higher over the past few years. Privatisation initiatives have seen the commencement of the first Public Private Partnership (PPP) project by Ministry of Health (MoH), which targets radiology and medical imaging services in the Riyadh region. From a regulatory perspective, we have seen the Council of Cooperative Health Insurance ( C C H I ) increasing its focus on enforcing mandatory health insurance for all companies operating in the private sector. This should translate into a larger pool of beneficiaries and positively impact demand for private healthcare services in the future. Overall, we are witnessing continuous efforts and further initiatives in favour of increased private sector involvement and investments in the healthcare space.

Governmentinitiatives

The healthcare and social development sector maintained its position as the third largest recipient of government expenditures in the 2019 fiscal budget. This is equivalent to 15.6 percent of the total budget for 2019, as against to 15.4 percent in 2018 and 14.4 percent in 2017.

The budget amount allocated for the sector has grown by 8 percent to reach SAR 172 billion in 2019, as compared to SAR 159 billion in 2018.

These positive trends point to the government’s willingness to invest, driving growth and improvement in the sector over the coming years.

Figure 1 shows the rising allocation of the government expenditure in the healthcare and social development sector over the past three years.

Part of the allocated funds for the sector are channeled towards achieving the goals and targets defined in the Saudi Vision 2030 and the 2020 NTP.

The government is directing funds towards building robust healthcare infrastructure, by completing construction and installation of equipment in hospitals and primary healthcare centres, in different regions throughout the Kingdom.

Saudi Vision 2030 & the NTP

The MoH has delivered a Healthcare Transformation Strategy Plan as part of the Vision 2030 and the NTP, in which there are three elements that were identified as requiring improvement:

1. Health and quality of citizens’ life

2. Quality of service and value for the sector by containing costs

3. Outcomes and guiding new investments.

The MoH has identified that certain key healthcare indicators such as the number of healthcare practitioners, healthcare related universities, hospitals, medical centres, life expectancy and infant mortality rate, have witnessed significant improvement over the past years.

The number of hospitals expected to be delivered during 2016- 2020 stands at 30, which equates to 70 percent of the total number planned for the next five years, with a total capacity of 6,950 beds.

Other indicators which have been identified as areas in need of improvement include a high rate of chronic diseases, early age mortality and unfavorable lifestyle habits.

Mandatory health insurance

⦁ Saudi Arabia is increasing regulatory supervision regarding the adoption of the mandatory unified health insurance in the country, with the CCHI recently unveiling new procedures aimed at increasing the supervision of private sector companies.

⦁ The gradual rollout of mandatory health insurance in Saudi Arabia and the enforcement of the law are expected to translate into an increase in the number of beneficiaries and a wider utilisation of medical services at private healthcare facilities.

⦁ As of August 2019, there were 26 insurance companies operating in Saudi Arabia and the number of insured persons in the Kingdom stood at 11,075,993.

Privatisation and PPPschemes

The MoH is planning a series of PPP projects ranging from primary healthcare facilities to medical cities. The MoH recently embarked on its first PPP project (inviting local and international service providers) which targets radiology and medical imaging services covering several hospitals in the Greater Riyadh region. Once delivered the project is expected to improve medical imaging services in terms of wait and turn- around times as well as reliability of imaging for more appropriate treatment. This collaboration will improve the availability of highly specialised services such as Positron Emission Tomography scan and Nuclear Medicine in Riyadh.

This first PPP project reflects the government’s commitment towards achieving the ambitious privatisation plan, as updating and expanding radiology services across the country with the private sector is a key target in relation to the healthcare sector.

Long-termcare/ rehabilitation

Our healthcare research has identified LTC (including rehabilitation) as a sector with strong demand fundamentals, which is set to expand especially with the changing population dynamics.

These segments have also been identified by the government in the Health Transformation Strategy which states: “There is inadequate capacity in extended care services such as rehabilitation, long-term care and home care.” In addition, this segment is also on the PPP list, under the NTP programme.

Defining long-termcare

LTC is a collection of services which assist both medical and non-medical conditions of patients with chronic illness or disabilities.

Rehabilitation is a key element of LTC care and can be classified into physical and mental rehabilitation.

Figure 1 identifies different health conditions and the required health facilities to cater to these conditions. Patients that fall under the LTC category do not usually require an acute care setting, instead they require limited healthcare services that are specific to their condition.

However, due to lack of such facilities, LTC patients occupying hospital beds create bottlenecks within the general health system.

Statistical data on LTC is negligible, as it has historically been a niche segment and served by only a handful of healthcare service providers (mainly government bodies).

Key points that support investment within the LTC sector in Saudi Arabiaare presentedbelow:

⦁ Due to scarcity of LTC infrastructure, the government has to send patients abroad for treatment, which is a very costly proposition. Taking rehabilitation as an example, 36,000 accident patients needed to be cared for in 2015, with only 236 beds dedicated for LTC in MoH hospitals.

⦁ Figure 4 presents LTC (including health rehabilitation) bed density by developed nations in comparison to Saudi Arabia.

⦁ Statistics show that 13.9 percent of the MoH active beds were blocked by LTC patients in 2017, compared to 7 percent in 2016. Figure 5 presents the breakdown of this data for Saudi Arabia by area.

⦁ In addition, our primary research (based on interviews with stakeholders) indicates that approximately 10 percent of acute care beds within other government and private sectors are utilised by LTC patients. This translates to around 9,000 beds, including MoH beds, that are blocked by such patients representing unmet demand. According to leading healthcare operators the unmet demand is higher and their estimate is in the range of 12,000 to 15,000 beds.

⦁ To help investment, the government is seeking to introduce approximately 2,000 beds for extended care and rehabilitation under the PPP mechanism by 2022, with a guaranteed offtake agreement.

⦁ Private sector LTC service providers are operating at optimal utilisation.

⦁ In addition to just numeric supply constrains there are certain specialist services within this sphere that are non- existent (or minimal) which can be introduced such as cardiopulmonary rehabilitation, neuro rehabilitation etc.