Healthcare 2.0: What’s Next For The Region’s Healthcare Sector?

The regional healthcare sector appears to have witnessed phenomenal growth over the past decade, evidenced by the increasing supply of hospitals and clinics across the region. Overall, healthcare expenditures in the GCC grew from $60 billion in 2013 to $72 billion in 2018. Total healthcare spend is expected to grow to $89 billion by 2022 according to BMI reserach, representing an overall increase of nearly 50% in the GCC from 2013 to 2022.

Government outlays comprise approximately 72% of total GCC healthcare expenditures in 2018. However, there is an increasing drive to promote private spending in the sector by encouraging the adoption of Public Private Partnership (PPP) models. Increased contributions are evidenced by positive growth forecasts—private sector contribution is expected to grow at a CAGR of 7.4% over 20182022 in the GCC, compared to a CAGR of 4.9% for the government sector for the same period.

Overall, positive outlook in both public and private spending over the coming years is driven by several factors, including:

• The increasing penetration of compulsory health insurance, which will likely strengthen the healthcare sector by improving accessibility and utilization.

• The rising prevalence of lifestyle diseases, which has resulted in increasing awareness of preventive care (health checks and screenings) among the general public.

• Recent regional government initiatives focused on improving local infrastructure and reduce dependence on expatriate clinicians.

Upon closer examination, a similar growth pattern becomes particularly evident in the U.A.E. From 2013 to 2017, the number of hospitals has grown from 107 to 137. As of 2017, this comprises a total of approximately 13,200 hospital beds, representing a CAGR of 4.8% in that period. Similar to the expenditure pattern across the GCC, there is a predominance of government-related expenditure. In 2018, the U.A.E. government contributed 66% of the country’s

total healthcare expenditure of $15 billion. Going forward the private sector is expected to witness stronger growth. From 2018 to 2022, the private sector healthcare spend is set to grow at a CAGR of 9.5% compared the government contribution of 4.4%. This is mainly supported by:

• The rising emergence and support for PPP in the UAE healthcare sector.

• An increase in the aging population is anticipated to escalate demand for treatments and hospital beds.

• The privatization of hospitals and mandatory medical insurance, especially in Dubai and Abu Dhabi, will continue to encourage spending and contribute to a more integrated health system.

Considering the past growth of the healthcare sector in the U.A.E, one might argue that the market has reached a certain stage of maturity. Changes in the sector over the coming decade may be determined by several key themes affecting supply/demand dynamics; regulatory and market demand driven factors are likely to shape the sector in the years to come.

The introduction of mandatory health insurance in Abu Dhabi has led the way in promoting coverage for all U.A.E. nationals and residents in the emirate. U.A.E. nationals living in Abu Dhabi are covered at no cost through the “Thiqa” program. Additionally, all employers are required to provide health insurance to their employees and their employees’ dependents in Abu Dhabi. In general, a mandatory health insurance scheme drives demand for private facilities that will also attract investments.

In 2017, the U.A.E. government made significant steps towards setting up PPP schemes to promote private sector investments. In particular, the U.A.E. Cabinet issued a resolution on the procedures manual for partnerships between federal entities and the private sector. The aim was to diversify mechanisms for developing strategic infrastructure projects and improve the quality of services. A steady increase in public private partnerships is projected in various areas of healthcare delivery, including ambulatory care, home care, long-term stay and day-surgery centres among other areas.

Looking at the consumer side, certain factors affect the demand side for healthcare services. The population of the U.A.E. is growing, exhibiting an underlying change in demographics. The World Bank projects that the U.A.E.’s population will grow from 9.4 million people in mid-2017 to almost 11.1 million by 2030, with an average life expectancy of 79.8 years (up from 77.5 years in 2015). Also, the U.A.E.’s demographics are projected to change, as residents aged 65+ are expected to comprise a growing proportion of the population, increasing from 1.1% at present to 4.4% by 2030.

Opportunities to educate and develop U.A.E. medical professionals within the nation are expanding—the landscaping is changing. Today, the country is home to multiple medical universities across the emirates, providing local and international students with access to education including medicine, dentistry, pharmacy, and nursing among other fields. As per the Dubai Health Authority (DHA)

Strategy 2016–2021, a government directive supports Dubai’s aims to attract, retain, and develop the healthcare workforce, with a goal of providing access to world-class medical educational opportunities. These initiatives are well placed given that 82% of physicians and 96% of nurses are expatriates and considering that the country intends to reduce that dependence on expat practitioners in healthcare.

The growing emergence of medical tourism is another factor shaping the outlook of healthcare in the U.A.E. The country has witnessed a continuous increase in medical tourism, with visitors seeking treatments ranging from major surgery to rehabilitation and cosmetic corrections. In 2016, the Medical Tourism Index indicated that Dubai and Abu Dhabi were respectively ranked as the 16th and 25th best global destinations for medical tourism. The wider tourism ecosystem, in terms of the country’s growing offering in tourism attractions, hotels, entertainment and the provision of world class aviation and transport logistics, further underscore the U.A.E.’s potential as a medical tourism destination.

The rapid development of the regional healthcare sector over the last decade, driven by government and private funding, has certainly put regional healthcare provision on the global map. Now, with the sector gradually maturing, it is key for existing healthcare players and new entrants to align their business model to today’s regulatory changes and shifting market conditions.