Forbes Middle East

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

- Authored by Richard Stolz, an Associate Director in KPMG’s Global Strategy Group based in Dubai.

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.

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