Speaking in private – healthcare funding

In recent years, healthcare across the Gulf region has witnessed an unprecedented transformation. Growing at a rate of 12.1% a year – taking it from $40.3 billion in 2015 to an estimated $71.3 billion by 2020 – the GCC – comprising Saudi Arabia, Kuwait, the UAE, Qatar, Bahrain and Oman – healthcare market is seeing an influx of public funds and an uptick in private sector participation. Noting the increase in demand, governments are treating this investment as a strategic priority.

The reasons for this are not hard to determine. While the past few decades have seen major advances in the field, GCC healthcare systems are still contending with capacity gaps and inconsistent standards. These challenges are compounded by changing demographics and the growing prevalence of non-communicable diseases. In a nutshell, populations are larger, older and less healthy than they have ever been before, and their need for services is pressing.

Take type 2 diabetes, which affects over 35 million people across the MENA region, around 40% of whom are suspected to be undiagnosed. With this part of the world disproportionately impacted – five GCC countries feature in the world’s top ten countries for diabetes prevalence – the region faces obstacles in terms of prevention and treatment.

Despite ongoing efforts in this field, the International Diabetes Federation expects the regional incidence to rise from 9.1 to 11.4% of adults by 2040. Given the dramatic population growth that is also forecast for the time period, this will more than double the number of sufferers.

The rates of cardiovascular disease are similarly perturbing. People are not only succumbing in their droves but also succumbing young; cardiovascular disease is responsible for 45% of premature deaths in the region, and many people suffer heart attacks in their 40s or even younger. Given that over half the Gulf population is under 25, experts have warned that we are teetering on the brink of an epidemic.

Of course, these two conditions, along with cancer to some extent, do not strike in isolation: they are related to metabolic syndrome, which in turn is related to lifestyle factors such as poor diet, lack of exercise and obesity. As Maher Abouzeid – president and CEO of Middle East and Turkey at GE Healthcare – explains, the region is contending with a potent blend of risk factors.

“Non-communicable diseases have seen an exponential rise over the past ten years,” he points out. “One major factor is the massive increase in population. If you look at a country like Dubai, it has doubled its population over the past ten to 15 years. At the same time, obesity, particularly childhood obesity, is causing more of these problems. In this part of the world, that’s definitely an important factor for diabetes.”

Abouzeid adds that cancer prognosis in the region has historically suffered from the paucity of screening programmes. While cancer rates remain lower here than in Europe and North America, they are steadily catching up, with some epidemiologists predicting incidence will double by 2030. It seems that if the GCC states are to lower cancer mortality, they will need a solid plan of action.

Diminishing returns

So what is being done in concrete terms to improve healthcare infrastructure and address this growing burden? Despite the increase in government spending, it is unlikely that simply pumping more funds into hospitals will prove sustainable in the long term. The drop in oil prices has eaten into GCC government revenues, forcing them to dig deep into their sovereign wealth funds and revise their economic strategies. In a time of tightened purse strings, nobody can afford to simply throw money at the problem.

Abouzeid, too, emphasises that higher public spending does not always equate to a direct improvement in services. “One of the key problems is how they can improve quality of care while keeping costs in check, and how they can put together a sustainable healthcare system,” he says. “In some cases, the investment in healthcare is inversely proportional to the quality of care and, despite adding more investment, the quality of treatment is much lower than it should be. This is what is keeping each and every minister of health up at night.”

He says there is a growing consensus surrounding the need to engage the private sector. Historically, the Middle East has depended heavily on public funding to meet its needs: the government accounted for 68% of Emirati healthcare expenditure in 2012. As we move past the boom years, however, this kind of state dependence does not seem tenable.

“This is a region predominantly controlled by the public sector, but it has a fast-growing private sector when it comes to healthcare,” says Abouzeid.

“The private sector can do it faster, better and more efficiently. So this is how they’re looking to improve quality of care while keeping costs down.”

Specifically, governments are turning towards public-private partnerships (PPPs), in which a private party provides a public service and shoulders a high proportion of the risk. These are becoming more prevalent in the Middle East as governments seek to plug a capital spending shortfall and speed up economic diversification.

In 2015, Dubai passed a law designed to encourage the use of PPPs by removing some of the associated regulatory hurdles, described as “an overwhelmingly positive step forward for the future for the development of a PPP market in Dubai”. 

Similar laws have been implemented in Kuwait and Bahrain, and another is being drafted in Oman, which will likely prompt a surge of PPPs. According to rating agency Standard & Poor’s, we can also expect to see more partnerships of this kind in Saudi Arabia and Qatar.

Along with transport and utilities, healthcare stands to reap clear benefits. We can already see this happening in Turkey, where the Ministry of Health is implementing one of the largest healthcare PPP programmes on the planet. With the support of the World Bank, the government has partnered with multiple investors to renovate hospital infrastructure, build new integrated ‘health campuses’, and increase the quality and efficiency of the health service.

Healthy provision

For private companies such as GE, these new investment models provide a golden opportunity. Both sides bring something important to the table: governments can identify healthcare gaps that need addressing, whereas private companies can leverage their expertise and resources to develop some sorely needed solutions.

This goes far beyond just supplying equipment. GE has worked with governments and private customers across the Middle East for more than 80 years, giving the company an abiding insight into the region’s healthcare needs. And while a staggering 90% of Middle East hospitals are equipped with GE technology, the company’s involvement often spills over into financing and operations management.

“We do not consider ourselves a technology provider; we are a partner with the public sector and we provide a complete turnkey solution,” says Abouzeid. “This means the funding and financing on one side, technology on another side and education on another.”

In January this year, the company signed a PPP agreement with the UAE Ministry of Health that gave it the rights to equip, manage and operate 11 hospital radiology departments across the Emirates. The financing here is somewhat complex: while GE is making the upfront capital investment, it will be paid per patient by the insurance companies that work with the ministry.

According to Abouzeid, the company has a number of other customers in the pipeline that will be announced in the near future. In the past, GE has launched mobile mammography clinics in partnership with the Saudi Ministry of Health, joined forces with the Children’s Cancer Hospital Egypt to inaugurate a cyclotron production facility and instigated a successful programme to train health professionals in Saudi Arabia.

The company is also positioning itself as a leader in digitisation. As big data and the internet of things become increasingly important in healthcare, the market will reward providers that can innovate in this space. GE’s product offerings include, for example, a digital pathology solution that eliminates the need to physically pass samples between doctors. It is also putting together a cloud-based platform designed to facilitate faster ‘healthcare exchange’ and crunch big data more effectively.

These things take time

Looking to the future, Abouzeid is confident the region will continue to embrace change. As GE expands its brand, the company is seeing a rapacious appetite for the sort of expertise that only the private sector can offer.

“Although the countries in this part of the world are all going to see slashed budgets, the need is still there – if you’re sick, you need to go to the hospital,” says Abouzeid. “So in the funding mechanism, there’ll be more shifting between the public and private sector, and the private sector will play a major role. We’re going to see more insurance companies, and we’re going to see more care areas privatised within the public sector.”

Of course, we would be well advised to expect some teething problems as this comes to pass. Not every technology provider is properly equipped to jump aboard the PPP model, and the public sector, for its part, isn’t used to purchasing services this way. In certain countries, regulatory changes will be necessary before revenue sharing and so forth can truly happen.

On top of this, funding is likely to prove a key point of contention – specifically, who’s going to pay for the public sector to buy a private service and who’s going to buy the equipment? Abouzeid contends that companies with deeper pockets will stand a better chance of succeeding, but he feels that workable templates will arise with time and experience.

“There’s a shift and a change in the market dynamic, and it will take some time to stabilise,” he says. “But, personally, I’m optimistic about the future of the region’s healthcare system and quality of care.”