Mansoor Ahmed

As investors and operators in the healthcare sector make challenging decisions due to trends and industry changes, the market in Saudi Arabia is continuing to grow due to demand from a rising population, a high number of elderly people, and an increase in health insurance coverage.

The Kingdom’s healthcare sector is structured to provide a basic platform of services to all, with specialized treatment facilities offered at some private and public hospitals.

And the government is encouraging private sector participation to keep pace with the burgeoning demand, as it continues to develop medical cities, such as King Faisal Medical City and King Abdulaziz Medical City, despite fiscal deficit.

Saudi Arabia has the largest and one of the fastest growing populations in the GCC. Reported estimates suggest that it will rise from its current 32.7 million to 34.7 million by 2020.

This will have a dramatic effect on demands for healthcare, especially as demographic trends suggest that the population will change from Baby Boomers to Generation X, Y & Z. During 2010, the population above 60 years was 1.1 million, and it is estimated that by 2020, that population will cross 2 million.

This shift will have an impact on disease patterns and the type of healthcare services required.

As the number of patients increases, the impact on the capacity of hospital beds will be significant. In 2015, the average healthcare facility visit per person in Saudi Arabia was 2.1.

The average length of stay was 3.9 days in general hospitals, 67.2 days in psychiatric hospitals, and 2.8 days for gynecology and obstetrics. The average bed occupancy rate was 55.1% in general hospitals, 65.7% in psychiatric hospitals and 59% for gynecology and obstetrics.

Saudi Arabia currently has around 462 hospitals and 69,394 healthcare beds. However, this isn’t enough. Current numbers mean that there are 2.2 beds per 1,000 population, compared to the world average of 3.13.

Even at 2.2, KSA needs 10,200 additional beds by 2025. At 3.13, it would need an additional 44,000. The MoH operates almost 60% of the bed supply, while the private sector operates approximately 31% of the healthcare facilities, with 24% of the bed supply.

The total number of beds at MoH hospitals increased from around 35,800 in 2012 to 41,297 in 2015. While the private sector capacity increased from 14,200 beds to 16,648 in the same period.

The government is recognizing the need for further investment, and the healthcare sector has benefited from an increased budget allocation over the years. In 2016, $33.3 billion was allocated for health and social affairs (14.9% of the budget). It was the third highest allocation, after education with $55 billion, and military with $47.7 billion.

The increased budget will uplift the Kingdom’s healthcare sector by building 38 new hospitals, with a total capacity of 9,100 beds, in addition to two medical cities accommodating 2,350 beds.

As part of its Vision 2030 commitments, the private sector is being encouraged to play an increasing role in meeting the healthcare demand. Whereas the public sector is expected to focus on promoting preventive care, reducing infectious diseases and encouraging citizens to make use of primary care as a first step.

It will deepen collaboration and integration between health and social care, as well as support families to provide home care when necessary for their relatives. Vision 2030 aims to provide healthcare through public corporations, both to enhance quality and to prepare for privatization in the longer term.

There are also plans to work towards developing private medical insurance to improve access to services and reduce waiting times for appointments with specialists and consultants.

Overall, the private sector is offering lucrative opportunities but it also faces difficulties, such as high capital costs, problems in attracting quality doctors and nurses, and funding constraints for new entrants.

To overcome the shortage in human resources, both the private and public sectors are looking to establish more medical and nursing colleges.

And it is likely that, to overcome high capital costs, the future could see investors looking beyond traditional funding options, such as debt and equity, to explore emerging options, such as OpCo / PropCo, or a Joint Venture (JV) with an investor and REITs.

MANSOOR AHMED, DIRECTOR HEALTHCARE, EDUCATION, PPP MENA REGION, COLLIERS INTERNATIONAL.