Saudi health privatization plans left in doubt
Saudi Arabia, the Arabian Gulf’s largest consumer market, looked set to open its healthcare sector to foreign investors after acting health minister Adel Fakieh passed a ministerial decree this month.
But that was before a cabinet reshuffle saw Mr Fakieh replaced by Mohammed Al Hayazaa, leaving progress on privatisation in doubt.
To become law, the privatisation decree must be ratified by the council of ministers, chaired by King Abdullah bin Abdulaziz Al Saud. Mr Al Hayazaa’s support will be crucial to the success of the measure but the incoming health minister has made no public statements on the topic of privatisation. “Every time a new minister comes, a new policy comes – and it’s usually for the worse,” says Othman Abahussein, the chief executive of National Medical Care, a Saudi Arabian health-care provider.
The decree permits foreigners to own and run private health-care centres and facilities in the kingdom, after receiving approvals from the Saudi Arabian general investment authority and the ministry of health.
The Saudi Arabian government accounts for 75 per cent of spending on health care, according to management consultancy Strategy&, formerly Booz&Co.
Saudi Arabia’s healthcare industry looks promising to private investors.
A rapidly-growing and affluent population of 29 million, combined with underinvestment in key health segments, means the opportunities for private investors are sizeable.
“The only way to ensure that Saudi nationals’ health needs will be met without adversely affecting economic progress is to increase private sector participation in the health-care system,” said a report from Strategy&.
Mohammed Kamal, the director of research at the Dubai investment bank Arqaam Capital, characterised the kingdom’s health-care spending plans as “a case of chronic underinvestment and reactive over-expenditure”, according to Reuters.
The Saudi government plans to open about 150 new hospitals over the next four years or so at a rate of about 10 every three months, says Dr Mohammed Al Yemeni, a former deputy minister of planning and health economics.
At the moment, the country has only 260 board-certified physicians. Dr Al Yemeni suggests about 3,000 physicians will be needed across the country, with other analysts placing this estimate on the low side.
Dr Al Yemeni, a member of the committee that drafted the decree, is confident it will lead to health-care privatisations. “There is a movement taking place here. This did not happen by coincidence,” he says. “This is part of a trend on the part of the government of Saudi Arabia to diversify the economy.”
Mr Abahussein says: “The momentum of the government is there – lately the government has been feeling the pressure, so they have been outsourcing. They want more international investors and companies who add value to the healthcare system.” But he points out that high turnover in the ministry for health had led to reversals of the direction of policy in the past.
Regulatory clarity is needed in Saudi Arabia, Mr Abahussein says, to make the country’s healthcare sector more attractive to investors.
“For example, there are no clear definitions of tertiary care, long-term care, acute care, and primary care – I call it ‘spaghetti health care,’” he says. This creates uncertainty for companies that specialise in particular areas of care, he says.
These are not the only areas of uncertainty for investors. Ali Damathi, the chief executive of Saudi-based Al Faisaliah Healthcare, says that until regulations governing reimbursement for insurers are clarified, investors will remain wary of entering the Saudi healthcare market.
“It’s one step in the right direction,” he says of regulatory development, “but there’s a long way to go.”
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Published: December 13, 2014 04:00 AM