Expanding private sector in Middle East healthcare
By Nathaniel Hobbs, MJ Medical Director
The growth in demand for healthcare services across the Middle East is insatiable, unconstrained by dips in the oil price and wider economic malaise. With healthcare across the region largely publicly funded, and a significant public element in the provider sector, this rising demand poses a significant problem for those various public bodies who have a mandate for providing care; how to meet the growing demand against a constrained fiscal backdrop.
In response, many governments are making concerted efforts to involve the private sector further. On the payer side, numerous private health insurance systems are being rolled-out in an effort to maintain or increase coverage whilst alleviating the burden on public sector payers. On the provider side, many governments are making a concerted effort to incentivize incumbent and new private providers to develop and operate new healthcare facilities. Those providers are responding, with many projects in the planning or construction stage across the region. With returns of up to 7-10%, as an asset class these projects are proving extremely attractive proposition to investors.
Over the last few years, MJ Medical has advised many new investors considering such projects. Alongside our core services of capacity modelling and design brief development, we add value by providing key inputs into the investment appraisal process. These include assessing the appropriateness of the clinical services to be provided given the local market conditions, analysing the proposed capacity throughput to ensure the revenue model is robust, reviewing the design to ensure it is fit for purpose and of the right quality level, and testing the capital construction and equipment cost models for accuracy.
In addition to encouraging private provider expansion, the introduction of Public Private Procurement (PPP) models in the healthcare sector in the region is gaining significant traction. The exact nature of each model varies and is still evolving. Many are similar to the those well established in other countries, which include the private partner providing the public agency finance, design, construction, and facilities management for acute facilities over a long term (approx. 30 years) concessionary contract. However other models emerging in the region are more ambitious, including the provision of clinical care in the contract and covering community and primary care services.
The specifics of each approach will have a significant impact on how the market responds, and in particular the structure of the bidding consortium. A common key element will be ensuring that the facilities developed under the contract are the right size to meet the population demand, are the right cost to ensure the consortium’s bids are competitive, and the right design to ensure they deliver excellent clinical care and are adaptable to change through their lifespan. The early engagement of a health planner like MJ Medical, who has extensive experience under the PPP model, is then essential in interpreting the client’s requirements and translating them into a design that meets these criteria.
The legal framework to facilitate the utilisation of PPP models in healthcare is still embryonic in many countries in the region; however, there is no doubt that the momentum behind their role-out is significant. The model will soon form a key element of healthcare provision in many countries across the Middle East – having the right partners with both regional and PPP experience will be essential for bidding consortia in winning and delivering successful projects.