Identifying an acute shortage of skilled manpower and dearth of private investments as the key obstacles in the GCC healthcare system, Dubai-based investment bank Alpen Capital has called for large-scale reforms in the sector.
Alpen's report on the Gulf healthcare industry comes a few days after London-based Barclays Capital said healthcare ETFs, or exchange-traded funds, have attracted more than $190 million (Dh697.8m) of investments this year and are one of the largest drawers of funds in the current dicey markets.
"The GCC healthcare industry is poised for unparallel and consistent growth accompanied by a fundamental shift in the industry structure, infrastructure quality, payer model and funding options," said Tommy Trask, Executive Director and Head of Equity Research at Alpen.
"The GCC countries are likely to experience a sharp increase in healthcare needs primarily led by a growing and ageing population and a rise in chronic non-communicable 'lifestyle' diseases."
The GCC healthcare industry is expected to grow threefold to $47 billion to $55bn in the next 10 years, Alpen said, but asserted that this growth will not be possible until the governments clear some roadblocks.
"Although demand side factors spell confidence, the industry faces several supply-side constraints. Low private sector participation, sub-optimal health infrastructure availability and acute shortage of human resource for all medical services are major obstacles for growth in the industry," said the report.
Terming a young population as a factor supporting healthcare sector, the report called upon the GCC governments to ascertain their healthcare needs by solutions better than just inviting prominent healthcare groups. It called for attracting private investments into the sector and for establishment of a healthcare regulatory body.
"GCC needs to develop a strong professional healthcare workforce. Governments are rolling out red carpets to renowned western healthcare providers. However, unless the governments take strong initiatives to overcome the undersupply of healthcare professionals, the reform efforts will be rendered ineffective. Medical education and training of a paramedical workforce presents a major opportunity for private players to establish a footprint in the region," it said.
"Currently the industry is characterised by low private sector penetration, which stands at about 25 per cent in terms of expenditure. The healthcare industry in the region will benefit from increased private sector participation to help keep pace with increasing demand. Moreover, treatment of lifestyle ailments calls for establishment of super specialty hospitals with state-of-the-art facilities, further necessitating higher private sector participation," it added.
Alpine estimates the GCC?healthcare market at $18bn in 2008. It would rise to $47bn–$55bn by 2020, it pointed out, a compound annual growth rate of nine per cent. The bank estimated the size of the GCC healthcare services sector at about 46 million treatments in 2008.
Alpen called for public-private partnerships in the sector and said the steps taken by Abu Dhabi Health Authority set an example.
The investment bank called for a business-unit type framework for government sponsored hospitals and suggested setting up of new speciality and super-speciality hospitals. It emphasised on the need for an independent regulatory body to oversee the sector.
"The growing private sector participation will necessitate a more structured and independent healthcare regulator for both the public and private sector to set high quality standards and effective implement checks.
Currently, the ministry of health is both regulator and major provider of healthcare services. More international investments – both direct and institutional will be available once sound and independent regulatory bodies are established."
The investment bank, however, expressed satisfaction over the pace of construction of new hospitals (especially the ones directly funded by the government).
"Despite some significant project delays, the pipeline of GCC hospital project announced or under construction is very substantial. Barring major additional project delays, we see a sufficient supply of hospital beds in all GCC countries, except Oman. The UAE and Qatar have the most ambitious pipelines as measured by the number of beds per capita, and are banking on medical tourism from within and outside the GCC to maintain adequate occupancy rates across the industry."
The per-capital healthcare spending in the UAE is slow but is rising. "Per capita healthcare spending in the GCC was $631 in 2006, below the global average of $716. The US and the UK registered per capita healthcare spending of $6,719 and $3,332 respectively in the same period," it said.
"Going forward, we expect GCC per capita healthcare spending to grow faster than the global average. Growth in income levels as well as a rise in health insurance coverage will boost demand for healthcare services. Moreover, per capita healthcare requirements and spending will also increase as the GCC population ages and the disease mix changes," it added.
The evolutionary problems notwithstanding, the GCC healthcare sector is poised for a strong growth along with fundamental and structural changes.
"However, an efficient institutional framework and effective regulatory environment need to be prioritised to encourage private sector participation in the sector."
DEMOGRAPHIC ADVANTAGE
The GCC population, currently at about 38 million, is growing at one of the fastest rates in the world. And this, the Alpen report said, has the potential of driving the entire sector.
"Given the robust demand growth, governments in the region are actively looking at ways to boost private sector participation in healthcare services. Qatar, Bahrain, and the UAE have been most proactive in this regard, by providing concrete incentives to attract private investment, including commitments to reimburse a minimum number of patient visits to such hospitals, even if the number of patients is less," said the report.
"Moreover, they have helped private players by engaging them in the management of public facilities and reimbursing them for treating patents."
Income levels in the GCC region are broadly comparable to developed economies. However, the region trails the West in terms of healthcare expenditure. This would logically lead to higher spend on healthcare, it said. "As per capita health spending increases, we expect to see a greater reliance on private sector players and increased private-public partnerships."