Double-digit growth expected in UAE healthcare

Alpen Capital’s Sanjay Vig shares the company’s outlook for the healthcare sector in the UAE and GCC



Development of the healthcare sector has taken centre stage in the Gulf Cooperation Council countries, as they witness an era of demographic transition accompanied by the rising prevalence of lifestyle-related diseases. In order to ease the growing pressure on the healthcare system, governments are injecting huge funds and encouraging private sector participation to match the quality of services offered in developed countries. They are also investing heavily in technological advancements as well as rolling out mandatory health insurance schemes in all the countries to further accelerate the growth of the healthcare sector.

However, the current economic scenario, with a sustained decline in oil prices, poses a challenge to the GCC economies which are heavily reliant on oil revenues. Government expenditure forms a large part of the healthcare spending in the region and this spending might be curtailed as a part of the austerity measures. We also see the rise of public private partnerships (PPPs) as an inevitable new order promoting the growth of the GCC healthcare sector and helping the governments manage the rising costs in the sector by welcoming private sector participation.

Industry Outlook

The GCC healthcare market is projected to grow at a 12.1 per cent CAGR from an estimated $40.3bn in 2015 to $71.3bn in 2020. An increase in the population and the rising cost of treatment are the primary factors aiding this growth.

From an estimated $24.0bn in 2015, the outpatient market is forecast to reach $42.4bn billion in 2020. The inpatient market is anticipated to grow from $16.4bn to $28.9bn billion during the same period.

The healthcare market in each GCC country is anticipated to expand by 11-13 per cent between 2015 and 2020 in terms of annual average growth rates. In addition, the demand for hospital beds is projected to grow at a 2.3 per cent CAGR from an estimated 101,797 beds in 2015 to 113,925 beds in 2020.

Outlook for the UAE Healthcare market

The healthcare market in the UAE is projected to reach $19.5bn in 2020, indicating an annual average growth of 12.7 per cent from 2015. The outpatient and inpatient markets are projected to reach $12.1bn and $7.5bn respectively in 2020. The country is also likely to see a nearly 3 per cent annual increase in the number of hospital beds required, presenting a demand of more than 13,800 beds by 2020.

Growth drivers

The UAE population is expected to grow 2.9 per cent annually between 2015 and 2020 and this is likely to increase the demand for healthcare. Sedentary lifestyles coupled with a penchant for packaged and fast food have led to an increase in the occurrence of lifestyle-related diseases such as obesity, diabetes, hypertension, cancer, and heart ailments in the GCC nations.

Most of the GCC governments are introducing mandatory health insurance. In February 2014, Dubai Health Authority passed a law mandating health insurance for all residents in Dubai. The law would be implemented in phases spread over two and half years.

Each country in the GCC has devised a long-term strategic plan or vision to expand and upgrade its healthcare system. The five-year health strategy of Abu Dhabi is mainly concentrated on e-health and healthcare informatics, in addition to reducing capacity gaps and improving the quality of care. In January 2015, Dubai Health Authority revealed its 10-year healthcare plan that focuses on building a world-class and patient-centric model of care.

Sensing the demand, the government as well as private players have injected multi-billion dollars into the healthcare sector to construct large and specialised healthcare facilities. The GCC region has nearly 350 hospital projects under various stages of development.

There are several initiatives within the GCC healthcare sector that are focused on medical tourism and are likely to not only attract patients from across the world but also reduce the outbound visits of citizens for specialised treatment, thereby aiding the growth of the healthcare sector in the region.

Challenges

Though the GCC Healthcare sector is growing at a rapid pace, it is not devoid of challenges. The current economic environment and low oil prices are putting pressure on healthcare spending. Factors such as the high cost of medical treatments, increasing outbound medical tourism, a dearth of local talent leading to high dependence on expatriates, entry barriers faced by private players and a lack of of homogenous regulation pose a threat to the growth of the healthcare sector.

Trends

Rise of the PPP model: Private sector involvement is becoming imperative to meet the rising demand for healthcare as well as to reduce the burden of costs on the government finances. Government policies to increase insurance coverage and provide other infrastructure support as well as financial incentives are drawing investors to the region. The government of Abu Dhabi has entered into partnerships with major international hospitals such as Cleveland Clinic, Johns Hopkins, Vamed, and Bumrungrad. Public hospitals in the UAE such as Sheikh Khalifa General Hospital and Rashid Hospital have handed over their management to the private providers, NMC Health and InterHealth Canada, respectively. On September 20, 2015, the government of Dubai proposed a new PPP law to encourage private sector funding. Such laws and strategies are likely to increase the private sector involvement in the UAE’s healthcare sector.

Increasing use of Information Technology: The present tech-savvy generation has encouraged the use of innovative healthcare information technology such as eVisits, digitisation of electronic medical records, data analytics, and mobile applications for patient engagement. The adoption of such technologies has the potential to improve the quality of care and reduce the cost substantially for both patients as well as providers.

Rising focus on preventive care: Growing health awareness among residents along with government’ efforts to improve the basic health indicators are leading to a shift from curative care to preventive care.

Long-term and post-acute care facilities: The rising prevalence of chronic diseases alongside an anticipated increase in the ageing population is prompting the need for long-term and post-acute care facilities in the GCC region.

Strengthening specialised care, medical education and research: Improvement in the standard of living has increased the incidence of lifestyle-related diseases in the GCC region, creating demand for specialised centres and resources of care. In addition to focusing on providing more specialised care centres, nations are also engaging in research and strategic partnerships to strengthen their healthcare system

In conclusion, favourable socio-economic factors coupled with the UAE government’s focus on adopting a patient-centric model and improving the overall delivery system will continue to drive the growth of the UAE healthcare industry.

Sanjay Vig is managing director of Alpen Capital (ME) Limited

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