The GCC healthcare sector is poised for strong growth: outlook

The heightened focus on the healthcare sector following Covis-19 pandemic led to transformative changes in the industry with the convergence of medical innovations and disruptive technologies.

Responding to the unprecedented demands during the pandemic placed enormous pressure on the healthcare sector worldwide and was a sharp learning curve for all countries including the UAE and other member nations of the Gulf Cooperation Council (GCC).

In the years since, the rise of automation and precision medicine, consolidation of key players, government reforms, and a spurt of infrastructural developments have seen the GCC experience a more rapid and extensive healthcare transformation than other regions.

While the pandemic became a catalyst for change and paved the way for exciting growth opportunities, a combination of several other interrelated factors has positioned the GCC healthcare sector for continued expansion at a healthy pace.

Maturing insurance sector

Mandatory health insurance regulations have driven the growth of the healthcare sector across the region, with major implications on how healthcare is funded and delivered. The Council of Cooperative Health Insurance (CCHI) in Saudi Arabia aims to cover up to 50 per cent of the population with an insurance scheme by 2030, acting as a major driver of the sector going forward. Qatar introduced a new mandatory insurance law in 2022, while Bahrain and Oman are also working towards universal coverage.

Shift toward public-private collaboration

In line with their desire to rebalance the relative roles of the public-private sector, governments across the region have shifted their focus from building and delivering the service themselves, to attracting more private investment to do this on their behalf. The subsequent easing of regulation on foreign investment in healthcare has resulted in more participation by both private investors and foreign operators.

This rebalancing has resulted in an increased number of Public Private Partnership initiatives (PPPs) across the GCC. PPPs meet the objectives of both governments (to spend less public money delivering healthcare) and private investors (seeking more opportunities to invest in alternative real estate sectors). That said, not all the proposed PPP projects have progressed to delivery, highlighting the need for further deregulation to provide greater certainty to potential investors.

One of the most successful PPPs in the healthcare sector has resulted in Pure Health, the largest integrated healthcare network which is assuming responsibility for the operation and management of all MOHAP hospital laboratories across the country and managing hospitals, clinics, diagnostics, insurance, pharmacies, health-tech, procurement platforms across the UAE.

Focus on specialised care in healthcare

Patients, investors, providers, and regulators are all preferring specialised services, provided through centers of excellence in specific tertiary care specialties. A range of smaller formats is also emerging rapidly.

These include short-stay surgical centers, urgent care facilities, sports medicine facilities, medical wellness facilities, long-term care, and mental health facilities.

The growth of these new formats is being driven by increasing patient preference for care outside of traditional hospital settings.

Response to the pandemic

The decline in medical tourism which resulted from travel restrictions and the desire to build stronger local supply chains have had important implications for the GCC healthcare sector. The most obvious of these include attempts to reduce outbound medical tourism, drive more greenfield investment in the region, and a marked growth in the manufacturing of pharmaceuticals and other medical supplies within the GCC.

We have also observed significant business consolidation across the region as large groups are expanding through acquisitions, a trend spurred by the UAE’s sovereign wealth funds, including Mubadala which merged its healthcare assets with G42 Group to create M42, a tech-enabled healthcare company; and ADQ, which launched its healthcare platform, Pure Health.

Other acquisitions by UAE entities include the 60 per cent stake in Human Development Company, Saudi Arabia, by Amanat Holdings; the direct acquisition of a 15 per cent stake in Burjeel Holdings by International Holding Company (IHC), the diversified Abu Dhabi-based conglomerate; and the expansion of the asset portfolio of Gulf Islamic Investments (GII) through a stake in Saudi Arabia’s Al Meswak Dental chain.

Leading US healthcare group CommonSpirit has also acquired an equity stake in the UAE’s Arabian Healthcare Group while in Saudi Arabia, Dallah Healthcare acquired a 19 per cent stake in IMC, and Arabian International Healthcare Holding acquired of 51 per cent stake in Innovative Care.

Global trends like digital technology and environmental sustainability have also shaped the ongoing evolution of the healthcare landscape in the GCC. The integration of Artificial Intelligence, for instance, has important implications for changes in facility function and workplace strategy, alongside increased support for both clinical and non-clinical decision-making.

Dubai, Abu Dhabi, and Riyadh are emerging as the most mature markets in the GCC, with the delivery of more specialised and higher-order facilities. Elsewhere, smaller cities are experiencing a growth of lower-order clinics and medical centers to service the day-to-day needs of the local population.

The development of mega projects across the region is also creating opportunities for more customised and targeted healthcare formats. Improved infrastructure has further resulted in shifts in how the associated real estate is delivered, financed, and utilised.

This article was authored by Sandeep Sinha, head of Healthcare Consulting, MEA JLL.