Saudi Arabia’s growing health pains, and how to cure them

An increase in life expectancy, an expected 19 million babies and alarming rises in obesity and diabetes are all set to put pressure on Saudi Arabia’s health-care sector — with as many as 178,000 new hospital beds required by 2050.

These are the key findings of an in-depth report on health care in the Kingdom, which sets out how the sector urgently needs to respond to a booming population, changing demographics and the burden of chronic diseases.

The report, “Kingdom of Saudi Arabia — Healthcare Overview 2018,” released exclusively to Arab News by advisory firm Colliers International, highlights the challenges faced over the next three decades. These include the demand for greater maternity and pediatric care, and more geriatric services — but also outlines the “lucrative” business opportunities the sector offers for overseas investors.

“Under Vision 2030, the country is going through fundamental structural changes in all the sectors, including the health-care sector,” said Mansoor Ahmed, the Middle East and North Africa (MENA) director of real estate, health care, education and PPP for Colliers International. “The  health-care sector in KSA is undergoing evolution on the back of rapid advancements in technology, research and development (R&D) in line with the global and regional trends. Recent trends and industry dynamics require operators in the health-care sector to make challenging decisions.”

Ahmed said one of the main challenges is tackling the huge projected shortfall in the number of hospital beds across the country.

Saudi Arabia, the largest country in the Gulf Cooperation Council (GCC), has a current estimated population of about 32.6 million which is expected to reach
77.2 million by 2050, growing at 2.65 percent a year, the Kingdom’s historical growth rate.

This, said Ahmed, means Saudi Arabia will need a further 110,000 beds by 2030, and 178,000 beds by 2050, if applying the world’s ratio of 2.7 beds per 1,000 people.

 If applying Saudi Arabia’s current ratio of 2.23 beds per 1,000 people, the Kingdom would still need 51,000 extra beds by 2030 and 102,000 by 2050, if the population continues to rise at 2.65 percent annually.

The report outlines the attractive investment opportunities that Saudi Arabia’s health market offers to overseas investors, fueled by the booming — and changing — population.

“This increase in population is expected to fuel the demand for health-care services in the Kingdom,” Ahmed said. “Concurrently, the health-care system needs to treat emerging lifestyle diseases and illnesses associated with modern and urban lifestyles, partially due to the growing middle-income population.”

The report highlights that about 19 million babies will be born in the Kingdom from 2015 to 2050. “This creates demand for facilities and services relating to mother and child care (obstetrics, gynaecology, pediatrics), along with the more common prevailing communicable and some non-communicable diseases.”

An increase in life expectancy is also expected to extend from the current level of 73.1 years and 76.1 years for males and females respectively, to 78.4 and 81.3 by 2050.

This, Ahmed said, is expected to create demand on long-term care (LTC) facilities, focusing on geriatric-related care, rehabilitation and home health-care services. Based on current international benchmarks, this is expected to reach between 41,200 and 61,800 LTC beds by 2050.

Ahmed said that the 20-39 year age-group — a bracket which 12 million people across the Kingdom fall into — is an important target group for future health-care planning.

“Analyzing the demographic trends, it is estimated that KSA’s population will change from baby boomers to Generation X, Y and Z,” said Ahmed. “This shift will impact disease patterns and, in turn, the type of health-care services required.

“There is the development of chronic diseases: cardiovascular, irritable bowel syndrome, chronic obstructive pulmonary disease and some types of cancer (in this age bracket),” he said. “In this age group, there is considerable demand not only for curative but also preventative facilities.”

Unprecedented rises in the incidences of hypertension, obesity and Type 2 diabetes and related illnesses — including heart attacks, strokes, narrowing of arteries (atherosclerosis) and high blood pressure — are also fueling greater demand for health-care services.

The Colliers report suggested the most profitable opportunities for investors and operators will include day-care surgical centers, maternity and paediatric care, laboratory and diagnostic centers, long-term and rehabilitative care, specialized services and more primary care clinics and medical centers to meet the demand of the rising population.

“Due to advancements in health-care technology, the number of day-care surgeries has significantly increased, resulting in higher demand for day-care surgery centers,” said Ahmed. “The demand for day-care surgical centers has also increased regionally and in the KSA, due to the increase in the prevalence of a number of lifestyle diseases; diabetes, obesity, depression, strokes, cardiovascular diseases, blood pressure etc., which do not require treatments in traditional hospital setups.”

The Colliers research also shows a high demand for maternity and pediatric services. “This supports a business case for developing stand-alone hospitals or as part of a hospital complex. Stand-alone laboratory and diagnostic centers are also required in the KSA to support the increasing volume of outpatient facilities and, with the changing age profile, the KSA also requires a large number of long-term care (LTC) facilities.”

Centers of excellence focusing on certain specialties such as ophthalmology, cosmetic surgery, IVF and orthopedics (sports medicine) are also expected to grow further, especially in Riyadh and Jeddah.

The research outlines that the government is encouraging private sector participation in the health-care sector as the public sector’s role is gradually changed to becoming more of a regulator, rather than as a provider of, health-care facilities, as highlighted in the National Transformation Plan (NTP) and the privatization plan.

In 2017, the Saudi Arabian General Investment Authority (SAGIA) announced that foreign investors can have 100 percent ownership in health and education sectors. Once implemented, this is expected to boost private sector investment in health care.

The Private Public Partnership (PPP) draft bill, released in July 2018 for public scrutiny, is also expected to boost private investment in the Kingdom with the concurrent impact on the Saudi economy. It is the beginnings of the legal framework through which the Saudi government can begin to outsource health-care provision.

The Saudi government has stated that its aim is to raise $200 billion (SR750 billion) by 2030 through privatization. New developments being constructed under the Kingdom’s Vision 2030 will also spell out further investment and opportunities in the health-care sector. NEOM, a $500-billion megacity and a key part of the Kingdom’s strategic vision to diversify the economy, will create new markets for many sectors, including health care and biotech.

“The biotech sector will focus on next-generation gene therapy, genomics, stem-cell research, nanobiology, bioengineering — as well as attracting the talent to research, develop and apply the new knowledge — meaning NEOM will be ‘a new nexus’ for this vital activity,” Ahmed said.

NEOM is also set to enhance Saudi Arabia’s position on the world tourist map and create a demand for second homes for both residents and overseas tourists, which health-care businesses could capitalize on, said Ahmed, including investment into hospitals, clinics, long-term rehabilitation centers, wellness retreats and fitness retreats.

The report said that one of the key challenges facing health-care investment in the Kingdom is the high-funding requirement. “Despite the fact that banks and other financial institutions actively seek investments within KSA’s health-care sector, they often limit their exposure by only servicing known market participants with proven track records,” Ahmed said. “International or regional operators contemplating entry into KSA’s market often struggle to secure project finance unless there is a recourse to alternative cash flows.”

The Kingdom is moving towards encouraging more private sector participation in health care but the extent of investment required is significant, Ahmed said. “In Colliers’ opinion, one way of bridging the required investment is by way of creating more Real Estate Investment Trust (REIT) funds, where investors combine their capital to buy a share of commercial real estate and then earn income from their shares. Based on Colliers’ estimate, REIT funds in the Kingdom can unlock about $7.5 billion to $8.5 billion property value from the private sector, thereby playing a key role in augmenting growth in the health-care sector.”

Ahmed said that the report shows that the Kingdom’s health-care sector, especially in the private sector, offers “several lucrative opportunities for developers, investors and operators.” 

 

From: Arab News