In sickness and in wealth: The Gulf’s healthcare PPP opportunity

As Gulf nations continue to see their populations grow, the need for investment in healthcare infrastructure is becoming a major issue

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Gulf healthcare is set to generate a growing pipeline of PPPs in the next five years and beyond. Led by Saudi Arabia and the UAE, the region has plans to rapidly grow its medical infrastructure as the population expands in line with economic diversification drives.

Across the Gulf Cooperation Council (GCC), healthcare spend was projected to reach $104.6bn in 2022, according to the UAE Ministry of Economy - well above the $2.4bn recorded in 2016.

Saudi Arabia accounts for 60% of the GCC’s healthcare expenditure, while the UAE comprises 25%.

Across all the Gulf countries, governments have traditionally been the primary investors. Going forward, health policymakers are looking outwards to PPP as nations look to quickly expand healthcare supply, cover gaps, and bring in specialist services.

While the mean age of Gulf citizens is relatively young at 27 years, its nationals are living longer. There is also a need to bring health services to underserved, remote parts of the region, particularly in Saudi Arabia. In addition, the six Gulf nations are contending with record high levels of non-communicable, ‘lifestyle’ diseases, such as diabetes and heart disease.

“Gulf infrastructure is a growth market and the healthcare sector is no exception to this,” says Joss Dare, managing partner in Dubai at law firm Ashurst. “The Gulf region has a young and fast-growing population, which creates an ever-increasing demand for suitable infrastructure to service their needs.”

Dare also points to a governmental recognition that too much healthcare has been “exported” – where Gulf nationals travel abroad for treatment.

“It would be beneficial, both medically and economically, to stem or reverse this flow by increasing the scope and quality of regional resources,” he says.

Nico de Koning, head of bids and assets at Besix Middle East, agrees that medical self-reliance is a top priority for regional decision-makers, in the same way that domestic food security has topped the political agenda since the pandemic.

“There is regional scope for building highly specialised centres, such as the Cardiology Center of Excellence in Dubai which is up for tender,” says Koning. “PPPs can handle a high level of sophistication and facilities management. This means locals could undergo sophisticated treatments in their own country and the centres could also attract international medical tourism revenues.”

There are currently seven healthcare PPPs listed on the Dubai government website, including highly specialised services such as cardiology, dialysis and physiotherapy.

Reenita Das, partner and senior vice president of the healthcare & life sciences practice at business consultants Frost & Sullivan, says: “The private sector can play an important role in expediting health services and adding more value. In the short term, PPPs could assist with mental health, rehabilitation, long-term care, chronic disease management, at-home care, and remote disease monitoring.”

The PPP model is well-suited to health services, she says, because projects are labour-intensive and often involve new technology and virtual care.

In the longer term, Das believes GCC authorities must evolve their ‘sick-care’ models to ‘healthcare’ strategies and move towards precision health.

“PPPs could help support the full spectrum of wellness, personalisation of care, population health management, and genetic testing models,” she says.

Healthcare is a lynchpin within the region’s overall strategic socio-economic plans, says Dare.

“Regional governments know healthcare growth requires significant financial investment and skills acquisition. This, in turn, encourages the adoption of PPP methodologies,” he says.

The Gulf region has looked to the success of developed privatised healthcare markets across Europe as a role model for seeking to expand the healthcare system as efficiently and rapidly as possible, Dare says.

However, there are some cautionary tales from Europe that the Gulf region may want to consider - especially from the UK, where its PFI programme has run into some difficulties. In part, this has been down to the way in which contracts were originally drafted, leaving scope for various interpretations of a number of clauses that have allowed for disputes to arise.

Furthermore, the complexity of hospitals, given the technology involved and the changing requirements as healthcare provision evolves, has meant that long-term contracts can sometimes prove an impediment to such evolution. While there are ways around such issues, these factors will need to be taken into consideration as projects are developed. closely integrated partnership models, where the public and private sectors’ interests are closely aligned, can help mitigate such issues - so attempting to transpose the UK’s PFI experience onto a programme of schemes in a Gulf country would not be appropriate.

“Many regional governments have recently adopted PPPs as a relatively new form of regulated procurement methodology, so it makes sense to apply these new laws and regulations to the identified strategic need to develop healthcare assets,” he adds.

Following a PPP route to procurement significantly de-risks government health agencies by passing risk onto the private sector and also allows the government to focus on its primary roles of oversight, regulation, licencing and policy making.

Dare adds: “Given the current rate of regional expansion, governments are looking to manage multiple healthcare projects in the most time- and cost-efficient manner possible – an outcome that can rarely be achieved by direct contracting or traditional procurement models.”