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International hospital alliances in the GCC
By Inga Louisa Stevens, Contributing Writer
According to a report released by Alpen Capital in 2016, the GCC healthcare market is projected to grow at a 12.1% CAGR from an estimated $ 40.3 billion in 2015 to $ 71.3 billion in 2020.The healthcare market in each GCC country is anticipated to expand by 11%-13% between 2015 and 2020, in terms of annual average growth rates, and the demand for number of hospital beds in the GCC region is projected to grow at a 2.3% CAGR from an estimated 101,797 beds in 2015 to 113,925 beds in 2020.
This projected growth is being driven by the changing demographic and epidemiological trends; including the ageing populations and an increase in lifestyle related diseases. Also, as health services and infrastructure in the region have improved over the years, people are now living longer than ever increasing the burden on the health systems.
With GCC governments increasingly incentivising Public-Private Partnerships (PPP), the way that healthcare is delivered in the GCC is now being transformed. The private sector is now increasingly managing operations, while the public sector will work as the regulator. Many existing hospitals, as well as a number of greenfield projects, are attracting the emergence of the larger, more diversified healthcare groups, into the mix.
Hospitals are also moving away from being large multipurpose and centralised care givers are to become more sizeable, specialised distributed centres. GCC governments have indicated strong support (financial and otherwise) for private sector players to establish specialised services in order to address a key market gap. As inpatient and outpatient demand flows into these private specialist facilities, their share of the overall market will increase significantly.
Partnering for Health
Alliances between local or regional hospital providers and internationally recognised healthcare brands and operators are becoming a mainstay in the way healthcare facilities across the GCC are run today. The world-class clinical expertise offered by these more established international brands are becoming a more attractive option for providers in the region who are looking to make tangible changes to the quality of their patient services and care.
However, according to Jeremy Panacheril, Partner, Healthcare and Life Sciences Transaction Advisory Services, EY, the best healthcare companies in the GCC are homegrown brands. He explains, “Often from the roots of physician-owned clinics and hospitals to multi-national, diversified healthcare businesses, many of the leading healthcare players in the GCC have broadened their capabilities, reach and scale and have, in the process, attracted significant private and public capital.”
As the GCC healthcare market has grown, and in particular as mergers and acquisitions (M&A) and capital raising events have created useful benchmarks for value, international operators have increasingly shown interest in GCC markets. “But not all international operators are the same,” says Panacheril. “Mediclinic, for example, which arguably serves the largest volume of patients in the UAE today, grew into its position through M&A, from a partnership with the Varkey Group to a buy-out of those shares, to the takeover of Al Noor Hospitals, and so on.”
“Mediclinic is clearly a seasoned operator, and one which has supported operating capabilities with very bold and creative M&A and capital raising solutions,” Panacheril continues. “Parkway Pantai, part of the IHH group, the second largest healthcare company by market capitalisation, similarly has grown aggressively outside its captive geographic base to markets like Turkey and India. Increasingly, public hospitals in countries like the UK, US and Germany, are also looking to create new revenue streams by tapping into emerging market opportunities.”
More Than Just a Brand
However, according to Panacheril, international operators have to provide more than their brand and will need to ensure the availability of specialist physicians and nurses, contribute capital and equipment, tie their fees not just to revenue but to profit and health outcomes, and offer turnkey solutions in the design and operation of facilities. “The days of operating agreements of 3-5% of turnover are fading and competition is increasing,” he explains. “And they need to consider that their brands, which may be highly regarded in their markets, may have less brand appeal in GCC markets, a sobering thought to many operators.”
Many financial investors see the opportunity to introduce international brands as a way to differentiate, particularly for the mid-to-high income patients, but this comes at a cost, and brand alone does not seem likely to create sustainable advantage. “A reputation is built over time and not all operators will be successful at operating in the GCC markets, with its unique cultural requirements, heterogeneous patient base, and challenges in recruiting skilled clinicians,” says Panacheril.
Some of the most reputable global healthcare providers entered the GCC markets through operating agreements for public hospitals. Examples include Johns Hopkins, Cleveland Clinic and Vamed in the Abu Dhabi Health Services Company (SEHA) network, all of which have very different agreements. Similarly, Kuwait has formed a separate organisation, Kuwait Authority for Partnership Projects (previously known as Partnerships Technical Bureau), to facilitate its PPPs. According to Panacheril, “In the light of public fiscal constraints, public hospital operators will need to be able to prove that hospitals can become self-funding, and may need to invest capital in order to do that. It appears likely that more public hospitals across the GCC would be open to operating agreements which improve both quality and financial performance, especially if they come with capital.”
In addition to international operators, Panacheril believes that homegrown brands like NMC Healthcare have a clear opportunity to capture new revenue streams through operating agreements, having proven their ability to successfully deliver quality health outcomes in GCC markets. “With so many potential operating partners, healthcare investors increasingly have the opportunity to structure agreements where operating partners have more ‘skin in the game’ and tie fees to specific financial and health outcomes,” he adds.
Tawam Hospital in Al Ain, which opened in 1979, is part of the Abu Dhabi Health Services Company (SEHA) network of public hospitals owned by the Health Authority Abu Dhabi (HAAD). The 469-bed tertiary care facility is the largest hospital in the UAE and serves as a regional referral centre for specialised medical care and a national referral centre for oncology services. Under the management agreement signed in 2006, Johns Hopkins Medicine International provides services including a management team for day-to-day operations management and oversight, a programme for development in the areas of clinical services, education, training, human resources and capital equipment, a facility master plan, virtual tumor boards, clinical lecture series, nurse training in evidence-based practice, and a number of other services.
American Hospital Dubai
In June 2016, the 240-bed multi-speciality American Hospital Dubai announced that it had joined the Mayo Clinic Care Network, a network of healthcare providers committed to better serving patients and their families through collaboration. As the first healthcare organisation in the Middle East to join the network, the formal agreement gives American Hospital Dubai access to the latest Mayo Clinic knowledge and promotes collaboration among physicians to benefit patients. Some of the network products and services include eConsults that enable American Hospital Dubai physicians to connect electronically and directly with Mayo specialists for additional input on a patient’s care, the AskMayoExpert database for reference at the point of care to offer the latest Mayo-vetted information on disease management, care guidelines, treatment recommendations and reference materials for a wide range of medical conditions, to name a few. American Hospital Dubai and other members undergo a rigorous evaluation before joining the Mayo Clinic Care Network. The members remain independent but share Mayo’s commitment to improving the quality and delivery of healthcare. Launched in 2011, the care network has more than 35 member organisations in the US, Mexico, Puerto Rico And Singapore.
Al Jalila Children’s Hospital
In 2016, the Dubai Health Authority’s (DHA) Al Jalila Children’s Speciality Hospital in Dubai, UAE, signed a partnership agreement with Alder Hey Children’s NHS Foundation Trust in Liverpool, which runs one of Europe’s largest and most established paediatric institutions. By establishing an official international affiliation agreement with an established world-class institution, this partnership will deliver care to children in Dubai at the highest level and on par with international standards. Having recently opened a brand new world-class hospital facility of comparable size to Al Jalila Children’s, Alder Hey provides guidance on how best to deal with teething problems often encountered when opening any new facility. Children requiring very specialised treatments not currently available in the UAE, such as complex neurosurgery and neuro-oncology, will benefit from being able to access those treatments at Alder Hey Children’s. Training programmes will be established between the two hospitals and Alder Hey will have access to patients with rare diseases which will support their research programmes.
SEHA Dialysis Services
In 2011, Fresenius Medical Care was appointed as Abu Dhabi Health Services Company PJSC’s (SEHA) partner to improve the provision of renal dialysis services offered by SEHA within the SEHA HealthSystem. The Management Services Agreement (MSA), which is designed to operate over a period of 10 years, is governed by a number of clinical and non-clinical performance indicators. Fresenius Medical Care will provide all management staff, while caregivers will remain SEHA employees. SEHA Dialysis Services is a business entity of SEHA and brings together all dialysis activities within the emirate of Abu Dhabi. This includes both haemodialysis and peritoneal dialysis activities and the haemodialysis clinics of the SEHA Health System. The SDS network comprises clinics at 11 SEHA hospitals located across Abu Dhabi: Sheikh Khalifa Medical City, Mafraq, Al Rahba, Tawam, Al Ain, Al Wagan, Madinat Zayed, Ghayathi, Al Marfa, Al Sila, and Delma Island.
Moorfields Eye Hospital Centre
Moorfields Eye Hospital NHS Foundation Trust in London, the oldest and one of the largest centres for ophthalmic treatment, teaching and research in the world and United Eastern Medical Services (UEMedical), Abu Dhabi’s leading privately owned healthcare development and investment company, signed a partnership agreement to establish Moorfields Eye Centre (MEC) in Abu Dhabi in 2014. Located in Abu Dhabi, MEC provides day case surgery and outpatient diagnostic and treatment services, for a variety of surgical and non-surgical eye conditions. Prior to this agreement, since October 2013, ophthalmology consultants from Moorfields had been providing outpatient services at UEMedical’s HealthPlus Diabetes & Endocrinology Centre in Abu Dhabi. According to Mohamad Ali Al Shorfa Al Hammadi, CEO & Managing Director of United Eastern Medical Services, “Through partnering with Moorfields we plan on bridging the gap in the current eye care services available in the emirate of Abu Dhabi.”
Clemenceau Medical Center
The 158-bed Clemenceau Medical Center in Beirut, Lebanon was chosen by Johns Hopkins Medicine International in 2002 to be one of its affiliated reputable medical institutions around the globe. This association gives the facility access to Johns Hopkins Medicine and Health System. Johns Hopkins Medicine International has provided services including Johns Hopkins faculty liaison (breast oncology, pathology, surgery, radiology), preparation for Joint Commission International accreditation, review of hospital architectural design, educational observerships at the Johns Hopkins Hospital,
infection control training, to name a few.
Johns Hopkins Aramco Healthcare
In 2013, Saudi Aramco partnered with Johns Hopkins Medicine to carve out and expand the capabilities of its medical services through Johns Hopkins Aramco Healthcare, drawing upon the vast expertise of The Johns Hopkins University and The Johns Hopkins and Health System to provide clinical programme development, research, training, safety and quality, and healthcare administration expertise. Johns Hopkins Aramco Healthcare, based in Dhahran, Saudi Arabia, is expected to evolve into a Centre of Excellence that provides enhanced speciality and subspeciality services, new lines of treatment, research and education that address some of the most significant healthcare challenges in the region. Saudi Aramco and Johns Hopkins Medicine each have an indirect ownership interest in the Saudi-registered company.