Growth in the Middle East - Deloitte’s 2015 Global Healthcare Sector Outlook10 December 2015
Across the globe, governments, healthcare delivery systems, insurers and consumers are engaged in a persistent tug of war between competing priorities: meeting the increasing demands for healthcare services and reducing the rising costs of those services. Deloitte’s 2015 Global Healthcare Sector Outlook examines the current issues impacting the healthcare sector, provides a snapshot of activity and suggests considerations for stakeholders as they look ahead to addressing these challenges.
Rapidly growing populations and per capita incomes, rising life expectancies, a high incidence of lifestyle-related diseases and ambitious medical infrastructure projects are driving healthcare industry growth in the Middle East’s Gulf Cooperation Council (GCC) states of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE. Yet, even though the region is making appreciable progress in its efforts to improve healthcare access and quality, pressure on the available capacity is increasing, and closing the wide gap between current and targeted states remains a top challenge. The healthcare workforce – especially physicians and nurses – remain mainly expatriates, and the region has a low penetration of healthcare insurance.
GCC states depend heavily on government funding to meet healthcare needs. In Saudi Arabia, for example, the government accounted for 65.8% of healthcare spending in 2012, according to WHO. Saudi Arabia spent an estimated $35.9 billion, or 4.8% of its GDP, on healthcare provisions in 2013. Total healthcare spending is projected to rise by an average of 6.2% a year between 2014 and 2018, to an estimated $48.3 billion. The Saudi Government funds healthcare directly and indirectly through subsidies to private institutions.
Saudi nationals are entitled to free healthcare, which is also available to religious pilgrims. To address increasing demand, the government’s 2014 budget allocated $28.8 billion to health and social welfare, which includes funding for 11 new hospitals, 11 medical centres and two medical complexes on top of the 132 hospitals and healthcare centres already under construction. Overall, the health ministry is planning to raise hospital capacity from 38,000 to 68,000 beds in five years.
After several years of large increases in budgetary spending, the Saudi Government is intensifying its efforts to promote private healthcare, with expanded health insurance, increased loan limits for the building of private hospitals and more support for public-private partnerships.
Healthcare, education and social services are priorities in the UAE’s federal budget, as the government wants to avoid the political unrest seen in other parts of the Middle East. WHO estimates that the UAE Government funded 68% of healthcare expenditure in 2012, which is the latest data available.
While healthcare constituted a fairly small proportion of GDP in 2013, at 3.5%, that share is expected to rise slightly to 3.6% between 2014 and 2018. Overall healthcare spending is expected to increase by 6.9% a year, from an estimated $14 billion in 2013 to $19.6 billion in 2018.
UAE nationals are covered under the government-funded healthcare programme. Expatriates, meanwhile, have to pay for private healthcare insurance. In 2008, the Abu Dhabi Government made health insurance mandatory for expatriates. The UAE Government is encouraging more private participation in the sector; however, it will likely continue to finance the bulk of healthcare spending in the near term.
Unequal access to healthcare facilities and a continued shortage of healthcare professionals across the Middle East illustrate the region’s need for more private sector involvement to fill the gap between increasing needs and available capacity. Governments are responding to this imperative by introducing programmes and incentives to encourage private sector growth, optimise current operations and leverage technology to raise the quality of healthcare services in GCC states.
Transformation and digital innovation
Adoption of new digital HIT advances such as electronic health records, mHealth, telemedicine and predictive analytics are transforming the way physicians, payers, patients and other healthcare stakeholders interact. Digital innovations like additive manufacturing, artificial intelligence, diagnostic devices and wearables are helping to facilitate new diagnostic and treatment options, increase process efficiency and reduce costs.
Technology advancements are also connecting developed and emerging markets – and participants along the healthcare value chain. These changes may be rapid and, in some parts of the world, disruptive to established healthcare models. However, their potential to improve the care process is already being seen across the board.
Healthcare expenditure in the Middle East
Together, the Middle East and Africa lead the world in expected healthcare spend growth, designating relatively large portions of their GDP to development in the sector. This is demonstrated in 2013 figures for healthcare expenditure.
Estimated healthcare expenditure in 2013: $35.9 billion
Healthcare as a share of GDP in 2013: 4.8%
Estimated healthcare expenditure in 2013: $14.0 billion
Healthcare as a share of GDP in 2013: 3.5%
2015: The big issues
Advances in treatments and government initiatives to increase access to care should mean a drive in sector expansion, but pressure to reduce costs is escalating. Meanwhile, growing populations and consumer wealth mean increasing demand for healthcare services but aging societies and chronic diseases are forcing health payers to make difficult decisions on benefit levels. In the midst of this tug of war, many historic business models and operating processes no longer suffice.
Four major trends were anticipated to impact stakeholders along the global healthcare value chain in 2015: cost, movements to adapt to market forces, transformation and digital innovation, and regulations and compliance.