Health & Education

Sharing the Burden

Healthcare Privatization

A series of ministerial shuffles and red tape has hindered healthcare privatization efforts in the short term.

From the outset, Saudi Arabia’s healthcare seems poised to offer attractive private sector investment opportunities: the Kingdom is the largest consumer of healthcare in the entire Middle East, growing demand for hospital beds (up to 70,000 by 2016, according to the Saudi Arabian General Investment Authority), unfulfilled needs in the healthcare value chain, and regulatory trends favoring a compulsory insurance-based system. However, after a series of Health Ministry reshuffles which saw five changes of ministers and acting ministers before finally settling on Eng. Khalid bin Abdulaziz Al-Falih, the exact progress of privatization legislation remains unclear.

According to an Economist report, up to 80% of total healthcare spending is through the government. With a fast rising population, most experts in the health sector recognize that in terms of cost and capacity, this model is neither sustainable nor does it serve the best interests of the Saudi people.

The awareness of the need for a larger private sector role has been around for quite some time, but the transition has not always been smooth. Saudi Arabia is currently in the middle of a massive 2010-20 general healthcare strategic plan, which calls for 141 additional hospitals, tertiary, and quaternary care, diversifying healthcare funding, attracting more private sector involvement in the delivery of healthcare, as well as shifting the Ministry of Health toward a supervisory role. Last January, Royal Decree 6560 called for the Saudi Arabian General Investment Authority (SAGIA) and the Ministry of Health to develop a specific strategy to further attract foreign investments in the sector, particularly in the construction, operation and management of hospitals, with a target of 34,000 additional beds by 2020.

Even with the current bureaucratic uncertainty and limited qualified human capital tempering private sector growth, opportunities in Saudi Arabia’s healthcare sector over the long term are broad, due to a rising and increasingly affluent population with clear, unfulfilled needs. In 2014, the total amount spent on healthcare was roughly $20 billion, with an estimated annual growth rate of 11%, being the highest in the region. In terms of financing, the government is now giving private companies interest-free loans for up to 50% of the building costs of new hospitals.

Perhaps the biggest boon to the private sector will be the continued rollout of private health insurance legislation. Phase II of the government health insurance plan will provide private healthcare coverage for public-sector workers, with additional segments of the population being covered by private healthcare policies. As the MoH eases its direct funding of healthcare services, the increase of compulsory private health insurance is expected to drive the demand for private healthcare services, which in turn may draw further foreign investment in the sector.