A change of tack: Greater cooperation between public and private could bring rewards

A substantial private health care segment already exists in Egypt, used by a fairly wide range of socioeconomic groups. The private sector largely coexists next to the public system, taking some of the strain off the latter and broadening the market. While a number of public-private partnerships (PPPs) have been pioneered, they have not been as extensively used as some would like. The logic behind sharing resources and expertise between the private, public and social segments is strong, and successful examples exist, but a degree of institutional opposition to private involvement – and Egypt’s political and economic difficulties of the past three years – have held back development.

TURBULENCE: While private providers have weathered the post-revolution era better than their counterparts in many sectors, they have not been immune to the difficulties created by political turbulence and tighter economic straits. “Utilisation and revenue have not been affected, but collection of insurance payments and the refusal rate from health maintenance organisations has risen,” Ghada El Ganzouri, a board member at Ganzouri Specialised Hospital, told OBG. A side effect of recent events is that some potential foreign investors have held off, waiting for greater clarity about the future and the easing of foreign currency restrictions that make both importing equipment and repatriating profits difficult.

Private involvement can take various forms. Referral of patients insured under public schemes – and the uninsured, who should be covered by the state safety net – to private units when necessary would ease pressure on government clinics and hospitals. Other forms of PPP could also be applied – for example, the private sector financing and managing public hospitals on a contractual basis. Outsourcing facility management is another possible model.

ADVANTAGES: Greater private participation could bring benefits beyond easing pressure on public resources, such as better cost management, more freedom in recruitment and employment policies, opportunities to harness international capital and expertise, greater flexibility and access to expensive equipment. One model of private participation that has had some success in Egypt is the use of privately owned equipment by public hospitals, and the connected establishment of independently managed units within public institutions.

UNDER THE KNIFE: One successful example is the Gamma Knife Centre (GKC) at the Ministry of Health (MoH) Nasser Hospital in Cairo, a joint venture between Egyptian and Swedish investors, including a major stake belonging to the Swedish government; local physicians and the National Bank of Egypt also have shares. Gamma knife technology is a form of radiosurgery, used for treating brain tumours and lesions, among other brain disorders, with minimal damage to surrounding tissue.

The GKC was established in 2001, originally on a build-operate-transfer model, and has treated almost 5000 people from across the MENA region, Africa and even Europe. Patients of all economic backgrounds have been catered for, paid by government, parastatal and private health insurance schemes. Some 60% are funded by the Egyptian government, under its various insurance organisations.

“We saw the opportunity for regular patient referrals, which is important for a successful business,” Moustafa El Asmar, the chairman and CEO of the GKC, told OBG. “We have a high flow of patients. The government was sending patients abroad for treatment, but now they are saving money by sending them to the GKC.” El Asmar said that the government can be an exacting partner, but for the right reasons, insisting on a detailed contract and agreements based upon Egyptian law; merely transferring a model from abroad would not necessarily be possible. The government has been supportive of the project, has not changed its terms, and has said it wants to attract more private investment along these PPP lines.

REFERRALS: There is theoretically already a system in place that sees public patients referred to private hospitals, but only after a three-layer process. If a patient is referred to a public hospital that cannot treat them, the patient will only be sent to a private unit if other government, university and parastatal hospitals are also unable to take them – a situation that is fairly rare. Before 2010 public to private referrals were more common, and a $384m fund existed to finance private treatment for a number of ailments, including hypertension, cancers, blood diseases and liver failure. However, the system was open to abuse, and the three-layer process was installed.

Making the money follow the patient more directly – a model being promoted elsewhere in the world – would also work at the hospital level. When there are long waiting lists at public hospitals or the system is otherwise overstretched, the government could send publically insured patients to private institutions. Given the low allocation of resources per head from public funding, this would not be a high-margin business for private providers, but it would supply them with a sustainable revenue stream and volumes when operating under capacity. Taking on publically insured patients could help private operators expand as well– particularly if the patients were allowed to top up their insurance coverage with their own money to go private.

However, these concepts are fairly radical for Egypt, where the health system still operates on the socialist lines established in the 1950s-60s, when the priority was basic universal care. Some MoH officials are averse to private participation, and many Egyptians are wary of privatisation. Government concerns about private provision are partly based on the reality that quality in the private sector is inconsistent. According to Hamad, some private hospitals and clinics are not up to standard. The extent to which other countries have overtaken Egypt’s private health care is indicated by the fact that the country is no longer regarded as a regional centre for medical tourism as it was in the late 1990s; Egyptians are just as likely to travel to the UAE and Jordan for care as foreigners are to come to Cairo and Alexandria.

PPP PIONEERS: It is perhaps significant that Egypt’s major recent pioneer health PPP projects come under the aegis of the Ministry of Higher Education rather than the MoH, though progress even on these has been slowed by political and economic difficulties.

One of Egypt’s first PPPs will see two hospital units opened in Alexandria, with Alexandria University as a partner. They are the 200-bed Maternity University Hospital, a gynaecology and obstetrics centre along with a blood bank, and the 224-bed Mowassat Specialised University Hospital offering neurosurgery, urology and nephrology services.

The projects are worth $356m, and the International Finance Corporation – the private sector arm of the World Bank Group – advised the government on the deals. In 2012 a consortium known as Arab Academy won the bid to be the private partner. The consortium includes Albareek Investments, DETAC Contracting, the UK’s G4S and German technology giant Siemens, and will finance, design, construct, equip and maintain the hospitals, as well as providing non-clinical facility services. The participation of major foreign companies is indicative of the appeal that the sector could have to international investors. However, at time of press it was not clear when the facilities would open. Progress had been stalled by Egypt’s uncertain political and economic direction “The private sector needs to be more involved in the public system. We could use models from places like Turkey, Indonesia and Brazil, which have overtaken Egypt in recent years,” Amr Hamza, the chairman and managing director of Unicare, a health management organisation, told OBG.

THE WAY FORWARD: There is widespread agreement that Egypt could and should do more to harness the capital, expertise and technology of the private sector. Projects such as the GKC show that international investors can play a central role in supporting the provision of specialist services without the cost excluding government-funded patients. Private participation can take a range of formats, but the nongovernmental segment has limited interaction with the public side. In the current political and economic climate, it is difficult to second-guess how quickly this will change. In the interim, the private sector will continue to seek opportunities for growth, which will partly depend on it delivering higher standards of care than those available in the public hospitals.