A positive impact: Private medical providers to benefit from an expected rise in demand

Already an indispensible part of the health care sector in the emirate, private medical care is ready to enter into a new and even more mature phase. Among the factors driving its growth are a new health insurance law that is being rolled out over the next several years, which will bring millions of new domestic customers to the private market. Further, preparations and investments for the Expo 2020, should help solidify the emirate as a medical tourism destination and increase Dubai’s reputation throughout the world.

A Significant Impact

 The new health insurance mandate will transform all aspects of the domestic health care industry and private medical providers should stand to benefit greatly from a major increase in demand. The new law is based loosely on regulations passed in Abu Dhabi, and if the impact on the industry there is any indication of what the effect will be in Dubai, a radical shift is on its way. In the years following the insurance mandate in Abu Dhabi, demand for medical treatment and services rose by 40% and many private hospitals saw their revenues double.

In its 2013 fourth-quarter report on the health care sector in the UAE, market research firm Colliers International stated that an efficient and high-quality private hospital could expect net profit margins between 15% and 20%. In order to enter the market, however, companies must make large capital outlays and finding reasonable sources of funding can be a hurdle. According to the same report, banks have been actively seeking investment opportunities within the sector, but because of the risk and long-term nature of building new facilities they have been more inclined to work with well-established companies. Public listings have also become an increasingly popular option for larger health care companies in the UAE. Publicly traded Mediclinic International was joined by other firms such as Al Noor Hospital and Dallah Healthcare Holding, which have had successful listings in recent years.

While the prospects of a growing market could mean that new entrants into the sector are on the horizon, established hospitals and care providers are well positioned to solidify their gains before any new competition appears. “There is a minimum time requirement of around four years to set up a hospital. For this reason, even if new players come, they will not be considered a threat in the short term,” Maged Mounir, the chief operating officer of Al Garhoud Hospital, told OBG.

More Promotion Needed

 As the coming rise in domestic demand brings strong growth and stability to the health care industry, further expansion into the world market through medical tourism represents an untapped resource that could take the sector to a new level. While Dubai is already one of the busiest travel destinations in the world and has all of the needed infrastructure to welcome patients, medical tourism is a highly competitive market and the emirate is working to establish itself within a crowded field. Key to this endeavour is marketing its existing strengths. “Dubai has the infrastructure in place to position the health care sector for medical tourism, but it needs to promote it more to be successful,” Mounir told OBG.

Winning the Expo 2020 has ensured the spotlight of the world will be on the emirate, and that it will be able to showcase all of the facilities and infrastructure that make it competitive with other, more mature and established destinations. Following the announcement that Dubai had been selected to host the Expo, Azad Moopen, chairman and managing director of DM Healthcare, expressed his view on its impact, telling local media, “The tremendous growth in the health care sector, with the hosting of Expo 2020, will go along with the long-term vision of Sheikh Mohammed bin Rashid Al Maktoum, vice-president and prime minister of the UAE and ruler of Dubai, to transform Dubai as a popular medical tourism destination in the Middle East. The World Expo 2020 will have a phenomenal positive impact on the UAE’s health care sector.”

Overcoming Challenges

 There has been a certain amount of fragmentation and lack of coordination in the UAE’s medical tourism industry mainly due to the fact that the private sector has been extremely active in the emirate. This has made it difficult for some potential medical tourists to find specialists and services that may exist in Dubai. In addition to newly formed government-led coordinating groups aimed at overcoming this challenge, private groups have also identified this gap and new consulting firms that specialise in assisting patients have begun opening. While neither private industry or government committees are likely to address every issue overnight, combined they should complement each other and continue to help attract more international patients to the emirate.

Staffing

With the expansion the industry has seen over the past years only expected to gain momentum with the increase in domestic and international demand, staffing is becoming a major issue for private health care providers. Coupled with the growth taking place in Abu Dhabi, firms have started looking at doctors and nurses who are already working within the UAE as an easier alternative to recruiting from abroad, which has contributed to the rise in salaries. Speaking to National, Binay Shetty, the chief operating officer of NMC Healthcare said, “Here they [hospitals] had recruited from abroad historically but because the pace of growth is so quick now, hospitals tend to recruit from the local market and this leads to short-term inflation of salaries.” With the increased demand expected from both local and international patients over the coming years, this will be an important cost to monitor.

Expansion Plans

 Home-grown companies are also doing well, and some are expanding beyond the borders of the UAE. DM Healthcare, one of the oldest and most successful Dubai-based firms, has set its sights on India, and is opening a $300m, 570-bed facility in the first part of 2014 to complement the two centres it already has in operation. The company does not seem to have completed its expansion in the country either, announcing that it plans to invest more than twice the amount it spent on its most recent facility in India over the coming years. The health care industry has also seen strong growth in groups using the emirate as a management centre and headquarters for the region. Mariano Gonzalez, managing director at Moorfields Eye Hospital Dubai, an overseas branch of Moorfields London Eye Hospital that is also involved in clinical quality, research and education development in the emirate, told OBG, “Many health care companies are using Dubai as a centre for operations in Africa, the Middle East and the Indian subcontinent due to the competitiveness of the infrastructure and supporting industry.”

Support Services

 Health care providers do not operate in a vacuum, and many leading companies that specialise in support services and medical products are also already present in the emirate. Looking to capitalise both on the domestic demand as well as the growth in neighbouring countries, a number of these companies also use Dubai as a regional headquarters, adding yet another dimension to the growing sector.