On track for expansion: Rising demand and increased investment will power the sector

While the state remains the largest player in the health care industry in Saudi Arabia, providing free treatment to nationals and stepping up spending, the authorities are working to encourage the expansion of the already substantial private health sector. Health spending has been on the rise, with the government having recently substantially increased the health budget, investing in infrastructure expansion and initiatives such as computerisation and audit programmes. Population growth, increasing life expectancy and the prevalence of noncommunicable, lifestyle-related diseases such as diabetes mean demand for health care services and spending will continue to grow in the medium to long term.

Market Structure

The Ministry of Health (MoH) is the main government provider of care; however, other government institutions, such as the national guard and national energy firm Saudi Aramco, also operate facilities, primarily for their employees and employee dependents. Health care at MoH facilities is gradually being restricted to nationals only, leaving the large expatriate community reliant on the private sector.

MoH health care is provided free of charge to nationals; however, many use private sector facilities because of factors such as perceptions of higher standards of care and lower waiting times. The government is working to encourage more private providers to enter the market in order to improve the capacity of health services in the Kingdom generally and reduce the burden on public hospitals – though there are some restrictions on private sector investment, such as a ban on companies with foreign ownership and insurance firms from owning hospitals and clinics.

Health Care Facilities

According to MoH data, there were 420 hospitals in the Kingdom in 2011, of which 251 were MoH hospitals, while 39 were other government hospitals and 130 were private. The number of MoH hospital beds stood at 34,450 out of a total of 58,696; of the remainder, 13,298 were private hospital beds and 10,948 belonged to other government hospitals. This gave an overall hospital bed rate of 20.7 per 10,000 of population, and of 16 government hospital beds per 10,000. In addition to hospitals, the Kingdom also hosts 2109 primary health care centres, 1987 private polyclinics and 198 private clinics.

The number of hospital beds has been growing more slowly than the population in recent years, meaning per capita rates have been falling; the number of beds per 10,000 of population stood at 20.68 in 2011, according to MoH figures, compared to 21.42 the previous year and 22.1 four years earlier. Growth in the private sector is currently outstripping that of government facilities, according to some indicators; for example, the number of private beds grew by 18% over the same period, compared to 9.6% for MoH hospital beds and 1.1% for other government hospitals. However, in other areas the state sector is matching or outstripping the growth of the private sector. For example, the increase in the number of doctors over the past five years been roughly the same in the MoH and private sectors (50.2% and 53.1% respectively), while the number of MoH nurses has grown significantly faster than that of the private sector (52.3% compared to 34.6%).

Employees

There were 69,424 physicians working in the Kingdom in 2011, according to the MoH, of whom slightly under half worked in MoH institutions. Of the remainder, 24,144 worked in the private sector and 13,081 worked in other government health institutions. These figures give rise to a rate of 24.4 physicians per 10,000 people. Of the total number of physicians, 13.2% were general practitioners.

While the per capita rate of beds has been falling, the coverage rate of health personnel has been growing steadily in recent years. In 2007 there were 2.3 physicians working in primary health care centres per 10,000 people according to MoH data. This had risen to 3 per 10,000 in 2011. For nurses, the figure rose from 4.9 to 5.9 (though the latter represented a reduction from a peak of 6.6 in 2009). Government plans will see significant rises in the number of health personnel working in the Kingdom over the medium term (see spending analysis). The Kingdom has a large medical training network to help with this, including 28 colleges of medicine (of which six are private institutions) as well as 19 colleges of dentistry (seven private) and 21 colleges of pharmacy (six private). In 2011, 1535 medical students graduated from state schools, in addition to 316 dentistry students, 461 nurses from nursing colleges and 1430 in applied sciences (with this including some additional nurses).

Saudiisation of the workforce is proceeding gradually among physicians. In 2011, 22.4% of all doctors were Saudi nationals, up from 21.6% in 2007 (though down from a peak of 23.1% in 2009, including from 20% to 23% among MoH physicians and from 4.1% to 5.6% in the private sector. Of physicians employed in other government health institutions (such as military hospitals), 49.5% were Saudis. Progress has been more marked among nurses, with the rate increasing from 28.8% to 33.6% in the same period, and among other health care personnel, with an increase from 59.1% to 69.1%, spread across all health care segments.

According to the general manager of GlaxoSmithKline Saudi Arabia, Masood Jaffery, there is a need for more trained Saudi pharmacists. “At the moment the number of trained Saudi pharmacists graduating from universities does not match the demands of the sector. To meet the growing demand for trained pharmacists and Saudiisation requirements, the Kingdom needs more pharmacy graduates,” he told OBG.

Regional Standing

While some of these indicators are rising, there may be a need for further improvement if the Kingdom is to keep up with the standards of the regional leaders and wealthy parts of the world. “In terms of the number of beds, doctors and nurses per capita, we fall behind most of the GCC and developed countries,” Fayad Dandashi, the CEO of medical technology firm Futuremed, told OBG.

Indicators on the extent to which Saudis share such concerns and how they rate health care in the Kingdom are mixed. For example, a poll conducted in March 2012 found that 60% of respondents were satisfied with the quality of health care in the Kingdom. While this represented a healthy majority, it was the lowest satisfaction level in the GCC, comparing to levels of between 62% and 90% for other states in the bloc.

However, another survey, the results of which were published in August 2012, suggested Saudi nationals were also the least likely in the region to prefer to seek medical care abroad (35%, compared to 65% for Kuwaitis, the most likely people in the region to do so), suggesting relative satisfaction with local facilities, though economic and social factors also play a role. There were 291,025 outbound trips for the purpose of health and medical care from the Kingdom in 2011, according to the Saudi Commission for Tourism and Antiquities’ Tourism Research and Information Centre (MAS), representing 1.9% of all outbound trips. According to statistics from the MAS, 103,009 people, or 0.6% of total visitors, came for medical and health purposes in 2011.

Usage

The Kingdom’s health facilities admitted 3.03m inpatients in 2011, of whom 56% were treated in MoH facilities, up from 51.78% the year before but down slightly from previous years. Of all inpatient admissions, 17.1% were to other government institutions and 26.7% were to private hospitals. Of outpatients, 50% of total visits to medical facilities were to MoH institutions, 17.6% were to other government facilities and 32.4% were to private institutions, of a total of 131.9m visits.

While MoH hospitals are more heavily used overall than the private sector, as indicated by the above statistics, more patients were admitted for surgery to private facilities than to state institutions; according to MoH data, 441,102 operations took place in MoH hospitals in 2011, compared to 186,993 in other public hospitals and 447,761 in the private sector. The latter was particularly heavily used for obstetric and gynaecological (OBS/GYN) operations, which accounted for 41.8% of all private sector operations (based on 186,943 private OBS/GYN operations), compared to 24.3% of all MoH operations and 7.9% of other public operations.

Health Insurance

Health insurance density stood at SR358 ($95.41) per capita in 2011, based on gross written premiums of SR8.7bn ($2.32bn). The segment is dominated by compulsory purchases; all private sector employers have been obliged to provide health cover to workers and their dependants since 2006 under the Mandatory Cooperative Health Insurance Law. The introduction of this law had a major impact on the sector, leading to a 250% expansion in health premiums over five years. There has been some discussion of expanding this to all residents, but this has yet to occur.

Low Spending

Uptake of private insurance by nationals not covered by mandatory private sector employer-provided health care is low, in line with generally low purchases of non-compulsory insurance in the Kingdom. As a consequence, out-of-pocket expenditure accounted for around half of spending on private health care and 18.6% of total health care expenditure in 2011.

Industry figures say that price competition in the health segment is intense, but that customers are less concerned with other factors. Speaking to OBG, Gary Lewin, the general manager of AXA Saudi Arabia, described the current situation as a price war. “Individuals and companies perceive compulsory health insurance as a tax and tend to buy the cheapest they can find, with little concern for added value,” he told OBG.

The intensity of price-focused competition has given rise to concerns about the potential impact on quality. “In a highly competitive environment, companies are fighting for a share of the health market by reducing prices, with a consequent risk of decreasing the quality of services by reducing the coverage,” Antoine Issa, the CEO of Allianz Insurance in Saudi Arabia, told OBG.

Illnesses

Non-communicable diseases – in particular those caused by unhealthy lifestyles – are becoming an increasingly important issue and represent a growing burden for the country, but also a major likely source of growth in expenditure. For example, the King Abdulaziz City for Science and Technology forecasts that cardiovascular disease will incur total costs of $21.33bn by 2032 and diabetes $31.99bn by 2035.

The spread of diabetes has garnered particular attention; per capita rates are the seventh-highest in the world, according to figures from the International Diabetes Federation. Levels are high in the regional as whole, largely due to poor diet and lack of exercise, though the Gulf population also appears to be more predisposed to develop the disease.

“Diabetes is becoming a major problem, which is likely pushing up health care costs,” Lewin told OBG. “Fortunately the country’s population is a young one, but that will not be the case forever.”

Such problems are related in particular to a high prevalence of unhealthy lifestyles, low exercise levels and high obesity rates. In a Gallup poll published in July 2012, 22% of Saudi respondents said they take 30 minutes or more of exercise at least three times a week, the lowest rate in the GCC. This fell to 16% for female respondents, though it rose to 33% for 15- to 29-year-olds, suggesting that younger Saudis are more likely to exercise and that the problem may well improve over time. Of Saudis over the age of 20, 45% of women and 29.5% of men were classified as obese in 2008, according to figures from the WHO, compared to regional averages for the Eastern Mediterranean area of 13% and 24.5%, respectively. High blood pressure was also more common, though tobacco use was significantly lower than in the region as a whole.

Better regulations for food and product safety should also help as well, according to Mohammed A Al Kanhal, the executive president of the Saudi Food and Drug Authority. Al Kanhal highlighted the importance of establishing transparent regulations to ensure the safety and quality of products. These will not only benefit local consumers, but also local manufacturers and retailers, as their exports will be more competitive as a result of accreditation.

Some industry players argue that large-scale changes to the country’s approach to health care are needed to encourage healthier living. “The unhealthy lifestyle in Saudi Arabia is not a result a lack of awareness,” Othman Abuhussein, the CEO of National Medical Care Company, told OBG. “People are aware of the issue, but the problem is that system is still more geared towards treatment than prevention. Preventive health care needs a strong primary care system; however, the primary care system is poor and won’t improve until there’s a better payment system, better facilities and primary care providers promote themselves better.”

Health Care IT

The use of IT is playing an increasingly important role in the provision of health care. For example, the MoH is currently implementing a five-year e-health roadmap as part of its e-health strategy, working with IBM and other advisors. This aims to provide electronic services to all MoH health care facilities and create interoperable electronic health records for all patients, allowing for easier transfer between facilities. Key aims include increasing the use of IT systems in health care institutions; the project will, for example, see standardised automated IT systems installed in 2900 primary health care centres, almost all of which used entirely manual systems before it began. Hospitals, where the degree of computerisation varies significantly, will see existing information systems checked and upgraded, and IT systems will be provided to hospitals whose systems are still entirely paper-based.

Potential For Impact

Industry players argue that improved IT can have a major positive impact on Saudi health care. “A more sophisticated IT infrastructure is key to developing a paperless system, whereby any patient file and history can be easily located by the provider as well as the individual patient,” said Abuhussein. “Such improvements would go a long way towards achieving a cohesive health care system in the Kingdom.” The initiative should provide significant opportunities to private sector firms as the MoH recommends that hospitals “outsource as many functions as possible during the initial years of the programme.”

The MoH also operates a clinical audit programme that uses a web-based portal for information gathering (see analysis), and in March 2012 launched another portal for reporting serious medical errors. In 2011 the national e-government facilitation initiative Yesser announced it would assist the Saudi Commission for Health Specialities to offer e-government services.

Working Remotely

There has also been growth in health provided remotely via the internet and mobile devices. The MoH already provides health educational content and advice on its website, as well as a health encyclopaedia, and the ministry also offers an informative mobile subscription service. Furthermore, rapid improvements and upgrades in telecoms and IT technology are set to facilitate growth in e-health care.

Local ICT firms are also beginning to offer specialised health care-focused services. In 2010 local mobile operator Mobily and international telecoms major Ericsson launched an mHealth solution, aimed primarily at chronically ill patients, that enables doctors to monitor them remotely via sensors attached to devices that transmit information back to health care institutions over 2G and 3G mobile networks, reducing the need for patients to travel to clinics. Companies are also beginning to exploit increasing smartphone and tablet ownership to offer sophisticated mHealth (mobile health care) services.

Outlook

Saudi Arabia has a growing population that, combined with increased life expectancy – and hence for example rising demand from elderly patients – and a rising rate of so-called lifestyle diseases such as diabetes, means demand for health care services is set to continue to grow for the foreseeable future. Increasingly, some of this demand will be met at least in part through IT and mobile device-enabled services. The expanding private sector is set to meet much of the growth as the government encourages its expansion, and provision by the MoH to non-nationals is reduced. However, significant increases in spending by the government and investment in infrastructure will also see major expansion in state facilities in coming years.