Better care: Capacity is being expanded and there are significant opportunities in some specialty areas

Fuelled by higher incomes; the growing, ageing population; a rise in the prevalence of lifestyle diseases; and the introduction of mandatory health insurance, Abu Dhabi’s health sector has expanded rapidly in the past five years. This has placed pressure on the sector, and the government is building new facilities, hiring doctors and training nationals to keep pace with demand. Meanwhile, private providers are taking up the numerous opportunities presented in this growing market.

Rising Demand

Given demographic trends, in 2012 the Health Authority - Abu Dhabi (HAAD) estimated that by 2022, Abu Dhabi will need up to an additional 4800 doctors, 13,000 nurses and 3600 hospital beds. According to Statistics Centre - Abu Dhabi, between 2005 and 2012, the population grew at 7.7% per annum, with the Abu Dhabi Economic Vision 2030 estimating the emirate’s population will double by 2030. This equates to a growth rate of approximately 5% per annum.

According to HAAD, aggressive growth in demand is expected for services relating to lifestyle-related diseases such as diabetes and cancer, where volumes are expected to increase by 5-16% for inpatients and 8-20% for outpatients. Dr Shamsheer Vayalil, chairman of Burjeel Hospital and LLH Hospital, told OBG, “To build a sustainable business model within the health care sector, given increased competition and the rising cost of medical supplies and equipment, it will be increasingly important that hospitals develop a network of services to achieve economies of scale.”

As is the case in many high-income countries, Abu Dhabi has experienced a notable rise in demand for treatment of non-communicable diseases. Cardiovascular diseases, for example, caused a quarter of all deaths in 2012. Some 30.4% of the UAE population was obese and 18.9% had diabetes, according to 2012 WHO data, making the UAE one of the top 10 countries worldwide for both diseases. Among nationals, the figures are even higher. A total of 33% of men were obese and 22% suffered from diabetes. Among Emirati women, the figures are 38% and 20%, respectively. “Without major changes, these rates are set to increase further as the young population ages,” a 2011 HAAD report stated.

Cancer is also a concern, accounting for 14% of all deaths in 2012. More residents died of breast cancer than any other type of cancer, largely due to late detection. The government now requires that all Emirati women be screened as a condition of their insurance re-enrolment. Additional health threats include respiratory infections, accounting for 12.3% of clinical episodes, and musculoskeletal disorders and digestive diseases, accounting for 8.3% and 6.6%, respectively.

Insurance Cover

Starting in 2006, Abu Dhabi required all employers to buy health insurance for their employees. The number of basic and enhanced health insurance contracts rose from 1.88m in 2008 to 2.7m in 2012, and the number of expatriate claims increased from 3.99m to 12.5m, according to HAAD data. In 2008, all nationals were provided with the new Thiqa plan, which provides access to public and private health providers. While nationals comprise just over 20% of Abu Dhabi’s population (20.4%, according to the “Abu Dhabi Statistical Yearbook 2013”), they make up a higher percentage of the elderly population and accounted for 36.4% of all medical claims in 2012.

“The implementation of mandatory health insurance is reshaping the sector, leading to an increased demand for affordable and accessible medical services,” BR Shetty, the CEO of NMC Healthcare, told OBG. “The current system grants everyone, regardless of income level, access to quality medical assistance.”

Abu Dhabi health providers are counting on benefitting from expanded health coverage in other emirates. For example, as of October 2014, companies in Dubai with over 1000 staff are required to provide health coverage to their employees. Furthermore, employers with between 100 and 999 employees will be required to provide coverage by July 2015 and companies with less than 100 staff will have until June 2016.

“The implementation of compulsory health insurance in Abu Dhabi has led to higher per capita health spending,” Dr Kassem Alom, CEO at Al Noor Hospitals Group, told OBG. “With other emirates such as Dubai and Sharjah introducing programmes of their own, we expect the same type of results to occur there as well.”

HAAD bed utilisation figures suggest that significant and ongoing capacity upgrades have ensured that bed numbers are sufficient for the current population. However, severe specialty shortages still exist and, as the population expands, additional bed capacity will be required. In 2012 Abu Dhabi had 2.7 hospital beds per 1000 population, compared to the US and UK, which had 3.0 and 3.3 beds per 1000 population, respectively. As of 2012, the emirate had 21.4 physicians per 10,000 population, compared with 19.3 in the UAE as a whole, 24.2 in the US and 27.4 in the UK.

“We are very encouraged by the potential of the health care sector. At present, about 50% of the UAE population has health insurance cover, and this proportion is rising as income increases. Dubai is in the process of introducing mandatory health insurance, just as Abu Dhabi did successfully in 2008. We also expect the Northern Emirates to follow suit. This will create additional need for professional, large-scale health care partners capable of handling high volumes of administrative work,” Salem Al Noaimi, the CEO and managing director of Abu Dhabi-based investment company Waha Capital, told OBG.

Market Structure

Both the government and private providers are constructing new facilities and expanding existing ones to keep up with the rising demand for health services. “With a growing population, total health care spending in the UAE is projected to reach 3.9% of GDP in 2014, up from 2.8% in 2011,” Al Noaimi said. The government health sector has undergone a number of reforms over the past decade, including the 2007 division of the General Authority for Health Care Services into two separate agencies, the Abu Dhabi Health Services Company (SEHA) and HAAD. As the sector policy-maker and regulator, HAAD licenses and monitors both health providers and insurance companies, regulates premiums and reimbursement rates, collects market data to identify capacity gaps, works with public and private providers to establish new facilities, and promotes public health campaigns.

In its strategic plan for 2011-15, HAAD identified 11 priorities among the categories of service delivery, process and technology, and people development. Key goals include increasing private-sector participation and filling identified gaps in services for emergency medicine, neonatology, cardiology, psychiatry, paediatrics, oncology, and obstetrics and gynaecology. In the most recent health report, HAAD stated, “Investors hold 42 preliminary hospital licences, which signals significant future capacity to meet this demand.” HAAD forecast that paediatrics and obstetrics will see improved capacity, and specialised projects under construction include the enhancement of neonatal capacity.

Government Role

SEHA operates state health providers. Even as the government promotes private participation in the health sector, certain specialisations are likely to remain dominated by SEHA. Public facilities are mostly focused on tertiary care, Sami Alom, chief strategy officer at Al Noor Hospitals Group, told OBG. “We aren’t going to expand into transplants and treating burns,” he said. “It just doesn’t make sense.”

Of the 39 hospitals operating in Abu Dhabi as of 2012, 32% were run by SEHA. However, SEHA hospitals tend to be much larger than private hospitals and better equipped for emergency and inpatient care. Of the emirate’s 4226 hospital beds, 2475 (or 58.5%) are in SEHA hospitals. According to HAAD’s 2012 figures, SEHA provided care in 37% of the emirate’s health episodes, but 88% of inpatient emergency room (ER) visits and 81% of outpatient ER visits.

In several of its larger facilities, SEHA is cooperating with international medical providers to manage operations, including Johns Hopkins Medicine, Cleveland Clinic and Fresenius Medical Care.

Investnment

 Abu Dhabi continues to invest billions in facility construction and training. In 2012 the emirate’s Executive Council approved the construction of 14 new health centres, including six hospitals. The investment will increase the number of general clinics, and expand specialty medicine with a new medical rehabilitation centre, a dialysis centre and a special-needs centre. Many new SEHA facilities are now under construction. For example, the Sheikh Khalifa Medical City (SKMC), on which construction is set to complete in 2019 or 2020, will include a general hospital, a paediatric hospital and a women’s health hospital. In September the council approved $28m to build a dialysis centre in SKMC. The government is also planning to spend $1.2bn on a new hospital in Al Ain with 687 beds, 104 specialised units, 17 units for X-ray, computed tomography scan and magnetic resonance imaging, along with 22 endoscopy diagnosis units.

SEHA is currently building a new 739-bed facility for the 30-year-old Mafraq Hospital, which offers general medicine, obstetrics, paediatrics and critical care, along with specialties in burn treatment; ear, nose and throat; and thoracic surgery. Set to open in 2015, the new facility will include four towers, with 65 additional intensive-care units for a total of 150; 200 extra physicians, for a total of 500; and a further 283 beds.

Mubadala Healthcare

 The government invests in strategically important areas through Mubadala Healthcare, a business unit of the state-owned investment firm, Mubadala Development Company. One of Mubadala’s flagship expansion projects, the 364-bed (expandable to 490) Cleveland Clinic Abu Dhabi will have five centres of excellence in the following institutes: heart and vascular, neurological, digestive disease, eye, and respiratory and critical care. Dr Marc Harrison, CEO of Cleveland Clinic Abu Dhabi, told OBG, “Cleveland Clinic Abu Dhabi is designed to address complex medical requirements which patients would ordinarily treat abroad.” In total, the hospital will have more than 30 medical specialities. Construction completion is scheduled for April 2014, and the 13-floor facility is already a local landmark. According to The National, the project, which is being constructed by Sixco-Samsung, a joint venture between Six Construct Company and South Korea’s Samsung, will be the largest steel-framed structure in the UAE. The clinic has already secured more than 400 staff and will employ a total of 175 consulting physicians, along with 2000 nurses and allied health professionals. Approximately 80% of physician chiefs have Cleveland Clinic experience. Mubadala Healthcare’s Healthpoint hospital opened its outpatient clinic in June 2013, and will eventually offer a range of inpatient and outpatient services, including orthopaedic surgery, spinal surgery and paediatrics, to name a few. At present, the clinic provides family medicine, women’s health services, orthopaedic and spine care, physiotherapy and rehabilitation, paediatrics and dentistry. Managed by leading German hospital operator Asklepios, Healthpoint is the new home to Mubadala Healthcare’s Abu Dhabi Knee & Sports Medicine Centre and the Wooridul Spine Centre. As services expand, additional specialities will include radiology, neurology, dermatology, and plastic and reconstructive surgery, among others.

In 2006, Mubadala Healthcare opened the first of its two branches of Imperial College London Diabetes Centre (ICLDC). Designed to treat the growing population of nationals living with diabetes, the centre initially served 200 patients a day. By 2013, the ICLDC was seeing an average of 550 patients per day, and Mubadala opened the second branch in Al Ain in 2012 to accommodate demand. According to Bashar Al Ramahi, CEO of ICLDC and senior vice-president at Mubadala Healthcare, “Specialised services for cardiovascular and paediatric care are essential when general hospitals cannot sustain the volume that standalone centres can provide. Despite a relatively small population, the high rate of diabetes within the emirate warrants the establishment of such specialised services.”

Private Health Providers

 Private providers in Abu Dhabi tend to focus on general medicine or high volume specialisations such as obstetrics, reproductive medicine or diabetes. As of 2012, 61% of outpatient hospital visits were to private providers. In non-hospital settings, private health care providers received 62% of visits to health centres and 97% of visits to health clinics. “Primary and secondary care are our bread and butter,” Sami Alom told OBG, “but we have more recently been moving into tertiary care.” Among private hospitals, publicly traded Al Noor is the market leader, with a 35% share of elective inpatients and a 33% share of non-emergency outpatient visits as of 2012. Al Noor’s three hospitals and 10 medical centres employed considerably more doctors and provided more than twice as many beds as its next-largest competitor.

In the first half of 2013, the firm’s revenue grew 10.9% year-on-year to $179.5m; however, net profit dropped 24.3% to $24.8m. Total outpatient and inpatient admissions grew 9.8% and 18.7%, respectively, according to Al Noor’s half-year financial results.

As the UAE moves toward universal medical coverage, Al Noor will look to expand into other emirates. Further, with insurance schemes expanding across the region, the company will consider competing in GCC countries where similar demographic trends provide investment opportunities, Sami Alom told OBG.

Second in its share of Abu Dhabi hospital visits, NMC Healthcare operates eight care facilities and a chain of pharmacies across the UAE. Listed on the London Stock Exchange, NMC Healthcare’s revenues increased 14.7% in the first six months of 2013 to $273.1m, while net profits rose 17.3% to $32.3m. “NMC plans to add a total of three hospitals with 410 beds in additional capacity in the UAE, including two hospitals and a medical centre in Abu Dhabi. A 100-bed maternity hospital is due to open in 2014 in Abu Dhabi City and NMC is also building a new 250-bed specialty hospital in Khalifa City A, expected to open in 2015,” BR Shetty, the founder and CEO of NMC Healthcare, told OBG.

A number of other service providers also operate within the emirate, for example, LLH Group, which runs four hospitals in Abu Dhabi: LLH Hospital, LLH Hospital Al Musafah, Life Care Hospital and the newly constructed Burjeel Hospital, which stands as one of the more high-end facilities currently available.

In the growing market, smaller operators are expanding and new providers are entering. The new Dh250m ($68.1m) Universal Hospital opened to patients in September 2013. The 168-bed facility has capacity to treat 1600 outpatients a day. Services include neurology, cardiology, urology, gynaecology and sports medicine. Dr Michael Bitzer, the CEO of Abu Dhabi-based National Health Insurance Company – Daman, told OBG, “An increase in the number of hospitals opening soon could run the risk of creating overcapacity, despite trends depicting a growing number of inpatients and outpatients in the health care sector. There are segments of the health care market that remain underserved and would welcome private-sector involvement.”

Plans

As of 2006, all employers of expatriates are required to provide their workers with health insurance and, for the majority of lower-income workers who may have previously gone without health insurance, the government subsidises the Dh600 ($163.30) per year Basic plan administered by Daman. In 2012, 1.34m residents subscribed to the Basic plan, up from 900,000 in 2008. In addition to the premium, the plan requires a 30% co-payment on pharmaceuticals and a deductible of Dh10-20 ($2.72-5.44) for medical visits, according to Sven Rohte, chief commercial officer at Daman.

White-collar expatriates tend to receive an “enhanced plan” with varying levels of service and benefits selected by employers. As of 2008, Abu Dhabi nationals receive the government-funded Thiqa plan, with top-up options to be paid by employers or out of pocket. However, medical cost inflation is putting pressure on both insurers and employers. Premiums would be even higher, analysts agree, but intense competition between Abu Dhabi’s 38 health insurers drives rates down, at times to below technically profitable levels.

Mohammed Sultan Al Hameli, chairman of HAAD, told OBG, “The escalating cost of premiums due to some misuse within the system is something we want to greatly reduce.” To this end, HAAD implemented an e-billings system to track all charges to insurers and identify where costs are consistently above average. “This clearly identifies where abuses are taking place and acts as a deterrent for anyone trying to take advantage of the system,” Al Hameli said. In 2010 HAAD introduced a payment system based on diagnostic-related groups for inpatient services. Under this mechanism, insurers reimburse providers at a package rate for classified services based on the average cost per case.

Increased demand is driven in part by the prevalence of non-communicable diseases and the government is putting resources into prevention. To combat diabetes and obesity, insurers and HAAD have partnered to launch campaigns to promote healthy living (see analysis). To reduce cancer fatalities, HAAD publicises the importance of mammograms, and other early diagnosis screening. Furthermore, the government has invested in a 200-bed campus to treat alcoholism and drug addiction, based on the assumption that addiction costs 2-4% of annual GDP, mostly due to loss of productivity and social and legal expenses.

Building Human Capital 

The biggest constraint for the rapidly growing sector is human capital. HAAD predicts Abu Dhabi will need 7100-10,300 doctors and 17,500-25,400 nurses by 2022, requiring annual recruitment and retention of 140-350 doctors and 430-920 nurses. The low level of Emiratisation in health professions increases turnover of medical staff, and when staff turnover is taken into account, HAAD forecasts 1200-1700 doctors and 2000-2900 nurses will need to be recruited on an annual basis.

“An increased national presence in health care is imperative for the development of a sustainable industry,” Al Hameli told OBG. “The rate of nationals pursuing careers in the profession is very low.” The government is working to Emiratise the medical field using similar strategies to those employed to increase national participation in other sectors: scholarships and stipends for education, and partnerships with international institutions that provide residencies for Emiratis.

Many of the management agreements between SEHA hospitals and international operators include conditions requiring an education component. For example, Al Corniche is training seven residents, three of which are Emirati. Cleveland Clinic Abu Dhabi is set to provide local training and the new Mafraq Hospital will have a separate building dedicated to education and training.

Even as Abu Dhabi trains a new generation of Emirati medical staff, hospitals and clinics must fill current gaps with foreign staff. The current licensing system for medical professionals provides an added challenge to recruitment. However, HAAD is working to reduce the red tape. “Going forward we recognise the importance of streamlining the licensing and recruitment process to stimulate private investment,” Al Hameli told OBG.

“We now provide exemptions to doctors who have passed their medical boards in countries with a strong medical history, from having to be re-examined, making it less expensive for hospitals to recruit new talent.”

Outlook

Abu Dhabi’s health care sector continues to grow rapidly, and government efforts have largely been able to keep pace. So far there are little signs of respite, as the emirate’s growing population and the rising incidence of lifestyle-related diseases are set to maintain pressure on the system. The ongoing roll-out of the universal health insurance programme also promises to increase demand for medical services.

The private sector will likely continue to expand by investing in high-volume needs such as reproductive health and communicable diseases, while areas such as acute and tertiary care are expected to remain the purview of government hospitals. To help support the future expansion of the sector, increased focus is being placed on developing the emirate’s training capacity, thereby ensuring a well-trained workforce capable of operating the many facilities now under construction.