Getting into shape: With a push from the state, private health care provision is on the rise

With high levels of government spending and steadily increasing private sector participation, Kuwait’s health care industry is poised for considerable expansion in the coming years. The Ministry of Health (MoH), which is constitutionally mandated to offer free health care to all Kuwaiti citizens, accounts for the great majority of medical provision. In 2011, the most recent year for which data is available, the government accounted for around 80% of total health expenditure in the country, according to the World Health Organisation (WHO), with the private sector making up the remaining 20%. In terms of beds and services, MoH facilities account for around 90% of the market. The quality of care on offer in Kuwait is in line with international standards in both public and private sector clinics and hospitals.

The health care sector is expected to benefit substantially from the state’s KD30bn ($107.15bn) National Development Plan (NDP), which was launched in February 2010. The NDP provides for an overhaul of the country’s health care sector – currently under way – including the construction of a substantial number of new hospitals and clinics and the creation of the Kuwait Health Assurance Company (KHAC), a new private health care provider. These developments are expected to result in the steady expansion of private sector activity in the coming years, which bodes well for public finances and future progress within the sector.

HISTORY: Kuwait has been supporting an organised health care industry for more than a century. In 1910 US missionaries established a clinic in an area that now includes Kuwait, largely at the behest of Mubarak Al Sabah, the ruler of the sheikhdom from 1896 through 1915. By 1919 the missionaries had begun establishing hospitals for both men and women. In 1934 the 34-bed Olcott Memorial Hospital opened its doors to patients. Two years later, in 1936, the local government established the health authority that would eventually be transformed into the MoH.

The discovery of oil in 1938 had a transformative effect on Kuwait’s health care system. In 1949 the government opened the Al Amiri Hospital, which is still in operation today. In the decade leading up to independence in 1961, the government rolled out a comprehensive, free health care system. Indeed, ensuring access to high-quality medical care was a priority for the young nation.

FOCUSED SPENDING: Health expenditures ranked third in the budget during this period, after public works and education. This focused spending had a positive impact on health indicators in Kuwait over the next three decades. By 1988 Kuwait was home to some 2641 doctors and boasted a doctor-to-patient ratio of 1:600, up from just 362 and a ratio of 1:1200 in 1962, according to data from the WHO.

Life expectancy jumped by around 10 years over the same period, from the low-to-mid 60s in the early 1960s to the low-to-mid 70s by 1990. These and other improvements during this period brought Kuwait in line with international health standards. Since then, the sector has mirrored health care development in most other post-industrial nations.

OVERSIGHT & FUNDING: The MoH is currently the regulator and the primary service provider. In 2010 the government drafted a bill to create an independent health authority, which is expected to take over the job of regulating the sector in the near future.

Medical care and related services are free for Kuwaiti citizens at all MoH facilities. Another draft bill, also drawn up in 2010, will eventually bring about the creation of a comprehensive health insurance regime for Kuwaiti citizens. Under the new plan the state is expected to continue to pay for all compulsory medical services, while individuals will be responsible for financing elective services.

While free health care provision continues to be a central tenet of the welfare state, the public system is increasingly considered to be a financial burden on the government’s coffers. “With escalating financial pressure being placed upon health services, it is becoming increasingly hard to justify spending on education and training,” said Qais Marafie, the CEO of Kuwait Life Sciences, a health care investment firm. “At the same time, the nation’s primary care practitioners are being expected to take on new roles in the management of long-term conditions.”

HIGH COSTS: Indeed, the state’s commitment to paying for health care for Kuwaiti citizens extends to covering foreign medical treatment, including, in some cases, costly travel and lodging expenses. In 2011 government expenditure on health on a per capita basis was $983, more than double the rate a decade earlier in 2001, when it stood at $408, according to WHO statistics. Health care costs are expected to continue to rise for the foreseeable future, primarily as a result of steady population growth and the increasing prevalence of non-communicable diseases, such as diabetes and cancer (see analysis).

Prior to 1994, expatriates were also entitled to free health care at government facilities. Since the mid-1990s, however, all expatriates in Kuwait have been required to purchase a health assurance plan from the MoH via one of a number of international insurance brokers. The plans, which are heavily subsidised by the government, require expatriates to pay between KD1 ($3.57) and KD10 ($35.72) each time they visit a MoH clinic or hospital. The KHAC, which is expected to be launched in 2015, will effectively supplant this system. In an effort to reduce public health expenditure over the past decade, the government has worked to encourage employers to obtain private health insurance for their employees.

BY THE NUMBERS: In general, Kuwait boasts high health standards. The country’s infant mortality rate stood at 10.7 per 1000 live births in 2011, down substantially from 15 per 1000 in 1990 and 80 to 100 per 1000 in 1950, according to WHO data. Similarly, as of 2011, life expectancy in Kuwait was at 77.9, up from 74 in 1990. These improvements are primarily the result of a steadily expanding public health system. In 2011 Kuwait had 18.5 hospital beds per 10,000 people, compared to 10.7 in the UAE and 21.4 in Saudi Arabia. Similarly, in 2011 Kuwait had 24.4 physicians and 47.4 nurses per 10,000 people, compared to 14.7 and 22.6 in the UAE, for example. A handful of new hospitals are expected to be constructed under the NDP, which will require the MoH to hire a substantial number of new doctors and nurses, thereby boosting these ratios further in the coming years.

In 2011 around 7% of total government expenditure went towards the health sector, up from 5.6% in 2010 and 6.2% in 2001, according to MoH data. The same year, as previously mentioned, the government was responsible for around 80% of total spending on health care in Kuwait, down from 83.9% in 2010, but up from 76.8% in 2009 and 77.7% in 2001. In 2011 total health expenditure was equal to around 3% of GDP, down from 3.3% in 2010, but up from 2% in 2009. In general, health expenditure as a percentage of GDP has fluctuated between 2% and 3.5% over the past decade, according to the WHO.

HEALTH ISSUES: The high level of government investment in health care in recent years has had a positive impact on the overall health of the population. Most communicable diseases have been eradicated as a result of high immunisation rates for common maladies such as Hepatitis B, measles and diphtheria, among others. That said, as in many other countries in the Middle East, and particularly the Gulf, Kuwait has seen rising rates of non-communicable diseases. Lifestyle-related issues, such as obesity, diabetes, cancer and heart disease, are especially prevalent. Indeed, according to the WHO, as of 2011 some 70% of Kuwaiti men and more than 80% of Kuwaiti women were either overweight or obese. Similarly, according to the International Diabetes Federation, in 2011 Kuwait was ranked first in the Middle East and North Africa and third in the world in terms of diabetes prevalence, with around 21-25% of the population suffering from the disease.

Eating out is perhaps the primary contributor to obesity, with over KD1bn ($3.57bn) spent in restaurants annually. According to a report in the locally based Arab Times, as of mid-2012 there were 4793 restaurants operating in Kuwait, which is equal to one restaurant per 230 people, compared to one restaurant per 600 people in the US, for example. Despite rising prices at most restaurants, some 80% of the population eats fast food regularly, and casual dining restaurants attract 65% of the population while fine dining establishments draw 40%.

The government has taken a proactive role in combatting non-communicable diseases. The Public Authority for Youth and Sport, for example, is particularly focused on improving young people’s health through the establishment of several youth-oriented fitness and creativity centres. In addition, the state-funded Dasman Diabetes Institute, which was launched in June 2006, has become a key centre for diabetes treatment, education and research in the Middle East. However, according to Kazem Behbehani, the institute’s director-general, while diabetes treatment is necessary, prevention is the country’s long-term goal. “The best scenario for Kuwait now is to move away from hospitals and focus on primary health care,” Behbehani told OBG (see analysis).

THE PUBLIC SYSTEM: According to statistics from Kuwait’s Central Statistical Bureau (CSB), in 2011, the most recent year for which official data is available, the public health care system consisted of 15 hospitals, 92 general care clinics, 92 childhood care clinics, 68 preventative care clinics, 64 diabetes clinics, 80 dental care clinics and 33 maternal care centres. The MoH operates a general hospital in each of Kuwait’s six governorates and a number of additional specialty hospitals, which are located in various population centres around the country. In 2011 there were 6703 beds in total in MoH health facilities, up from 6338 in 2010 and 6072 in 2009, according to CSB data. Similarly, the public system has seen a steady rise in medical staff in recent years.

In 2011 some 6082 physicians and 16,102 nurses worked in MoH hospitals and clinics, up from 5680 physicians and 15,283 nurses in 2010 and 5340 physicians and 13,554 nurses in 2009. The largest government hospitals in terms of employees in 2011 were the general hospitals in Farwaniya, Al Adan, Al Jahra, Mubarak Al Kabeer and Al Sabah.

SPECIALIST FIELDS: In addition to the six general hospitals, the government operates a number of specialist institutions. Specialist hospitals are dedicated to physical medicine and rehabilitation; maternity; chest diseases; infectious diseases; psychological issues; allergies; diabetes; and cancer, among other areas. The country is home to a number of major institutions committed to treating and carrying out research on non-communicable diseases, which are increasingly prevalent throughout the Gulf. For example, the aforementioned Dasman Diabetes Institute is widely considered to be a leading centre for diabetes Public health care workers, 2009-11 research in the Middle East and further afield (see analysis). The Kuwait Cancer Centre, a $617.5m project currently under construction, is expected to play a similar role for cancer research and treatment.

HOSPITAL EXPANSION: The rise in beds and medical staff over the past few years is due primarily to the government’s KD1.1bn ($3.93bn) hospital expansion project, which was launched as part of the NDP in 2010. Under the initiative, which is currently under way, the MoH is working to upgrade and expand nine hospitals, including Al Amiri Hospital, Al Razi Hospital, Al Sabah Hospital, Farwaniya Hospital and Adan Hospital, among others. Plans for the Al Razi project include constructing a new 11-storey building that will include a total of 27,000 sq metres and will be linked to the existing hospital.

The plan, which is expected to result in the addition of 4369 new beds in total, is one of the most extensive overarching health care development projects currently under way in the Gulf region. Individual large-scale health-related projects taking place as part of this plan include the Jaber Al Ahmad Al Jaber Al Sabah Hospital, a KD304m ($1.09m) complex that will be the largest medical facility in the country when it is completed in mid-2013; the previously mentioned Kuwait Cancer Centre; and a $350m expansion of the general hospital in Al Amiri.

In the move to upgrade hospitals, some say improving the tendering process could be beneficial. “The tendering process for equipment in Kuwait needs modification. The equipment is obsolete by the time the tendering process is complete, which has led to outdated equipment,” Ghassan M Mamlouk, the CEO of Advanced Technology Company, told OBG.

PRIVATE PROVIDERS: While MoH facilities dominate the health care industry in Kuwait, the private sector is considered to be ascendant. “If more private participation is encouraged, the sector will grow exponentially,” Nadeem Nazir, the hospital director of New Mowasat Hospital, told OBG. According to the CSB, in 2011 the country was home to 12 private hospitals and 1038 beds, up from nine hospitals and 808 beds the previous year. Similarly, as of 2011 private hospitals and clinics employed 1699 physicians and 4494 nurses, up from 1589 physicians and 4252 nurses in 2010 and 1454 physicians and 3753 nurses in 2009, according to the CSB.

Al Salam International Hospital, initially established in 1964, is the largest private health provider in Kuwait, with 169 beds. It is majority-owned by Kuwait Finance House, a leading local sharia-compliant financial institution. Al Salam functions as a general hospital, and as such, provides a wide variety of medical services. Other leading private facilities include Hadi Hospital; Dar Al Shifa Hospital; New Mowasat Hospital; Royale Hayat Hospital and Taiba Hospital.

As the quality of health care throughout both the MoH and private system is in line with international standards, many private hospitals have worked to differentiate themselves from public facilities in other ways. For example, Royale Hayat Hospital, which was founded in 2006, partnered with Banyan Tree Hotels & Resorts, an international hospitality management firm. “We have stepped out from being a mother-and-child hospital to be a multi-specialty luxury hospital that aims to blend excellent hospitality with expert health care,” Dr Bader Alzaid Altraiji, deputy CEO of Royale Hayat Hospital, told OBG.

Other companies have worked to partner with the public health care system. United Medical Services, which was established in 2003 by a handful of local investors, is one of the largest health services companies currently active in Kuwait. The firm has controlling shares in a variety of local medical firms, including Al Maidan Dental Clinic, United Pharmaceutical, United Medical Technology and United Laboratories, among others.

THE KHAC: The creation of a state-funded, private sector health care provider has the potential to transform the industry in Kuwait and could, if all goes according to plan, serve as a model for health care reform throughout the region. The goal of the KHAC project, which was initially launched in 2010, is to establish a private company to manage health insurance and care for foreign residents who are privately employed, thereby partly relieving the government of the financial burden of caring for Kuwait’s large expatriate population. Companies are already bidding on the project, which is being managed by the MOH and the government’s sovereign wealth fund, the Kuwait Investment Authority (KIA). An initial round of bidding in late 2011 was cancelled after the listing failed to attract sufficient interest.

The KIA is committed to ensuring that the current round of bidding is successful. “Previously, we wanted to partner with a Kuwaiti company, but now we are planning to accept foreign bids as well,” said Mohammad S M Al Munafi, the acting managing director of the institutions and new projects department at the KIA. “If we don’t see more than one bid this time around we are planning to launch the KHAC ourselves, and then pass it off to a private company at some point in the future.”

The KHAC will operate as a full-service health maintenance organisation (HMO), developing and managing health assurance plans for foreign residents, liaising with the government to allow expatriates to Public health care facilities, 2009-11 access the MoH’s specialised hospitals and other advanced care facilities and, perhaps most importantly, building and operating three new hospitals and 15 clinics. The KIA’s primary model for the company is Kaiser Permanente, an HMO in the US. The firm will provide primary and secondary care at its own facilities, while specialised care will be outsourced to MoH facilities at a fixed rate.

For the purpose of this project, Kuwait has been divided into three major health regions, each of which will host one of the new hospitals and a handful of the new clinics. Kuwaiti citizens will be able to access the new facilities for a nominal fee, and the KHAC could potentially also eventually develop managed care plans for nationals. “The best scenario for Kuwait now is to move away from hospitals and focus on primary health care,” Zaid Al Siksek, the CEO of Health Authority Abu Dhabi, told OBG.

OWNERSHIP: The KHAC project is being developed on a joint basis by the MoH and the KIA, in conjunction with a number of local consulting firms. Provided that the second round of bidding goes as planned, by late 2013 a strategic private operator will own 26% of the company. The investor will have five years to complete the new medical infrastructure. The remainder of the KHAC will be owned by the government (24%) and Kuwaiti citizens via an initial public offering (IPO) of 50% of the firm on the Kuwait Stock Exchange (KSE). With a guaranteed initial client base of around 1.6m people – an estimated 62% of the expatriate population in Kuwait, according to the KIA – the KHAC is expected to eventually be one of the largest health care companies in the Middle East. Indeed, the firm is expected to boast a staff of more than 8000 employees and a capital base of around KD318m ($1.14bn), according to local news reports. “We are planning for the KHAC IPO to take place before the end of 2013,” said Al Munafi. “It will be the biggest listing in Kuwait’s history. We want the company to be a major holding throughout the region.”

CHALLENGES: Health care providers in Kuwait face a number of issues. With a substantial number of new hospitals and clinics expected to open in the coming years, the MoH will require a steadily increasing number of medical staff. A significant percentage of the staff currently working in the public system are expatriates, as the local health-related workforce remains relatively small. Due to an ongoing international shortage of qualified nurses, the MoH could struggle to hire enough new foreign employees to meet local demand. KHAC will likely face a similar challenge. In an effort to overcome this issue, the government is working to encourage Kuwaitis to train in the medical field. The MoH is also in the process of hiring more foreign nurses and other staffers.

Gaps in capacity in other health-related areas also present long-term challenges for the sector. Few local hospitals carry out research of any kind, for example. “There is a need for applied research, which will be better utilised with less bureaucracy and more support from the government,” said Behbehani. While the launch of the KHAC is expected to have a positive impact on the sector, the size and scope of the project – it will be the first private health care management company in the country and one of the largest in the region from its first day of operation – means that it is inherently a high-risk endeavour.

OUTLOOK: The government, which is expected to continue to be the leading player in health care in Kuwait for the foreseeable future, is working to address these issues. While KHAC is scheduled to be launched before the end of 2015, the project will be rolled out in phases to ensure its stability and success. “We are aiming to have everything up and running in four years,” said Al Munafi.

Provided everything goes as planned, the KHAC will have a positive impact on both the cost and quality of health care on offer for locals and expatriates alike. There is also potential for the new company to serve as a catalyst for the growth of the nascent private health insurance industry (see Insurance chapter). Perhaps more importantly, the KHAC is also expected to reduce the cost burden of health insurance that currently rests on the government, thereby freeing up public resources while also maintaining high standards throughout the sector. If the programme is successful, it might eventually be expanded to include Kuwaiti nationals.

With this in mind, Kuwait’s health care industry is on the verge of a major period of development and expansion. The planned establishment of an independent regulatory body in the near future is a sign of market maturation. While the MoH will likely continue to play a central role for years to come, particularly in terms of health care provision for nationals, the private sector is increasingly active, and could potentially serve as a major foreign direct investment draw over the course of the coming decade.