Private sector participation to meet rising health care demand in Kuwait

Significant improvements in health outcomes have been achieved in Kuwait over the past 20 years, especially in terms of the extension of life expectancy and the reduction of infant mortality rates. The reform of the Kuwaiti health care sector is central to the Kuwait National Development Plan, which is also known as New Kuwait 2035. With a growing population and an increasing incidence of lifestyle-related diseases, demand for health care is projected to continue to rise over the longer term, in particular for specialist treatments.

The state has traditionally played an extensive role in health care provision; however, moving forward, it aims to improve the quality and efficiency of public health services in line with international benchmarks, while also boosting private sector activity. Progress is being made in achieving key aspects of New Kuwait 2035, such as increasing bed capacity in public hospitals and combatting chronic non-communicable diseases (NCDs).

Oversight

The Ministry of Health (MoH) serves as the principal provider of health care services in Kuwait in addition to regulating the conditions under which the private sector may operate. Primary care is delivered through a network of health centres and clinics providing general practitioner, dentistry, maternal and child care, laboratory, radiology and preventive medical services. In the meantime secondary health care is provided through six general hospitals: Jahra Hospital, Amiri Hospital, the Mubarak Al Kabeer Hospital, Sabah Hospital, Farwaniya Hospital and Al Adan Hospital.

The combined bed capacity was 4024 in the final quarter of 2017, according to the most recent available figures from the Central Statistical Bureau (CSB). In addition, there are 13 government-run specialist hospitals located throughout the country, consisting of specialised institutions focused on cancer, infectious disease, allergy and palliative care among others, with a combined bed capacity of 3139, according to the CSB. This capacity is set to increase substantially with the expansion of Al Adan Hospital, which is earmarked for completion by April 2020. The KD232m ($764m) upgrade is set to feature specialist facilities for surgery and physiotherapy, and offer an additional 635 beds. Tertiary health care is provided through specialised clinics or overseas treatment, often at the expense of the MoH in instances where certain procedures cannot be provided in-country.

Structure

The public sector accounts for over 80% of health care spending in the country, despite much of the population having the disposable income to pay for private care. Aware of this, the government has sought to reduce the share of the national budget allocated to the health care system through a series of reforms aimed at increasing efficiency and reducing costs. The government has also privatised certain segments and undertaken a series of public-private partnerships supporting the establishment of new private options, consisting of both hospitals and health care groups. These facilities often have a better reputation than their public sector equivalents, in part due to shorter waiting times and the perceived higher level of services and treatment on offer. They also tend to principally focus on the provision of primary and secondary care, rather than tertiary treatment.

Among the most prominent of these private hospitals are New Mowasat, a 100-bed facility which is publicly listed on Boursa Kuwait; and Al Seef Hospital, a 120-bed general hospital with a focus on maternity and children’s health services, which forms part of the domestic company United Medical Services (UMS), one of the largest operators in the private sector. In 2019 UMS completed the construction of International Hospital, a 140-bed general hospital which provides a broad range of specialist treatments.

General Indicators

The government allocated KD2.3bn ($7.6bn), or 10.9% of the state budget, to the MoH for FY 2018/19, according to the Ministry of Finance. As of September 2019 the details of the national budget for FY 2019/20 were awaiting further approvals prior to publication. According to the latest available figures from the World Bank, Kuwait allocated 3.9% of GDP to health care in 2016, a slight decrease from the 4% spent in 2015. Furthermore, 83.8% of total health expenditure in 2016 was funded by the government. This figure was higher than the GCC average of 76%, but similar to that of Oman and Qatar, where the government accounted for 89.1% and 81.6% of health care spending, respectively. Per capita spending on health care, however, sits quite close to the regional average: in 2014 Kuwait spent $2320 per capita, according to the latest available figures from the World Health Organisation (WHO), as opposed to about $2330 in the wider GCC.

The majority of Kuwait’s health care indicators are comparable to those of developed nations, and the country has successfully managed to eradicate most communicable diseases, including measles, tuberculosis and cholera, by providing widespread basic access to primary care facilities. Life expectancy sits at 74 for men and 76 for women, according to the WHO. The neonatal mortality rate stood at 4 per 1000 live births in 2017; while the mortality rate for children under five-years of age was recorded at 8 per 1000 births. Meanwhile, 100% of live births were attended by skilled attendants in 2015. With a decrease in the incidence of communicable diseases and an increase in life expectancy, the burden of disease has shifted towards NCDs, such as cardiovascular and respiratory diseases, diabetes and cancer. Given the high cost and length of treating such illnesses – all of which are contributed to by lifestyle choices – health care expenditure and demand growth within the Kuwaiti health care services market is set to rise. Indeed, total government and private health expenditure is forecast to reach $5.8bn by 2022, according to a report published by investment bank Alpen Capital in May 2018.

Disease Burden

As a result of the expected rise in expenditure, coupled with a desire from the government to reduce spending on the sector, the Kuwait Direct Investment Promotion Authority (KDIPA) has highlighted health care as a major area for investment. One particular focus the KDIPA has highlighted are the increased opportunities in providing lifestyle clinics, spas, nutrition, preventive and personalised medicine for the treatment of NCDs. These diseases were responsible for 72% of all deaths in Kuwait in 2017, with key contributing factors including tobacco usage, physical inactivity and poor diet. Kuwait ranks 11th in the world for the prevalence of obesity, and has one of the highest rates of diabetes, with 15.1% of the population affected in 2017, according to the International Diabetes Federation. In addition to NCDs, leading causes of deaths included communicable, maternal, perinatal and nutritional conditions (15%) and injuries (13%), according to the WHO.

Similar to other Gulf states, tackling NCDs through preventive measures and education initiatives has become a major cornerstone of public health policy in recent years. Bodies such as the Dasman Diabetes Institute and the Kuwait Obesity Association conduct regular awareness campaigns and host events to promote healthy lifestyle modification among the populace. The government has also actively cooperated with organisations such as the UN Interagency Task Force on the Prevention and Control of NCDs in their efforts to reduce the risks for the population.

Public Sector

All Kuwaiti citizens are entitled to free medical treatment at public facilities, while expats are required to pay an annual fee to access these services. The majority of the foreign nationals using public facilities are blue-collar workers, with more affluent expats opting for private treatment.

As the result of rising demand and increased waiting times at public health care institutions, the government has sought to increase capacity. Progress is being made towards meeting this objective. For example, in November 2018 the KD300m ($988.1m) Jaber Al Ahmad Al Sabah Hospital complex opened to the public. Providing 1168 beds, the hospital is now the largest medical facility in the country. A total of 2479 new hospital beds are expected to come on-line by 2020 as a result of expansions at Sabah Hospital, Farwaniya Hospital and Kuwait Cancer Centre. Nevertheless, further efforts will be needed in order to adequately meet demand, with the population expected to grow at a compound annual growth rate (CAGR) 2.8% per year until 2022, while the share of the population aged over 50 years is expected to rise to 20% by the same year, according to Alpen Capital. “The main challenge faced by the government is to respond to demand while also maintaining the quality of the services provided,” Dr Yousif Zahr, CEO of Seef Hospital, told OBG.

As part of its efforts to reduce congestion at public health facilities, the MoH announced a rise in April 2019 of the upfront fee expat would have to pay when seeking services at polyclinics, from KD2 ($6.59) to KD10 ($32.94). This follows the introduction of fees for all medical facilities and the doubling of annual health insurance contributions that took place in 2017.

Private Sector

Many Kuwaitis opt for private care, particularly for specialist treatment, with demand growing fastest for obstetrics, gynaecology and cardiology, according to KDIPA. There is therefore considerable scope for increased private participation in the provision of specialist treatments. Indeed, the government has sought to boost activity in the segment to reduce the need for outbound medical tourism. This is because overseas treatment for Kuwaiti nationals typically includes both health care fees and living costs, with these expenses costing the state $1.5bn for the treatment of 11,000 Kuwaitis in 2014 alone, according to the latest figures from consultancy firm PwC.

In light of ongoing capacity pressures in public health care facilities, the government has attempted to encourage the private sector to assume the bulk of responsibility for providing treatment to the sizeable expat population, which makes up roughly two-thirds, or 70%, of the population. In 2010 the government established the Kuwait Health Assurance Company (KHAC) – also known as Dhaman – a joint-stock entity that took responsibility for the provision of non-emergency health care for foreign nationals employed in the private sector. KHAC is 24% owned by the government through the Kuwait Investment Authority – the country’s sovereign wealth fund – along with the Public Institution for Social Security. Meanwhile, 26% is held by Arabi Holding Group and the remaining 50% by other Kuwaiti private investors. In order to expand its range of health care services to expats, KHAC is currently building two new hospitals in Ahmad and Jahra, both of which are expected to be completed in 2020.

Insurance

The expansion of expat-specific insurance coverage has also been a key strategy undertaken by KHAC. Under the scheme, foreign nationals will be obliged to take out insurance with the company to cover the cost of their treatment, as well use KHAC facilities for non-urgent services. Currently, it is compulsory to have medical insurance in Kuwait; however, many multinationals provide private health care insurance as part of their compensation packages to both local and expat employees. A law proposing the mandatory issuance of medical insurance to visitors to the country was passed by the National Assembly in March 2019, which forbids the Ministry of Interior from issuing visit visas without a health insurance policy in place.

Medical Staff

Kuwait relies on both locals and foreign nationals to meet demand for health care professionals. While a Kuwaitisation policy is in place that aims to lessen dependence on foreign workers, the WHO anticipates that the country’s reliance on non-Kuwaiti staff will continue. Kuwait has one medical school, the College of Medicine at Kuwait University, with many Kuwaiti citizens opting to study medicine abroad in places such as the UK and the US.

In 2019 the MoH announced that the country had a surplus of nursing staff, with three nurses for every eight hospital beds in Kuwait. However, the country still faces a shortage of other medical professionals. There were 2.6 physicians per 1000 people in 2015, according to the latest available figures from the World Bank. In general, recruiting and retaining skilled staff at private hospitals in a timely manner remains problematic, despite attempts by the MoH to make this process both more efficient and technology driven, Dr Alexander Varghese, hospital director of New Mowasat Hospital in Kuwait, told OBG.

Pharmaceuticals

Demand for pharmaceuticals is also growing, driven by the rise in NCDs, population growth and high per capita income. However, the market remains fragmented and dominated by multinationals, such a the US-based Pfizer. The more limited local production is undertaken by the Kuwait Saudi Pharmaceutical Industries Company, which makes over 120 products geared towards the local market and exports to the GCC, the Middle East and Africa. In December 2016 the government granted 12 companies permits to build pharmaceutical factories in an attempt to boost domestic manufacturing. Based on the government’s current spending patterns on pharmaceuticals, enhancing these facilities could potentially generate sizeable cost savings. While the domestic pharmaceutical industry is well placed to attract greater investment, there are barriers to foreign investment, including sometimes onerous regulation, the comparatively small size of the market and a preference for branded medicines over generics. Nevertheless, drug sales are forecast to rise at a CAGR of 5.2% between 2017 and 2022, increasing from KD327bn ($1.1trn) to KD422bn ($1.4trn), according to Fitch Solutions.

Outlook

As Kuwait accelerates its health care development strategy as part of New Kuwait 2035, the country’s health care and pharmaceutical markets have both been highlighted as high-priority sectors for investment, with many projects set to be carried out under public-private partnerships.

The growing population, high per capita income and shifting disease burden broadly ensure growth in the sector into the foreseeable future. Private services are set to assume a greater role in the provision of health care, particularly in terms of specialist treatments and their delivery, with the government trying proactively to ease the burden of health care on the public purse.