Sameena Ahmad, Managing Director at Alpen Capital
Alpen Capital today announced the publication of its GCC Healthcare Report as a part of its Industry Research services. The report encompasses profiles of each GCC country and highlights the existing market scenario in the healthcare sector. In addition, the study covers profiles of major publicly-listed and private firms including details about their performance and market position.
“We estimate demand for healthcare in the region to grow due to a rapidly growing population, rising income levels and increased insurance penetration. The change in disease mix with an increased prevalence of lifestyle-related diseases is also expected to drive per capita spending on healthcare” says Sameena Ahmad, Managing Director at Alpen Capital.
“With soaring healthcare costs and the consequent additional burden on state finances, the GCC governments are actively pursuing reforms and policy measures to promote private sector participation” says Sanjay Vig, Managing Director at Alpen Capital. He adds, “The GCC healthcare sector offers attractive opportunities as reforms gather pace and the market opens up further. Underlying demand in GCC’s healthcare sector is increasingly attracting private equity (PE) investors”.
According to Alpen Capital, the GCC healthcare market is projected to grow at an annual rate of 11% to USD43.9 billion by 2015 from an estimated USD25.6 billion in 2010. Outpatient and inpatient markets are expected to account for 82% and 18%, respectively, of the overall market size. Saudi Arabia is projected to be the fastest growing market along with the UAE.
The demand for number of hospital beds is expected to be 93,992 in 2015, an addition of 8,669 beds from 2010, which is in line with the expected supply looking at the number of projects in the pipeline. The number of beds remain in line with the current GCC average and below the US and European averages. The gradual improvement of healthcare infrastructure and standards in the GCC along with increasing insurance penetration should see an increase in number of patients opting for treatments locally, thus seeing an increase in demand for hospital beds.
Key Growth Drivers
Demographic factors are likely to be the main driver for healthcare services in GCC. A rapidly growing and aging population significantly boosts healthcare spending. According to the United Nations, the GCC population is expected to increase at a CAGR of 2.2% during 2010–2015 compared to 1.1% globally.
The proportion of obese people in the GCC population is considerably higher than the global average. This has increased the prevalence of chronic diseases and, in turn, boosted demand for healthcare services. Health insurance coverage is likely to expand over the next few years as the GCC governments mandate health insurance, giving a further boost to the healthcare sector in the region.
Healthcare standards in GCC are constantly improving. Factors such as infant mortality and life expectancy at birth continue to improve. However at the same time, growth in per capita income and a sedentary lifestyle has led to the increase in the incidence of lifestyle lifestyle-related diseases such as diabetes and obesity.
Healthcare cost in GCC is on the rise due to increasing use of new and advanced technologies. Studies reveal that new medical technologies lift healthcare costs by 38–62%.
Authorities have increased focus on technological advancement by adopting e-health services which automate processes and, in turn, enhance quality and cost efficiency. High investment projects and new regulations to ensure international healthcare standards are also expected to expand GCC’s medical tourism business.
While there is a good pipeline of investment in larger hospitals, there is a quicker growth of smaller clinics and ambulatory centers to serve untapped markets in new residential developments. This is largely due to their lower capital requirement and quick return on investment. Entry of private players is also expected to modernize existing infrastructure, boost capacity to cater to rising demand as well as enhance operations and efficiency to offer high-quality services at affordable and competitive prices.
Healthcare spending in GCC depends excessively on government finances. This has become a major challenge with soaring health costs. Despite growing investments in the sector, healthcare infrastructure in GCC countries lags developed nations in terms of hospital beds, diagnostic labs and clinics as well as medical staff. For private sector players, investment in the healthcare sector remains a challenge as it is capital intensive with a long payback period.
Shortage of medical personnel is a key concern in GCC. There are limited medical education options in the region and high dependence on expatriates (nearly 40–80% of total workforce in the sector) aggravates the issue. GCC governments continue to spend millions of dollars on healthcare imports each year due to lack of sufficient services. In 2009 alone, the UAE spent USD2.0 billion on overseas medical treatment for its nationals.
However, even with all these factors, the healthcare sector in the GCC continues its upward trend. The sector’s near to long-term outlook is promising and GCC governments are committed to undertake measures to address the current challenges.