Healthcare in the GCC: New challenges for the Public sector

Summary: The GCC has one of the best public healthcare sectors, in terms of capital investments and infrastructure support. However, it seems to be underutilized and loosely controlled. In this era of mandatory insurance, what does it need to do to counter the ever-growing threat of private healthcare sector? 

GCC spends close to USD 10 Billion annually on public health care services. It is estimated that total spending on GCC healthcare will reach in excess of USD 60 billion in the next 15 years. While government makes up for three-fourth of the present expenditure today, it will become extremely challenging to maintain that ratio, especially with increased competition from the private sector. Having invested heavily in healthcare services, governments around the GCC need to make sure that their resources are not laid to waste. It will be an immense loss-not only in terms of material value, but also of a system that has a lot of potential to turn itself around into a profit making machine.

The best part is that the above objective can be accomplished without compromising on the subsidy that is extended to the citizens. Further, the public sector has a great opportunity in making itself attractive to the consumers and insurers, especially so now when insurance is just taking a foothold in this region. One cannot negate the scale that public sector has achieved in the past 20 years. The most attractive thing about this scale is not only its network and reach, but the quality of infrastructure that it has, both in terms of people and equipment.

It does not take much to underscore this point. Visit any of the government hospitals or even primary health centers and it is for all to see how well-equipped these places are. Yes, there is an issue about the staff strength, but even that is more an issue of efficiency rather than of numbers. Like any other public sector, there are concerns regarding how efficient the system is. But there is no dearth of resources. Any private concern with three quarters of resources of a government set-up would be lucky!Private players are waking up to the fact that if they do not move fast enough, they will most likely be left behind. Therefore they are moving into multiple markets simultaneously (or are planning to). On the market side, life expectancy is up to 73 years in 2004, from 60 years 20 years back. Communicable diseases are on their lowest ever, and visits to hospitals have increased by almost 12% year-on-year for the last 5 years. People have become more ‘health-conscious’ on one hand, and on the other, life style diseases have almost invaded the region with greater than 20% of population suffering from diabetes.Market is on the curve of booming.

In this scenario, what choices does public sector have? How do they ensure they are not the losers in all this? How do they make sure they can remain afloat, and even become profitable in the long run?

Some of the options that they need to start considering, almost feverishly are:

1.       Move from being regulators to marketers: One of the most important step that GCC governments can take is to separate their roles of being a regulators and service providers. There has been some movement in the UAE in that regard, but it is still in its infancy, and the intertwining is still only conceptual.  Government should stick to what they do best – regulate and control. They need to separate themselves from being a service provider, and the best way to do that is not to form another government company (which is the case wherever it is happening), which is mandated with managing the services. A better and more effective way will be ally with large private players (global), and form a company that is managed by experienced health managers. A mere formation of another government company, while meeting the objective of separation of regulatory from providing services, will fail to meet the superior objective- of being market-oriented. That objective will be met only when people who know the market come to helm of affairs. 

2.       Adopt the SBU model: The most rampant of all problems in government healthcare sector is that of accountability. This problem magnifies greatly when it comes to systems that heavily subsidize the patients. Most often than not, hospitals do not have budgets, and they have no efficiency targets. It is not a surprise to see that hospital managers do not have payroll information readily available, as that is a subject of the ministry. They have no clue about the value of equipment, or of the costs that are involved in running individual departments of the hospital (or for that matter, the hospital itself!). In this scenario, it is impossible to talk about accountability. The first step, therefore, is to adopt a SBU model, in which each hospital has its own board, is given a budget, is supplied not only with volumes of supplies but also costs of the same. At the end of the year, each hospital is evaluated objectively on how they used there budgets and how have they served the markets. This will introduce a sense of accountability and move the model from being a ‘cost-centric’ to ‘revenue-centric’, if not ‘profit-centric’. 

3.       Ally with private operators: Governments are already realizing that private operators bring a lot of experience in terms of managing hospitals, and they do it better than government itself. However, the model that is being followed is that of ‘employing’ or ‘contracting’ such companies for a few years. While it is a good step in the right direction, it might not be the complete step. Because private operators are employed for a finite period of time (usually short; 2-3 years) and paid fixed fee for the same, they seldom bring a long-term vision on board. This short-term view causes spikes in some areas, and sharp troughs in the others. At the end of the contract, if they have not done well, they are asked to quit, and someone else is brought in. This is not healthy for the set-up. A good way to counter this would be make healthcare providers equity partners in the venture. It could be done either by linking with (1) above, where a player holds a stake at a national level, or at individual levels where each hospital has a player who bids for the stake. Presence of government can balance in the venture will act as a balance so that profit-making does not supersede or undermine social causes. 

4.       Establish super-specialty centers:  Governments have the funds to invest in super-specialty centers, and these cannot be matched by private players. Hence, this is space in which public sector can establish a pure-play, and face minimal or no resistance. Such centers can support later-day research, hence attract top-notch doctors, in turn attracting traffic of those patients who were otherwise headed west. Public sector will have three distinct advantages in doing this: 1. It will play in a non-competitive environment, hence greater chances of making profit. 2. It will stem and control expenditure done on sending patients abroad, which costs dearly to the exchequer. 3. it will incubate research activities, and hence proliferate medical education in the region. 

5.       Merge different organization: UAE, for example, has 3 distinct public health organizations – Ministry of Health, Department of Health and Medical Services, and Health Authority. It is difficult to envisage how different they would be when they are serving the same purpose – providing quality healthcare to the residents of UAE. It is no surprise then, that a lot of processes and resources are replicated resulting in immense loss of efficiency and resources. A merger of these organizations to create a unified healthcare organization which encompasses all that they do, without unnecessary replication of resources.  

Finally, if this region and especially aspiring cities like Dubai and Doha, want to establish themselves as serious ‘world cities’, they will have to look at healthcare sector very seriously. People would like to stay in these places long-term when they see that these cities offer, not only world-class leisure and tourism, but also world-class healthcare they either are used to, or aspire for. It is time that governments looked at improving the state of healthcare affairs pronto.