The Prospects of Doing Business in Healthcare Sector in Saudi Arabia

The international community confirms the great significance of the healthcare sector which strives to grant people an opportunity to lead a healthy lifestyle by ensuring that everyone has access to high-quality professional treatment. Deloitte’s report predicts that the health sector is going to get around $ 8.7 trillion in spending in 2020.

State of Market

Saudi Arabia is obviously no exception. It experiences a growing demand for healthcare services due to growing per capita expenses in public health, changes in demographic structure, and the rising numbers of patients with chronic illnesses. Moreover, people are getting more conscious about their physical and mental health, which makes investing in this promising sector even more appealing.

The latest reports of the Ministry of Health, World Health Organization and International Monetary Fund inform that the Kingdom of Saudi Arabia spent 13 Billion dollars on the healthcare sector in 2015. The rise of the Compound Annual Growth Rate (CAGR) reached 7.2% between 1999 and 2005, which influenced the average spending. It is also expected to keep escalating at 12.3% rate and reach 71.2 billion in 2020.

Privatization of the Healthcare Sector in Saudi Arabia

Recently, the Ministry of Health privatized healthcare services in the Kingdom. The medical institutions will act independently of the Ministry and become public organizations, that will compete with each other in professionality and efficiency. The Ministry will stop playing a role of a service provider in order to become a leader that works on creating better conditions for the industry.

The Ministry added that the services will be integrated. All of the primary care, general and specialized hospitals are going to citizens with comprehensive and effective treatment and prophylaxis.

The privatization and adoption of the private sector’s methods in the promotion of quality improvement, increasing productivity, waste reduction, acceleration of decision-making process and decentralization will lower the administrative and financial burdens of the government.

Healthcare services will be regulated by the contract between parties. This contract model implies a low risk for the customers thanks to well-defined requests and fixed project management methodologies. However, after the agreement is signed any changes in the scope would cause a modification in cost and timing. Therefore, it is important to negotiate each feature and appraise the suitable cost for the project implementation at the first set-out.

An outsourcing company and a customer can fix up periodic payments. The agreement may settle the specific sum of the overall price that customer pays for after each stage of treatment during the project.

Undoubtedly, privatization is a positive process and might be a better option to deal with financing and prevent losses. Privatization should also improve operations of medical institutions by good governance and close observation of their financial affairs while seeking for continued profitability in the highly competitive environment.

The medical institutions will have no other options to draw patients’ attention but to provide competitive services that meet the highest international standards. That also means the availability of the most up-to-date medical equipment and the best medical staff.

Privatization will definitely make a revolution in healthcare sector in Saudi Arabia where hundreds of health centers and 200 clinics deliver quality healthcare. It will surely encourage the private sector to invest more funds to medicine. The health sector is predicted to amount to $100 billion (SR375 billion) in total private investment by 2020, adding 12,500 new beds annually.

Under the privatization process, a holding organization with about 30 subsidiaries, is going to be set up in order to control management and performance of 276 hospitals and 2,300 health centers, which have to be detached from the Health Ministry and governed by special-purpose private organizations.

Furthermore, proceeding with privatization is predicted to attract more investments into healthcare-related projects all over Saudi Arabia, in particular, progressive medical devices and equipment. A total of $2.1 billion is predicted to be invested in infrastructure projects for health equipment and devices by 2023 with annual expenses on them growing from $180 million to $250 million by 2020.

Saudi and International leaders focused on advanced medical technologies in KSA under the Vision 2030 program.

First steps and the Outlook

The process has already taken off and there are some noteworthy projects to highlight.

Dar Al-Hijrah is one of the major projects under construction in the city of Madinah that will include a hospital for 400 beds among many other services for pilgrims Prophet’s Mosque located nearby.

The Batterjee Medical City in Dammam is expected to be the establishment of a 150-bed private hospital with the newest medical equipment covering all specialties in compliance with the global best medical practices. The area of ​the project will be 550,000 sq. meters. Fully functional, it will provide high-quality specialized services to people not only throughout the Eastern Province but also to patients from Kuwait and Bahrain.

Saudi and International leaders focused on advanced medical technologies in KSA under the Vision 2030 program. The main tasks of the conference were to upgrade record keeping in medical companies and to encourage clinics to invest wisely in documentation enhancement.

John Daniels, the Global Vice President for HIMSS Analytics, focused attendees’ attention on the Electronic Medical Record Adoption as a key to success for medical institutions that are concentrated on providing efficient healthcare services.

Dr. Mustafa H. Qurban, Consultant and CIO, King Fahd Military Medical Complex ventilated the idea that the IT role in medicine is going to become a primary service function that is more engaged in the business operations and strategy.

That means IT specialists must be an integral part of the everyday decision-making process related to patients.