Outlook Oman 2016

Investing in health

Low oil prices have been forcing Oman to streamline finances, which also includes trimming healthcare expenses. This in turn has provided an opportunity for private healthcare providers to fill the gap. This is evident by the aggressive expansion plans set in motion by private hospitals during a time when most of the other industries are holding on to their money.

In the past one year, the country witnessed the opening of two new hospitals in Muscat and several others have also declared their intentions to expand facilities to cope with burgeoning demand for quality medical services. All major private healthcare providers in Oman such as Muscat Private Hospital, Burjeel Hospitals, Aster and Starcare Hospital have stated their intentions to expand their facilities.The government is also looking at setting up of a large medical city on the outskirt of the capital city, which would be run in the public private partnership model.

“The country’s population is growing and that means there will be demand for quality medical services despite having economic problems due to softening of crude oil prices. It gives us confidence that private hospitals will have a great future in the country,” says Dr Aladin al Amri, CEO at Muscat Private Hospital.

Changing priorities

Oman, along with other GCC nations, has a robust cradle to grave welfare system. The country provides free medical care for its citizens, has opened a good number of hospitals, healthcare centres and other facilities in the past years. In some cases if the required services are not available in the country, the state even sponsors treatment of Omanis in foreign countries. But the softening of crude prices over the last two years has strained public finances and reduced the government’s ability to invest in building new hospitals in Oman. There has been a significant reduction in the healthcare budget in 2015 and 2016 and this has increased the importance of private healthcare services in Oman.

“Allowing a regulated private healthcare sector to function alongside the public sector can significantly contribute to addressing the medical needs of both local and the expatriate population,” says Christopher Evans, CEO at Burjeel Hospital.

“This will also offer Omanis the choice to pay – by themselves or through private medical insurance – for their medical care, thereby substantially reducing the public sector’s healthcare burden,” he adds.

Industry experts are saying private healthcare providers could play a larger role in reducing the state’s health expenditures if compulsory health insurance is introduced in the country, like in the UAE. Besides that utilising public private partnership in healthcare and liberalising norms for opening private hospitals will also help in reducing the state’s burden.

Agreeing to this, V T Shaileshwaran, MD of Apollo Hospitals, says, “The current economic situation requires private healthcare providers to share some of the healthcare burden. There are many means to do it and compulsory insurance is one.”

Now, Oman has around 70 tertiary care hospitals, with over 6,400 beds, offering a range of specialised and general patient care services across the country. However the private sector accounts for less than ten per cent of it. But experts are of the view that the government has to rope in the private sector either through public private partnership model or by introducing mandatory health insurance for the entire population.

As per WHO recommendations, a country should have a medical infrastructure equivalent to five beds per 1,000 population. But in Oman, the number is only 1.8 beds per 1,000 population, which is almost par with other GCC countries but much lower than other developed countries such as Germany where the number stood at eight beds per 1,000 population, according to a report by MEED in 2014.

“Government hospitals are under pressure. There is huge waiting period for surgeries. If someone applies for a simple knee replacement surgery today, there would be around 100 other patients waiting for it. In such a case, one will have to wait for at least six months,” says Seeniya Biju, chief operating officer at Aster Oman, which runs Al Raffah Hospitals & Clinics in the country.

Agreeing to this, Dr Askar Kukkadi, director of Starcare Hospital, says, “Majority of our patients are Omanis who have access to free public healthcare facilities but they choose to come here and pay for the services offered by us. Lesser waiting times, ease of access to healthcare and being able to see the doctor of your choice are perhaps the most common reasons for Omanis to choose private hospitals.”

As per available information, the last big hospital in the government sector was opened around 20 years ago, creating a big gap between demand and supply.

“A number of companies are providing medical insurance to their employees and this has also helped private healthcare providers as people don't have to worry about cost much,”says Dr Housam Ahmed Akoum, chief operating officer at KIMS Oman Hospital.

He says Oman, like other GCC countries, has a growing population so it need to add more hospitals to cater to need of the people and private players who provide good services will benefit in the long run.

Robust private sector

To bridge the gap between burgeoning demand for medical services, owing to the rapid rise in population, private healthcare providers were quick to add capacities. “Oman's population is rising and the country has a very high fertility rate. So we are confident that there will be a need for more quality medial services,” says Amri.

Currently Muscat Private Hospital is under renovation and once completed, its total capacity would be doubled to 140 beds by the end of 2017-18. He says, “We have our land and our own building and in the future if the need arises we can expand very easily. We are operating in Oman for the last 16 years, and have very high quality standards.”

Starcare Hospital is looking at expanding services. “We are looking to set up with a 200 bed hospital, for which we have identified the location and land. Negotiations are at an advanced stage and once that is completed, we will be looking for investors and also speaking to ministries for their guidance and approvals,” says Kukkadi.

Al Raffah also plans to set up a hospital in Nizwa and increase the number of polyclinics.

Earlier this year, the Ministry of Health also signed a memorandum of understanding (MoU) with Oman Investment Fund to set up a medical city, which will comprise several specialty hospitals consisting of about 1,200 beds, including a general specialties hospital, pediatric hospital, trauma centre, rehabilitation centre, neurology centre, diagnostic radiology center, medical laboratories center, and a centre for education, training and research. It will also include a college for health sciences and supporting facilities.

The proposed city will be set up through public private partnership to attract private investments for constructing hospitals and clinics, besides other commercial investments such as constructing shopping centres, hotels, residential compounds, and recreational centres.

Challenges

Though private hospitals in Oman are expanding robustly, the low oil prices environment is also creating problems for them. Many corporates are renegotiating healthcare packages taken by them and government-owned companies and ministries have slowed down on referring surgeries to private hospitals.

“We are a part of the GCC economy and all the problems faced by other GCC countries are also troubling us. In such a stressed economic scenario some hiccups are expected,” says Amri.

Insurances companies are also pressurising hospitals for more discounts and reimbursements from them are taking much longer. Dr Kukkadi says, “There has been some delay in getting reimbursements as clients are apparently also not paying premiums on time to insurance companies.We were prepared for some impact which was inevitable.”

Another bigger challenge, which could potentially impact as the number of hospitals in Oman have gone up, is the probability that some may resort to aggressive pricing. “Although I see competition as also providing opportunities, I equally ensure readiness to respond to competitor activity, particularly for extreme situations,” says Evans.

“Burjeel Hospital also has the advantage providing significantly higher quality care and facilities than competitors as well as the backing of VPS Healthcare, a strong group. So we remain very confident of withstanding commercial pressure.”

However, Amri believes that the segment which they are catering to wouldn't be much affected by pricing wars. “We cater to high end consumers, who appreciate the quality services provided us. I don't think they would choose any other hospital just because it is cheap,” says Amri.

Another big challenge in healthcare delivery is that almost all of the private medical services sector is concentrated in the capital city only.

“It is very difficult to convince doctors to move to remote location as they also have families. And they prefer not to venture in those areas where quality education and entertainment facilities are not available,” says Biju.

Agreeing to this Evans says, “Oman's population distribution is such that it doesn't justify setting up of a large hospital in remote locations. That is why we have a chain of clinics in other locations to provide healthcare facilities and a big hospital in the capital to work as a referral centre for specialised services.”

Though the country, particularly Muscat, have sufficiently large number of hospitals it still lacks speciality centres. “There is an urgent need for specialty hospitals in Oman, and this is a missing link here. Most private players are interested in general hospitals only as the required investment for a specialty hospital is very high and returns would take much longer,” says Akoum.

The life expectancy of an Omani has increased from around 50 years in the 1970s to around 76 years now. As people tend to live longer they need more medical care. The general consensus is that Oman needs more beds and more hospitals providing secondary and tertiary levels of healthcare and private sector can play a pivotal role in bridging the current gap. 

Investing in health
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