The countries of the Gulf Cooperation Council (GCC) have young populations and are economically classified as emerging markets, but in terms of public health they already rival the problems of much more developed countries. Epidemic health problems such as overeating, high-sugar diets, and a lack of physical exertion are eroding the gains in health and wellbeing that the six GCC countries made in the past generation, when they climbed from societies with limited nutritional resources to countries whose per-capita consumption is equal or in excess of more mature economies.

The evidence for this problem comes from the alarming pace at which non-communicable diseases (NCDs) are occurring across the region. NCDs such as cancer, diabetes, cardiovascular diseases, respiratory disease, and neuropsychiatric conditions are now common. Indeed, five of the 10 countries in the world where diabetes is most prevalent are located in the six-nation GCC, according to the International Diabetes Federation.

In Saudi Arabia, the World Health Organization (WHO) reports that two-thirds of citizens over 15 years old are classified as overweight (meaning they weigh more than is optimal), and more than a third of Saudi women are obese (their weight is excessive enough to affect their health). In the United Arab Emirates, according to the WHO, cardiovascular disease annually claims 244 lives out of every 100,000 people, whereas in the United States the death toll is 194 lives out of every 100,000 people each year, according to the Center for Disease Control and Prevention.

A costly killer

These figures show that the GCC is now in the category where NCDs are a leading cause of death and disability. The WHO warns that without proper health policy intervention, eight of the top 10 leading causes of death in 2030 worldwide will be related to NCDs, to devastating personal and economic effects. According to this scary scenario, the cumulative output loss caused by the top five NCDs over the next two decades could reach $45 trillion — roughly three quarters the size of today’s world economy.

The economic toll also affects economic growth through direct and indirect costs. Direct costs are typically associated with the treatment of patients including spending on healthcare human resources, medical equipment and consumables, and drugs. The World Bank estimates that the lost potential of future GDP annually stands between 1 to 5 percent, due to the impact of NCDs. For the GCC countries, which often have small populations of nationals with limited participation in the workforce, the impact of NCDs also means further dependency on expatriates in the workforce.

Even larger are the indirect medical costs which NCDs extract from patients, their families, and society. NCDs reduce productivity, diminishing economic output. They limit individuals’ productive potential and invariably reduce income and savings. Moreover, the need to provide long-term support and care to patients puts a strain on their families as well. From society’s perspective, NCDs reduce life expectancy, workplace efficiency and productivity, thereby depleting the quality and quantity of the workforce.

The GCC has a positive record of reducing infectious diseases; mortality from these illnesses is forecast by the WHO to continue its current decline. However, while the GCC’s diseases profiles are increasingly similar to those of developed countries, their level of investment in healthcare infrastructure remains much lower.

Working towards a solution

GCC governments have started to address this problem and recognize that much of the effort to limit the impact of NCDs involves preventative medicine. The six countries are already collaborating through the GCC Health Ministers Council.

The Saudi Ministry of Health has launched several programs to fight and prevent NCDs, such as cardiovascular diseases and diabetes.

In Abu Dhabi, the Weqaya (“Prevention”) initiative screened all citizens in the emirate and assigned them a risk score. Individuals with high scores were then either referred to specialists or invited to participate in healthy lifestyle classes. The screening program, which has cost the emirate around $10 million, or $60 per citizen, since its launch, is slated to be repeated every three years.

Abu Dhabi expects to save around $488 million by 2030 from the program and follow-up consultations, besides the improvements in quality of life and increased life expectancy to patients.

Such programs are critical to reducing the impact of NCDs on GCC societies and economies, but they need to be implemented on a grander scale. In order to achieve greater impact, governments must allocate resources to fight and prevent these diseases that are commensurate with the magnitude of the problem.

The next step has to be an urgent rethink of the GCC’s national healthcare systems — which were designed to fight infectious diseases and focus on treatment — and the development of capabilities that specifically tackle these new challenges. First, government should make NCDs a key priority for health planning. The official aim should be better quality of life for their populations, which will reduce unnecessary medical costs and lost economic productivity.

Second, governments should redesign their healthcare delivery models to allocate more resources to education and prevention, and less on the old approach of cure and treatment. Indeed, it is typically more cost effective to prevent diseases rather than cure them. For instance, a well-funded national tobacco control program in Saudi Arabia would require around $30 million per year, which is equivalent to the budget of a mid-sized hospital.

Third, the GCC should further strengthen the collaborative efforts of the Health Ministers Council. Specifically, the council should build on its valuable initial efforts and convene GCC countries to develop a clear and feasible plan of action for coming years, starting with a detailed, GCC-wide diagnostic. To carry out the diagnostic, countries first would need to build the capabilities to conduct a survey and analyze its data. This will allow governments to better understand the health profile of their populations and their burden of disease.

The knowledge acquired should then be used to develop national strategies and plans, as well as budget requirements and change legislation as required. In the meantime, preventative and educational programs should be further reinforced or developed. This diagnostic exercise will allow GCC countries to properly quantify the extent to which their populations are affected by NCDs and identify priorities for action.

Addressing the diseases of wealth

The Arab Gulf’s natural resources have propelled its countries into the ranks of the world’s prosperous nations. Life expectancy is longer, child mortality is down, and the population has access to good quality healthcare. If these gains are to be sustained, the diseases that come with wealth, the NCDs, will have to be addressed. With a strategic rethink of healthcare provision and more investment in prevention, GCC countries can reduce the human suffering of NCDs and the broader costs to society and the economy, and so add more to the region’s quality of life.

When Maria Carballo recently returned to her job with an airline in the United Arab Emirates, she felt fortunate. Her tests after completing treatment for breast cancer had shown that she was free of the disease. She also felt that she had made the right decision to choose not Dubai for her therapy but a specialized oncology center in her home city, Madrid, where she said counselling was excellent, she felt safe, and all care was provided under one roof.

Maria, an expat living with her family in Dubai, had been diagnosed with breast cancer at a check-up she took in the emirate, but the ordeal of having a cancer diagnosis was made more challenging by a disjointed experience with doctors. “I was sent all over the place in Dubai to take tests and some of the tests were sent abroad. Then there was no continuous care by one doctor but several were involved, giving me different opinions on my results and leaving me confused,” she explains.

While factors ranging from language and cultural affinity to costs make it logical that expats tend to seek specialized treatment in their countries of origin, recent polling has shown that preferences for treatment abroad are also strong among nationals of Gulf Cooperation Council countries. Survey results released last month by Gallup said that 39 percent of nationals in the UAE and 35 percent in Saudi Arabia prefer to take medical treatment abroad. In each of Qatar, Oman, and Bahrain, more than 40 percent say they prefer medical treatment in another country and in Kuwait, the rate is 65 percent.    

Even as surveys published in spring 2012 revealed that residents of the six GCC countries were, at satisfaction rates of on average over 70 percent, much happier with their domestic healthcare systems than people living in other parts of the Middle East and North Africa, Gallup said much work needed to be done to convince GCC residents that treatment for serious illnesses can be accessed without having to “first travel to the airport”. It cited poor quality of care and unavailability of certain specialized treatments such as oncology among the main reasons why nationals prefer treatment abroad.  

The costs of medical care have risen worldwide and led to increased portions of countries’ gross domestic product having to be allocated to healthcare. However, since the cost increases were far from uniform and since medical progress also greatly favored specializations of medical practitioners and diversification of entire healthcare sectors, medical tourism is a growth industry which more and more countries are trying to benefit from. 

Thus, although the UAE incurs costs of $2 billion annually, according to Gallup, from sending nationals abroad for treatment, the emirates are also developing their inbound medical tourism with vigor.

An emirate of opportunity

According to consultants Frost & Sullivan, a total of 4.3 million medical tourists visited the Middle East in 2011. Of these, most chose the UAE. Dubai could generate health tourism revenues of $1.66 billion by the end of 2012, a prospect which adds significantly to the emirate’s attractiveness for regional healthcare groups such as Riyadh-based Saudi German Hospital Group (SGHG).  

“Dubai, and indeed the UAE, is definitely far cheaper than the United States and United Kingdom, for example, in terms of medical services. However, it is more expensive than Thailand or India, for example, but the quality of the treatment here is far higher,” says Makarem Batterjee, president-elect of Bait Al Batterjee Holding, which owns SGHG and earlier this year opened the Saudi-German Hospital Dubai (SGH Dubai).

SGHG and other groups aim to develop speciality centers for treatment of cancers and other diseases where local treatment options have not met rising needs. SGH Dubai is the first investment in a facility in the UAE by SGHG, which has been around since 1988 as provider of healthcare to the Saudi population. SGHG’s portfolio includes five hospitals on its home turf and one in Yemen. 

According to Batterjee, the group envisages growing 16 percent per year, opening 30 further hospitals in places such as Saudi Arabia, Cairo, Abu Dhabi, Al Ain, Ajman and Sharjah over the next couple of years. The group chose Dubai for its first project in the UAE, despite higher costs to establish a facility here, because, as Batterjee explains, the emirate is “a recruitment center within the GCC and attracting talent is a very important aspect.”

Fishing in a new pond

Of more than $200 million invested in the multi-speciality SGH Dubai, about $109 million went to the site development and construction that was carried out by a sister company of SGHG. Rather than being located in the Dubai Health Care City (DHCC) further north, the hospital sits in the Al Barsha area of Dubai, with a large catchment area in the vibrant economic zones and upscale residential quarters nearby — and no competing provider in the direct vicinity.

“It was my father’s vision not to set up in DHCC; there are too many fishermen in a small pond, the customer gets confused,” says Batterjee. “In addition, housing is an issue in Dubai and we have the advantage to offer our staff nice apartments close to their workplace.” Plans for expansion of SGHG facilities in Dubai are already in place as six specialized treatment centers, including facilities focused on diabetes and oncology, are scheduled to be built near to the main hospital in the next couple of years.

Another key reason why SGHG invested so heavily in the location is medical tourism and Dubai’s proven success in attracting these tourists on international and regional levels. “Even our nationals want to get away, especially for private things like cosmetic surgery,” says Batterjee.

Whilst it can take years to obtain licenses and operating hospitals requires constant reinvestment to keep up to date with the advancement in medicine and equipment, it is a business that has been rewarding for the family-owned group. Treating more than one million patients across its network, SGHG aims to treat 100,000 patients in Dubai by end of next year, including UAE and GCC residents as well as patients from Africa, Russia, Northern Europe.

Mid-market economics

In financial terms, Dubai is actually a mid-market location when it comes to direct treatment costs. According to a 2012 DHCC edition of a medical tourism guide publication called Patients Beyond Borders, a procedure in a DHCC treatment facility can cost from 18 to 75 percent less than in the US, but some countries, such as Israel or India, have more developed capacities in tourism for medically assisted conception, and India and other Asian countries generally beat the emirate on prices.

Reputation is key

Cost elements are, however, only one and not necessarily the decisive factor why patients chose a destination. Quality of care and reputation building play key roles for developing inbound medical tourism — this counts among the reasons why operators and the government in the UAE emphasize the value of certification by the Joint Commission    International.

Social and cultural factors as well as smart marketing are also not to be underestimated in their importance. In the Middle East, Lebanon and Jordan were other countries where operators in the healthcare sector have made efforts to attract medical tourists, and while Jordan is a lower-cost alternative to Dubai, Lebanon has had niche success in drawing in seekers of cosmetic surgery.

The UAE, however, with its mixture of governmental support for healthcare projects, investments by private operators and international appeal as general destination for visitors, appears set to claim the position as the largest medical tourism destination in the Middle East and North Africa for years to come.  

It is a challenging sector but therein lies its profit potential. “Nothing is easy in healthcare,” says Batterjee. “It’s not like repairing a car, you are dealing with people’s lives [which means] you need lots of controls and [to] recruit doctors with diligence, but that’s why it’s a good business.”

With an entrenched sedentary lifestyle, junk food as part of the daily diet, a climate that discourages outdoor walking, an aging population and a good few genetic predispositions, the outlook for healthcare costs in the Gulf is both devastating and titillating.

Consulting firm Frost & Sullivan (F&S) calculated the rise in per capita expenditure on healthcare in Gulf Cooperation Council (GCC) countries at a compound annual growth rate of 11.9 percent between 2006 and 2010, and forecasted the spending growth to remain similarly high at 10.3 percent between 2010 and 2018.

The states in the GCC will need some 90,000 additional hospital beds by 2018, according to F&S. The countries with the largest demand are Saudi Arabia and the United Arab Emirates where 4,000 beds are under construction but thousands more will be needed. Another forecast, by consulting firm McKinsey & Co, projects direct healthcare costs in the GCC at $60 billion in 2025.

“The healthcare challenges faced by the region today are unprecedented and would have been unforeseen just a few decades back,” says Aziz Koleilat, general manager for the Middle East at GE Healthcare, the UK-based $17 billion medical technology and services division of the General Electric corporation of the United States.

Demand for medicare investments

Pick up any forecast on the demand for healthcare in the GCC and it smells of a serious opportunity for healthcare providers and manufacturers of pharmaceuticals or treatment machinery. For investors, delving into the regional healthcare sector means dealing with stringent rules and red tape, not to mention high capital requirements for healthcare facilities and technology to stay ahead of the game. But it is well worth the effort, according to Makarem Batterjee of Riyadh-based Bait Al Batterjee Holding Co and Saudi German Hospitals Group (SGHG).

“Investors are getting into this field globally, because they have realized its high entry barriers mean it is not an easy business to get into so it is less crowded,” says Batterjee, whose company just invested over $200 million in the 300-bed Saudi German Hospital in Dubai, the group’s new flagship facility.

Besides the rising demand for treatment, Koleilat sees ample opportunity for investment into the preventative market. “The biggest concern that the Middle East faces is the rising incidence of lifestyle diseases that encompass obesity, diabetes and stress,” he says. “The opportunity for healing is strengthened when the focus of healthcare shifts from an overt emphasis on treatment to early diagnosis.”

According to the International Diabetes Federation, the UAE ranks second in the world for diabetes prevalence, at 20 percent, followed by Saudi Arabia, at 16.7 percent. This explains why Julphar, the only pharmaceutical drug manufacturer in the UAE, chose insulin for its production line, in addition to general medicines which it distributes around the region.

A market more attractive

Some 90 percent of drugs in the GCC are imported, and with a current market size of $1.8 billion and future growth of 7 to 9 percent in the UAE alone, according to F&S estimates, and with few players in the GCC market, there is room for investment in research and development (R&D) and local production.

Nevertheless, regulations and patent laws along international lines slow things down and setting up a plant takes at least two years. But the process is becoming easier as governments set up free zones, such a DuBiotech in the UAE, in order to attract foreign firms to set up both R&D and manufacturing facilities in the region.

“The return on this investment is expected to materialize in the long term, [we are] working toward creating a manufacturing hub in the Gulf,” says Manisha Rawat, research analyst at Frost & Sullivan’s healthcare practice.

The biggest hurdle faced is the need to import raw materials, but in Rawat’s view the problem can be solved by sourcing them from countries such as China and India.

Saudi Arabia takes nearly 60 percent of the healthcare market share and has set aside a large chunk of its budget, 11 percent, to address demand. The UAE comes second with nearly 20 percent, according to a report by investment bank Alpen Capital. More than $14 billion is currently being spent on healthcare projects in the region, of which the UAE public sector alone plans to spend around $11 billion by 2015, triple the expenditure of 10 years ago.

The costs of this increasing supply of hospital facilities is borne mainly by governments, but private-public partnerships, such as Abu Dhabi’s Mubadala-Cleveland Clinics, are increasingly filling gaps that have emerged.

The existing plans to increase hospital beds will suffice to maintain the current ratio of beds to population, says Bipul Kumar Jha, senior consultant in healthcare practice at F&S. “However, matching up to the international standards as in the developed nations is an area of concern,” he points out.

International accreditation

Ashraf Ismail, managing director of the Middle East International Office at the accreditation firm Joint Commission International (JCI), points out that: “The Dubai government’s leadership wants to meet international standards and their directives have been instrumental in implementing the same in terms of facilities, quality of care and staff, thus setting the direction the emirate’s hospitals and other healthcare facilities are heading in.”

JCI was established in 1994 to assist international health care organizations, public health agencies, ministries and others to improve the quality and safety of patient care in more than 80 countries. Some 450 public and private healthcare organizations have been accredited globally since 1999, of which the UAE alone has a total of 56 health facilities with JCI accreditations, says Jha.

According to JCI, the Middle East is the world’s fastest growing region in terms of accreditation, a trend that is driven by higher awareness on quality medical care and supported by the growing importance of insurance companies, which rely on accreditation as part of evaluating medical facilities that policy holders can access.

“[Insurers] are aware that accredited places offer more cost-effective, efficient and better service, quality and safety, so now hospitals are competing to get accredited,” Ismail adds. “Insurance is the future for providing healthcare in the region. People simply can’t afford healthcare without it.”

Connecting care

Dubai Healthcare City (DHCC), the emirate’s medical cluster with free-zone status, is leading the field of provider growth, with Sharjah and Ras Al Khaimah also intent on getting in on the action.

DHCC, which was launched as a project in November 2002 and served about 3,000 patients in 2005, has grown from footfall of 410,000 patients in 2010 to more than 500,000 in 2011.

“The DHCC has been successful in attracting foreign companies, education institutions and medical supply companies,” Jha remarks. “This has in turn helped to improve the situation of the entire UAE healthcare system as a whole.”

Besides improved efficiencies, healthcare operators have an important opportunity in streamlining diagnostics and treatment services to better meet the needs of patients. The Ambulatory Healthcare Services (AHS), a unit of state-owned Abu Dhabi Health Services Company (SEHA), could be a trend-setter for integration of diverse health services in the UAE. “We have all the services under one roof, meaning we don’t need to refer patients for tests, x-rays etcetera. It all stays in our network and we have specialists which analyze all the results centrally, so your doctor has the test results within 24 hours,” says Dr. Omar al-Jabri, chief medical officer at AHS.

AHS has this summer become the first health care organization globally to receive a new “network accreditation” certificate from JCI. “We’re happy to collaborate with other health facilities in the UAE, who are interested in taking the accreditation and share our experience of the process with them,” Jabri tells Executive. “We already had some inquiries from several medical facilities in the Northern Emirates, for example RAK Hospital came to visit us.”

In Dubai, all government hospitals are already JCI accredited and the leadership’s directives point to all privately owned healthcare businesses having to follow suite. “As far as I am aware all privately owned medical centers, laboratories and even the smaller private clinics are expected to get accreditation by 2013,” confirms Ismail.

This could become a bit of a conundrum, however. Although accreditation itself isn’t expensive — $12,000 for the average hospital every three years —small non-purpose-built clinics will find it hard to make the cut, as they will simply fail on the physical building safety and security aspects, Ismail explained.

While the Dubai Health Authority (DHA) and Health Authority Abu Dhabi (HAAD) have taken the lead in implementing more stringent rules to raise standards over the years, medical providers say the rules and systems between themselves and the DHCC are in need of unification, and they claim time-consuming licensing procedures mean skills can’t always go where they are needed.

Calling for licensing to be completed within weeks instead of months, providers in Dubai are putting their hopes on an electronic process which is a work in progress at the DHA and envisaged to become reality by year-end.

According to Jha, a talked-about Emirates Health Authority could improve the health situation in a more equitable manner and with a greater focus and reduce localized development of healthcare infrastructure.

Another bottleneck is education. “The local talent pool is insufficient in fulfilling the demand,” Jha says. “The dependency on expatriate workforce is high and the private hospitals face a tough challenge in hiring and retaining the right kind of employees.”

As UAE authorities and private medical providers have been busy teaming up with medical educational institutions to offer government-endorsed medical degrees in the UAE, the country is today rife with opportunities for committed long-term investors whether in medical care or education.

Abu Dhabi-based NMC Health, the UAE’s largest private healthcare provider, only this spring proved the voracity of international investor appetite in regional health issues — seeking capital for its expansion in the UAE, the company in April raised the equivalent of $180 million via an initial public offering on the London Stock Exchange. Other providers are now planning to do the same.

The demand is definitely there, but whether the planned new free zones can be successful would depend on the regulations the authorities put in place and what type of medical facilities would want to set up, says Ismail, noting that: “Today the name of the game is quality.”