Riyadh plans radical surgery to rejuvenate Saudi health sector

Riyadh: At the busy emergency department of the King Saud Medical City in Riyadh, doctors are struggling to merge female- and male-only treatment rooms.

The complex, which incorporates the capital’s oldest hospital Shumaisi, is one of the few institutions to retain segregated facilities. Yet managers attempting to streamline its operations as part of a broader reorganisation of health care in Saudi Arabia are running up against the country’s deep social divisions: Families dislike being separated in hospital, but attempts to end gender segregation have sparked resistance from social conservatives. “There are always problems one way or the other,” said one of its doctors.

But patients will soon face even more radical change as the kingdom embarks on an overhaul of its bloated and inefficient health care sector in a programme aimed at cutting costs, boosting productivity, improving public health and bringing more locals into the workforce.

The efficiency drive comes as plunging oil prices have forced Riyadh to slash capital spending to rein in a budget deficit of about 15 per cent of gross domestic product this year. The government last month unveiled a radical austerity programme and last week announced that it was considering a stock market flotation of its state oil behemoth, Saudi Aramco.

The country’s health and social affairs budget, which already consumes a fifth of state spending, is set to increase as the number of over-65s in the country rises from 3 per cent of the population to 6 per cent within the next 10 years.

The spread of the Middle East respiratory syndrome coronavirus, which is now under control, also continues to drain resources.

Despite this, analysts say underuse of the health care system — only about half the services are in use at any one time — means there is significant slack in the system. McKinsey estimates efficiency savings of $90bn are possible by 2030.

“Our annual health spending is in the order of $45 billion, and while it is going to grow, we are looking for more efficiency, more bang for our buck,” said Khalid Al Falih, health minister and a former chief executive of Saudi Aramco.

The health ministry is working on a new financing model away from state funding, starting by shifting state-employed Saudis on to a health insurance model similar to the current private health insurance model for workers employed by the private sector.

The government is also considering using the tax system both to ease the burden on the state coffers and attempt to modify behaviour in a country with worsening health indicators. Despite decades of rising life expectancy, the kingdom has seen a sharp increase in heart disease and diabetes in recent years, and its obesity rate is twice the average in developed nations.

“We hope to offload the burden on to ‘sin taxes’ on goods such as cigarettes, soft drinks and snacks,” Falih said. Car insurance could be surtaxed to help fund the cost of treating motor accidents, he added. The kingdom’s deadly roads witnessed 7,661 road fatalities in 2013, or 27.4 per 100,000 of the population.

The government also wants to increase the number of Saudis employed in the health care sector as part of a broader initiative to boost nationals’ skills and diversify the economy. Only one in three health care workers is a local, according to McKinsey, with foreigners making up 82 per cent of doctors and 74 per cent of nurses. While the kingdom needs up to 7,000 more nurses a year, only 812 Saudi nurses graduated in 2014.

To fill the skills gap, the government is working to improve the quality of schooling on offer to Saudis, who, after a concerted public information campaign and societal changes, are increasingly willing to work in a sector that was once socially shunned. The government is aiming to train 100,000 nurses over the next 15 years.

To date, the government’s focus has been on building capacity in the health care system, but the productivity push means a change of strategy, Falih said. “We don’t want to overshoot — we also anticipate better education, strengthening primary health care and early detection.”

Dr Mahmoud Al Yamani, executive director of King Fahd Medical City, said the kingdom needed to move beyond a focus on treatment into prevention. “When you look at scale, it is more efficient to treat the whole population by preventing disease,” he said.

He said one reform path could see basic provision of health care gradually shifting towards the private sector, with government hospitals retaining responsibility for specialist care and delivering treatment in rural areas.

Ahead of an upcoming privatisation drive, the health ministry is set to “corporatise” state hospitals and clinics as it transforms itself into a regulator, rather than an operator. “We will unshackle hospitals and clinics to reform themselves or be doomed by the forces of the market place,” Falih said.

The private sector currently accounts for 30 per cent of Saudi health care, he says, but he expects that share to increase significantly. As much as 30 per cent of government spending in non-core areas such as procurement, logistics and dispensing medicine could also be outsourced, he argued.

Riyadh is actively seeking to attract foreign funds to the sector, with a conference for potential inward investors planned in the second half of 2016. “The opportunity is good, the risks are low and the regulatory environment enabling,” Falih said.

Private health care operators, which have enjoyed high profit margins of up to 20 per cent, are keen to expand. But executives remain wary, complaining of high bureaucratic barriers to entry and late payments since the collapse of the oil price.

“Payments have been drying up since April,” said one executive. “It’s putting many businesses under pressure.”

— Financial Times