The UAE’s healthcare sector will need additions in super-speciality hospitals and clinics rather than more of multi-speciality hospitals. Image Credit: Pankaj Sharma/Gulf News Archives

Dubai: The UAE’s healthcare sector will need additions in super-speciality hospitals and clinics rather than more of multi-speciality hospitals - this is so even in the aftermath of the COVID-19 outbreak.

“Hospital operators realise there is hardly any more room left for standard hospitals and clinics,” said Krishna Dhanak, Executive Director at Alpen Capital, the consultancy. “Larger projects have been put on hold - in fact, there haven’t been any announcements about major hospital projects since the pandemic.

“The last big project was before the pandemic - the Mayo Clinic venture in Abu Dhabi last year.”

But after the COVID-19 hit, there were at least some who thought the UAE will need more hospital beds and treatment facilities. But industry sources suggest that existing capacities are more than enough to handle the UAE population’s needs - as was proved in the way the pandemic was tackled.

Plus, the pandemic is more in the nature of a one-off, and creating more hospitals and clinics would not have been the answer.

Build niche offerings

Instead, the focus could be on longer term services that provide for acute care or treating chronic diseases. “We also have private healthcare operators launching speciality clinics focussed on dental and cosmetic care - and these have proved extremely profitable,’ said Dhanak.

“We are talking about capital expenditure of $5 million or so per clinic and catering to very specific clientele.”

The last big healthcare project in the UAE was before the pandemic - the Mayo Clinic venture in Abu Dhabi last year

- Krishna Dhanak, Executive Director, Alpen Capital

Can private operator think ‘small’?

The last 15 years have been a boom time for the UAE’s healthcare industry, as privately owned entities created massive capacities to compensate for less investments by the government.

In the UAE, the private sector participation in healthcare is estimated at around 68 per cent, as per Alpen Capital data. That compares with 24 per cent private sector presence in Saudi Arabia.

“There’s still more than $50 billion of healthcare projects in the Gulf region committed for 160 projects,” said Dhanak. “Much of that will be in markets where private sector operators are building up their presence, as in Saudi Arabia.

“But that’s not the situation in the UAE - this market does not need more generic hospitals. What it needs is niche services.”

as per 2017 data, the UAE had more than 13,312 hospital beds from 143 hospitals, and by now Still bearing the costs As evidenced during the pandemic crisis months, the governments continue to bear the brunt of the costs in the healthcare industry. The COVID-19 situation only magnified the extent of their role.

“The GCC has been swift in its response to the pandemic with unprecedented measures to mitigate risks,” the Alpen report on the state of the healthcare industry notes. Nevertheless, the crisis has caused considerable headwinds for the sector.”

Payments issue

Hospitals found they had to deal exclusively with COVID-19 cases, and that resulted in a sharp drop in outpatient numbers and in elective surgeries, which is what hospitals depend on for their cashflow. At some hospitals, outpatient numbers dropped by 70-80 per cent during the April to July phase, when the anti-COVID-19 spread measures were in full effect.

Since then the recovery in patient numbers has been gradual, and this continues to impact healthcare sector’s revenues.

Passing phase?

For new and existing investors in healthcare, the immediate future offers possibilities. ““A post-pandemic expected economic recovery coupled with favorable policy changes will offer interesting opportunities to encourage investor interest,” the Alpen report notes. “Ageing population, high prevalence of NCDs, focus on preventive care and quality enhancing reforms are reshaping and strengthening the GCC healthcare industry.”

But how quickly will investors pile in with new ventures? As the world hopes for a breakthrough vaccine to take on the COVID-19, investors might bide their time before making the next move.