Kingdom of Saudi Arabia Healthcare Overview 2018 - The Pulse: 8th Edition - Colliers ...
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The Pulse: 8th Edition Kingdom of Saudi Arabia Healthcare Overview 2018
GENERAL HOSPITALS CLINICS
We have a number of opportunities for healthcare We are seeking investors to partner with a
service providers. Market entry is possible by way recognized healthcare operator to establish
of management agreement, Joint Venture and Clinics in:
Long-term Lease of Land and/or Property. > Riyadh > Jeddah
> Muscat > Abu Dhabi > Abu Dhabi > Muscat
> Cairo
> Riyadh > Sharjah
Possible modes of market entry include:
> Jeddah > Ajman
> Management Agreement
> Cairo > Fujairah
> Joint Venture
> Dubai
> Long-term Lease of Land and/or Property
Providers and
Investors Seeking to Expand
in the Middle East and North Africa
Opportunities
for Healthcare
Service
The opportunities
are available in:
LONG TERM CARE CENTERS OF
& REHABILITATION EXCELLENCE
CENTERS An established and recognized healthcare
provider is seeking to setup centers of
We are seeking to introduce recognised excellence through management agreement,
Long-term Care and Rehabilitation joint venture or long term lease.
providers to reputable investors in Cairo,
Muscat, Abu Dhabi, Riyadh and Jeddah. The opportunities The Specialties are:
are available in: > Ophthalmology
> Riyadh > Ajman > Pediatric
> Management Agreement
> Cairo > Fujairah > Maternity
> Joint Venture
> Dubai > Muscat > IVF
> Long-term Lease of Land > Abu Dhabi > Jeddah > Orthopedic
and/or Property > Sharjah > Beauty & Cosmetics
> Wellness
The Kingdom of Saudi Arabia
with a current estimated
population of approximately
32.6 million is the largest country
Ian Albert
in the GCC. Under Vision 2030, Regional Director | MENA
the country is going through Valuation & Advisory
ian.albert@colliers.com
fundamental structural changes
in all the sectors including the
healthcare sector.
The Healthcare sector in KSA is
undergoing evolution on the back of rapid
advancements in technology, research and Mansoor Ahmed
Director | MENA
development (R&D) in line with the global Development Solutions | Healthcare
and regional trends. However, healthcare | Education & PPP
providers and professionals are grappling mansoor.ahmed@colliers.com
with several challenges concurrently,
such as patients becoming customers and
the patientcare transitioning from “fee
for quality” rather than “fee for service”.
This coupled with new compliance
requirements that aim at wellness
and prevention plus ensuring better
coordination, efficiencies, add depth and Imad Damrah
Managing Director
complexity to an increasingly competitive
Kingdom of Saudi Arabia
marketplace. imad.damrah@colliers.com
Kingdom of Saudi Arabia Healthcare Overview | The Pulse: 8th Edition | 2018 3
Recent trends and industry dynamics require operators in the >> Government commitment to healthcare is evident as the
healthcare sector to make challenging decisions. Whilst the government continues its efforts in developing various
healthcare system has improved across the region including medical cities, however, many of these facilities are expected
Saudi Arabia the sector offers opportunities for investors/ to be operated in conjunction with the private sector
operators. Key factors that make KSA’s healthcare market investment using various Public Private Partnership (PPP)
attractive are: models.
>> The healthcare and social services sector has been allocated
15% (SAR 147 million) of the total KSA’s 2018 budgeted
>> KSA’s Healthcare Sector is structured to provide a basic expenditures, up from actual spend of SAR 133 million during
platform of healthcare services to all, with specialised 2017. This 10.5% increase in the allocation reflects a strong
treatment facilities offered at some private and public indication of potential demand as well as the Government’s
hospitals. willingness to augment growth and improvement within the
>> KSA has an estimated population of 32.6 million in 2018, sector.
which is expected to double, reaching 77.2 million by 2050,
growing at 2.65% per annum. Assuming a more conservative
1.02% average annual growth, as suggested by World bank,
KSA population would still reach 45.1 million by 2050. Colliers International KSA
This increase in population is expected to fuel the demand
for healthcare services in the kingdom. Concurrently, the Healthcare Overview 2018
healthcare system needs to treat emerging Lifestyle Diseases (the 8th in The Pulse series)
and Illnesses associated with modern and urban lifestyle,
partially due to the growing middle-income population. provides an in-depth analysis
>> The government is encouraging private sector participation in of the key factors impacting
the healthcare sector as the public sector’s role is gradually the Saudi Healthcare sector
transitioned to becoming more of a regulator rather than as a
provider of healthcare facilities, as highlighted in the National and its future outlook and
Transformation Plan (NTP) and the privatisation plan. In identify opportunities and
2017, Saudi Arabian General Investment Authority (SAGIA)
announced that foreign investors can have 100% ownership challenges to operators
in health and education sectors, once implemented this is and investors.
expected to boost private sector investment in healthcare in
KSA.
4 Kingdom of Saudi Arabia Healthcare Overview | The Pulse: 8th Edition | 2018
Colliers International Healthcare Advisory & Valuation Services team is solely
focused on healthcare related business (OpCo) and real estate (PropCo),
from complex medical business related operational advisory to real estate
related advisory.
Our group has the experience and knowledge essential to providing forward
thinking solutions to any challenging healthcare related decisions where
success is measured in high quality care delivered in a cost effective way.
Hospitals
Daycare / Surgery Centers
Medical Clinics
Health / Medical Parks
Laboratories
Long Term Care / Rehab Centers
COMMITMENT PASSION EXPERIENCE KNOWLEDGE INTELLIGENCE
USP
Market Research | Market Entry & Expansion | Equity & Debt Fund Raising
Highest & Best Use Study | Market & Financial Feasibility Study
Operator Search and Selection | Land, Property & Business Valuations
Kingdom of Saudi Arabia Healthcare Overview | The Pulse: 8th Edition | 2018 5
Population
Density
Demographic
Northern by Governorate
Al-Jawf Borders 1-4
5-24
Tabuk
Ha’il 25-240
analysis
Persons/Sq km
Al-Qassim
Madinah
Riyadh
Eastern Province
Makkah
KSA is divided into 13 provinces, of which Makkah and Riyadh are the most
Al-Bahah
populated provinces in which approximately 16.3 million or 51.4% of the total Asir
population reside. These two provinces have the highest concentration of Najran
expatriates (non-Saudi Nationals) with 46.7% and 42.8% respectively. Jizan
Population of KSA
(2018 estimated) Madinah 6.6% KSA’s population
Jazan 4.8%
Aseer 6.8% by province, 2016
Al Qassem 4.8%
Tabouk 2.8%
32.6 M Eastern
15.1% Others
8.1%
Hail 2.%
Najran 1.8%
Al Jouf 1.6%
Riyadh Makkah
25.2% 26.2% Al Bahah 1.5%
Population
Density of Northern Borders 1.1%
KSA (P/km2)
15.1 Between 2010 and 2016, population grew at 2.65% CAGR. Assuming the same level
of growth until 2050, the Kingdom’s population is expected to reach 77.2 million.
However, based on a conservative estimate of 1.02% as suggested by World Bank,
KSA’s population is expected to reach 45.1 million by 2050.
Population growth, 2010 - 2050
PROJECTED
HISTORICAL %
80 2 .65
Male Female GR
CA
43% 1.03
%
57% 60
CAG
R
Population M
40
20
Current
0
Saudi Non Saudi 2010 2011 2012 2013 2014 2015 2016 2017 2018 2020 2030 2040 2050
37% Pessimistic Optimistic
63% Expanding population coupled with rising income levels are expected to fuel demand
for healthcare as well as infrastructure, energy, water, telecoms, technology, housing,
education, financial services etc.
6 Kingdom of Saudi Arabia Healthcare Overview | The Pulse: 8th Edition | 2018
Changing Population Profile
0.09M 0.3M 2.9M
80+ 0.9% 1.0% 6.4%
75-79
70-74 0.4M 1.3M 7.4M
65-69 3.8% 4.2% 16.5%
60-64
55-59
50-54 1.2M 7.5M 12.0M
45-49 12.8% 23.8% 26.6%
40-44
35-39
30-34 2.9M 11.9M 12.7M
25-29 29.5% 37.6% 28.1%
20-24
15-19
10-14 5.2M 0.5M 10.1M
05-09 53.0% 33.4% 22.4%
00-04
1400K 700K 0 700K 1400K 2.5M 2M 1M 0 1M 2M 2.5M 2.5M 2M 1M 0 1M 2M 2.5M
1980 9.7 M 2015 31.5 M 2050 45.1 M
The population pyramid in KSA has significantly changed between 1980 and 2015, and it
will further change by 2050 this will have a significant impact on healthcare demand in
terms of quality, quantity and type of healthcare facilities.
1980 2015 2050
During 2015-2050 approximately 19 million babies will be born in KSA, creating demand 10.5 10.1
for facilities and services, relating to mother and childcare (obstetrics, gynecology,
0-20
M M
pediatrics, etc.) along with the more common prevailing communicable and some
non-communicable diseases. 5.2
M
1980 2015 2050
The age group between 20-39 years is very important for future healthcare planning, as
12.7
it is common that there is the development of chronic diseases; cardiovascular, irritable 11.9 M
M
bowel syndrome, chronic obstructive pulmonary disease and some types of cancer.
These have a long term impact on demand for healthcare. With 12 million population in 20-39
this age group there is considerable demand not only for curative but also preventative
2.9
facilities. M
1980 2015 2050
Over the next three decades, we envisage a sharp rise in healthcare demand as 12.0
approximately 80.0% of an individual healthcare requirements typically occur post the
40-50 age range. This is primarily due to an increase in lifestyle related diseases, such
M
40-59
7.5
as diabetes, coronary and other obesity-related illnesses. M
1.2 M
An increase in life expectancy in KSA is expected to extend from the current level of
1980 2015 2050
73.1 years and 76.1 years for males and females respectively to 78.4 and 81.3 by 2050.
This is expected to create demand on long- term care (LTC) facilities, focusing on geriatric
10.3
60+
related care, rehabilitation and home healthcare services. M
Based on current international benchmarks of 4-6 beds per 1,000 population above
1.6 M
65 years, KSA currently needs from 6,400 to 9,600 beds dedicated for LTC, this is 0.49 M
expected to reach 41,200 – 61,800 LTC beds by 2050.
Kingdom of Saudi Arabia Healthcare Overview | The Pulse: 8th Edition | 2018 7
HEALTH &
WELLNESS
In many regional and international
markets among the keys to successful
second homes and resort developments,
especially targeting the affluent customers,
is yearlong destination conceptual
planning. To achieve this developers have
to go beyond spa packages to include
health driven wellness offerings; beauty
and cosmetic, weight loss and packages
relating to lifestyle disease. These increase
absorption, occupancy levels within the
development and enhance price premiums
Long beaches, valleys and deserts cradled by mountains all located in FITNESS/SKILL
north-western Saudi Arabia with breathtakingly diverse terrain, this unique
RETREATS
geographical location enjoys a temperate climate. Cool winds from the
Destination-based fitness camps are
Red Sea create the most desirable temperatures for future residents – on gaining popularity especially within
average around 10°C cooler than surrounding areas and the rest of the GCC. the younger generation Y and Z (age
range of 20 to 40 years). Destination
healthcare retreats comprise two
Creating Healthcare primary components ; retreats that
& Wellness HUB promote lifestyle changes and academies
focused on enhancing group skill
The NEOM City which will cost $500 billion and was announced in October techniques. The fitness industry is
upgrading with fitness slimming getaway
2017 will be located on the Red Sea Coast promising a new lifestyle that does
programs in holiday locations. With
not currently exist in Saudi Arabia. The new city is planned to span over a total obesity levels increasing across the
area of 10,000 square miles (25,900 square kilometers) linking KSA to Egypt region, the KSA holiday home market
and Jordan, creating new markets for many sectors, including healthcare and can benefit by applying these new trends
biotech. which will enhance the absorption /
occupancy of new developments and
The biotech sector will focus on next-generation gene therapy, genomics, stem price premiums.
cell research, nanobiology, bioengineering plus attracting the talent to research,
develop and apply the new knowledge, NEOM will be a new nexus for this vital RETIREMENT
activity.
COMMUNITIES
The Demand for Second Homes With approximately 1.6 million of Saudi
population above the age of 60 in 2015,
In last few decades alongside the demand for primary accommodation, a which is expected to increase to more
second-tier demand for second homes within the residential market has than 10 million by 2050, Colliers expects
an increasing demand for retirement
emerged, especially in the Eastern Province. With the development of NEOM
homes. There is an established pattern
city, Colliers expects that the second homes market flourish in the red sea area across international markets for
not only as secondary homes but also as an investment product supported and developing retirement communities that
driven by leisure, healthcare and wellness provide the look and feel of vacation
homes. There is a potential for the Saudi
Sustaining high occupancy levels all year round in second home destinations developers to look at capitalizing on such
can be challenging. Colliers has witnessed and advised on these challenges concepts within their developments.
in a number of countries. Often they can be addressed through introducing
healthcare and wellness driven resorts, long-term care and rehabilitation
facilities. These facilities can have a positive impact on occupancy levels by
REHABILITATION
attracting not only vacationers but also retired households and those seeking CENTRES
longer holidays within proximity to healthcare facilities. With a decline of the nursing home
model of care and the growth in more
While seasonality is part of the story, it can also be due to the lack of assisted living options, long-term
destination pull factors. Complex destination components, alongside leisure and rehabilitation centers have become
environment including proximity of hospitals, clinics, long-term rehabilitation common across international markets.
centers, wellness retreats, fitness/ skill retreats and retirement homes. Developers can integrate new real estate
products, targeting retirees as well as
There is an opportunity within the holiday home market for developers to create those looking for long-term care and
destinations by providing essential community infrastructure. immediately accessible amenities.
8 Kingdom of Saudi Arabia Healthcare Overview | The Pulse: 8th Edition | 2018
Lifestyle Diabetes prevalence (% of population ages 20 to 79) in 2017
diseases 20
18
20
18
20
18
20
18
20
18
20
18
20
18
20
18
20
18
20
18
20
18
20
18
20
18
20
18
20
18
20
18
20
18
Analyzing the demographic trends, it is 16 16 16 16 16 16 16 16 16 16 16 16 16 16 16 16 16
estimated that KSA’s population will change 14 14 14 14 14 14 14 14 14 14 14 14 14 14 14 14 14
from Baby Boomers to Generation X, Y & 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12
Z. This shift would impact disease patterns
10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10
and in turn the type of healthcare services
8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8
required.
6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6
Lifestyle diseases (also sometimes called 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4
diseases of longevity or diseases of 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2
civilization) are diseases that appear to 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
increase in frequency as countries become
more industrialized and life expectancy
increases due to urbanization and rising
disposable income. A more sedentary,
Qatar
Turkey
Germany
KSA
Egypt
UAE
Bahrain
Kuwait
Lebanon
Oman
Jordan
USA
China
Japan
Switzerland
Sweden
UK
consumption of processed food often leads
to increased chronic diseases (diabetes,
coronary problems and obesity-related
illnesses).
Obesity prevalence (% of population above 18) in 2016
Diabetes: 37.9
36.2
35.1 35.4 35.5
The rate of diabetes related illnesses has 32.0
32.1
31.7 32.0
witnessed an unprecedented increase 27.8
29.8
27.0
across the MENA Region. Based on latest
22.3
figures available for 2014, there were over 19.5 20.3
422 million people diagnosed with diabetes
in the world and MENA’s contribution was
38.7 million diabetic patients in 2017, which 6.2
is expected to increase to over 70 million 4.3
by 2024. In KSA during 2017, the diabetes
prevalence rate was 17.75% for age group
20-79 years, totaling to over 3.8 million
cases.
Germany
Turkey
Qatar
Japan
China
Switzerland
Sweden
Oman
UK
Bahrain
UAE
Egypt
Lebanon
KSA
Jordan
USA
Kuwait
Obesity:
In 2016, KSA’s obesity prevalence rate among
adults was 35.4%,also one of the highest in
Hypertension prevalence (% of population above 18) in 2015
the MENA region.
Hypertension: 30 30
The prevalence of hypertension among adults 25 25
in 2015 in KSA stood at 23.3% alsoone of
highest in the GCC region. 20 20
15 15
Common diseases of longevity
10 10
>> Alzheimer’s disease >> type 2 diabetes
>> atherosclerosis >> heart disease 5 5
>> asthma >> metabolic
0 0
>> some kinds of cancer syndrome
>> chronic liver disease >> chronic renal
or cirrhosis, Chronic failure
Germany
Turkey
Qatar
USA
UK
Japan
Switzerland
China
Sweden
Lebanon
Jordan
UAE
Bahrain
KSA
Kuwait
Oman
Egypt
Obstructive Pulmonary >> osteoporosis
Disease, >> stroke Source: World bank WHO,, Colliers International Research 2018
Kingdom of Saudi Arabia Healthcare Overview | The Pulse: 8th Edition | 2018 9
Healthcare expenditure per capita
Currently, the healthcare market in KSA is driven by public expenditure at 74.2% (2016) and 25.8% by private sector, which is
expected to increase to 28.1% by 2025.
The graph below shows the top 15 countries in the world per capita healthcare spending 3 times to 8 times more than KSA.
Healthcare expenditure per capita – 2015
10,000 900%
USD
As a % of KSA Per Capita Exp.
USD Per Capita 800%
8,000
As a % of 700%
KSA Per Capita Exp
600%
6,000
500%
400%
4,000
300%
2,000 200%
100%
0 0
Norway
Germany
Qatar
Turkey
Switzerland
USA
Luxembourg
Sweden
Denmark
Australia
Ireland
Netherlands
Austria
Canada
Iceland
UK
Andorra
UAE
Saudi Arabia
Bahrain
Kuwait
Lebanon
Oman
Jordan
Egypt
Average
Premium Per
Health Insurance Indicators 68.0% Person SAR
of
SAR 1,759 15.3 billion
1,027,833 Total Primary Saudis Expatriates claim paid
1,719,634 Total Dependent Saudis Insured to healthcare
SAR providers in 2017
6,185,809 Total Primary Non Saudis 13.4% 18.9 billion
2,009,456 Total Dependent Non Saudis of Saudi total health
Insured insurance premiums
10,942,732 Total Beneficiaries subscribed
in 2017 Utilization rate
27 Total Insurance Companies Claim per Issued
10 Tital TPA Companies rejection Member
ratio appox. Health 77%
5,026 Total Health Care Providers 25% Insurance
Loss Ratio
88%
Health Insurance Key Milestones
2006 2013 2016
Introduction of Mandatory Introduction of Mandatory Introduction of
Health Insurance for Expatriates Health Insurance for Unified Health
working in Private Sector Dependents of Expatriates Insurance Policy for
all Saudi employees
and their Dependents
working in the
2010 2014
Introduction of Mandatory Private Sector
Introduction of Mandatory
Health Insurance for Saudi Health Insurance for all
working in the Private Sector Visitors
10 Kingdom of Saudi Arabia Healthcare Overview | The Pulse: 8th Edition | 2018Hospitals & Bed Capacity by sectors Composition of hospitals and
beds by sector, 2016
The healthcare sector in KSA is represented by 3 healthcare players:
Hospitals
Ministry of Health (MoH) is the regulator for all healthcare
related activities and services within the country. MoH has
152
played a dominant role in providing healthcare services in
32.3%
KSA. In 2016, MoH contributed 58.3% of the total hospitals 274
and 59.1% of the total beds supply. The primary aim of these 58.3%
facilities is to provide care for free to Saudi nationals. However, 44
in areas where private hospitals are not available or under 9.4%
Ministry of certain emergency circumstances or in case of specialized
Health (MoH) treatments that are not available in local private hospitals,
expats can access MoH facilities.
The Quasi-Government healthcare facilities are hospitals
Beds
and health centers operated by the MoH and predominantly 17,428
catering to employees of the government organizations. Some 16.3%
of the Quasi-Government Facilities include: National Guard,
11,581 41,853
Quasi-Government Ministry of Defence and Aviation, Ministry of Interior, Royal
Commission, ARAMCO, etc.
16.3% 59.1%
Private sector facilities are accessed by expatriates as they do
not have access to public facilities and at times Saudi nationals
Private also visit private facilities to avoid the waiting time at public
MOH Sector
Sector facilities and benefit from the higher quality of care. Private
Quasi Govt Sector
sector operated approximately 32.2% of hospitals carrying Private Sector
24.6% of the overall bed supply.
Growth in Beds 70,000
12 817 17 428
60,000 22.1% 24.6%
Between 2010 and 2016 the number of doctors per 1,000
R5 .3%
population increased from 2.4 in 2010 to 2.8. The ratio of 50,000 CAG
nurses improved from 4.8 to 5.7 and number of beds per 10 939 CAGR 1.0% 11 581
40,000
1,000 population increased from 2.1 to 2.2. However, even 18.8% 16.3%
then it remains low compared to other developed countries 30,000
and even world average of 2.7 beds. Yet, it is far too simplistic 20,000 3%
to look only at bed ratios when looking at the Saudi healthcare R 3.
34 370
CAG 41 835
market. Population demographics, disease profiles, medical 10,000 59.1% 59.1%
procedural advances, insurance costs, government / private 0
sector involvement and affordability levels all have significant 2010 2016
impacts on bed and hospital demand numbers.
MOH (Beds) Quasi Govt (Beds) Private (Beds)
Key healthcare indicators per 1,000 population - 2015
14.0 Note: data for Japan and Canada for 2014
13.3
12.0 Physicians
13.2
10.0
11.3
Nurses
11.0
9.9
9.9
8.0
Beds
8.1
7.9
6.0
6.3
6.1
6.1
5.7
4.0
4.8
4.3
4.1
3.8
2.0
3.3
2.8
2.8
2.6
2.7
2.6
2.8
2.6
2.6
2.4
2.2
2.2
2.0
1.9
1.9
1.9
1.6
1.5
0.0
1.3
1.3
Germany France UK Canada USA Japan KSA Kuwait Oman UAE Qatar Bahrain
Kingdom of Saudi Arabia Healthcare Overview | The Pulse: 8th Edition | 2018 11Number of outpatients in KSA (millions),
2010 - 2016
140
40 51
120 31.1%
CAGR 4.6%
100
80 23 23
CAGR 0.0%
60
17.1%
Outpatient encounters in KSA,
40 2010-2016*
66 CAGR -0.5% 64
20 51.1% As the key healthcare provider in KSA, MoH hospitals
0
are the main providers of treatments to outpatients with
approximately 64.3 million of the outpatient encounters
2010 2016
in 2016. However, during 2010 – 2016, the volume of
Ministry Of Health Quasi Govt Private Sector
outpatient encounters in MoH decreased from 51.1% to
46.6%, while private sector encounters increased from
31.1% to 36.7%, with private sector experiencing a CAGR
Outpatient Encounters by Specialty in MOH
of 4.6%, with total volume of outpatients increasing from
hospitals in 2015**
40.5 to 50.7 million, compared to a decline of 2.0 million
outpatients in the MoH facilities. This trend can be
11.4% explained by the increasing number of insured expatriates
and the increasing popularity of the private sector among
11% Ophtalmology
Saudi nationals.
Obs/Gyn
Musculo-Skeletal
9.2% Top 7 regions in terms of the highest number of
45.6% ENT
outpatients included Riyadh (23.5%), Eastern (13.2%),
6.6% Oral and Dental
kin and Subcutaneous
S
Madinah (7.4%), Jeddah (7.0%), Jazan (6.9%),
5.9% Tissue Makkah (6.8%) and Al-Ahsa (6.0%).
4.5% Digestive System
5.9% Others
Key Causes of Death in KSA
6% Non-communicable diseases accounted for 68% of all
2%
2% Cardiovascular disease deaths in the KSA which is significant improvement.
2% Injuries The overall decline in communicable diseases can be
3% Iabetes, urogenital, blood
D explained by the improvement in sanitation systems,
and endocrine diseases
5% 45.6% Cancer
nutrition, hygiene awareness and invention of more
ommon infectious
C
effective medicine.
6%
diseases
Neonatal disorders As a result of urbanization, rise in life expectancy and
9%
hronic respiratory
C disposable income, an increase of chronic/lifestyle
18% Disease
diseases, such as diabetes, coronary problems and other
10% Neurological disorders
obesity-related illnesses, is increasing in KSA.
Digestive diseases
ental and behavioral
M
disorders
12 Kingdom of Saudi Arabia Healthcare Overview | The Pulse: 8th Edition | 2018Surgeries in KSA
by Specialty
& by Sector, -2016
100,000
120,000
20,000
40,000
60,000
80,000
0
OBS / Gyn
General
Inpatient encounters and surgeries
in KSA 2010-2016 Orthopedics
While in case of inpatient encounters during 2010 – 2016
the volume of outpatient encounters in MoH hospitals
decreased from 51.7% to 49.4%, while private sector
encounters increased from 32.5% to 35.5%, with private Ophtalmology
sector experiencing a CAGR of 2%, compared to virtually
no growth in MoH facilities.
During 2016 in KSA , six specialties accounted for 82.3% ENT
of all surgeries: OBS./GYN. – 24.0%, general surgery –
23.9%, orthopedic – 11.2%, ophthalmology – 8.6%, ENT –
8.5% and urology – 6.1%.
Top 7 regions in terms of the highest number of inpatients; Urology
Riyadh (22.8%), Jeddah (13.5%), Eastern (12.5%),
82.3%
Madinah (8.4%), Makkah (5.6%), Aseer (5.6%) and
Qaseem (5.3%).
Plastic
*Breakdown of outpatients and inpatients by region includes only numbers
for MoH and private sector. Number of outpatients in quasi-government
sector by region is not available.
** Data only available for MOH Hospitals
Faciodental
Number of inpatients in KSA (thousands),
2010 -2016
3,500 MOH Others
1068 1224
Private
3,000 32.5% 35.5%
% OGS
CAGR 2.8
518 522
Pediatrics
2,000 CAGR 0.1%
15.8% 15.1%
1,000
1701 CAGR 0.05% 1706 Neurosurgery
51.7% 48.4%
0
2010 2016
Ministry Of Health Quasi Govt Private Sector
Cardiac, Chest and Vascular
Kingdom of Saudi Arabia Healthcare Overview | The Pulse: 8th Edition | 2018 13The Saudi Public Private Partnership Law
Released in July 2018 for public debate > Providing easements in respect of Article 49: The Law
and comments, it is expected to boost publicly owned movable or immovable
private investment in the Kingdom with of Real Estate
property;
the concurrent impact on the Saudi Ownership and
> Right to collect tariffs or user fees
economy. and to generate revenues from other Investment by
The Private Public Partnership (PPP) types of activities directly or indirectly Non-Saudis
draft bill is the beginnings of the associated with the implementation of Non-Saudis may own real estate in
legal framework on which the Saudi the PPP Project; whole or in part, except for properties
government can begin to outsource > Setting discounted rental payments located within the boundaries of the
healthcare provision. The outsourcing for use of publicly owned property; cities of Makkah and Medina.
is expected to be done through typical > Granting exclusive rights to engage
Real estate may be leased to the
PPP projects for a fixed duration and / or in the activity in the framework of the
Private Party within the boundaries
selected disposal of government assets. concluded PPP Contract.
of the cities of Makkah and Madinah
The Saudi government stated aim is to > On behalf of Governmental Entity
for a period equal to the term of any
raise US$200 billion by 2030 through providing guarantees relating to
PPP Contract for the purpose of
privatization. • Quality of performance
implementing the PPP Contract for
• Delay in their obligations
real estate which is the subject of the
The features relating to healthcare and • Termination of the Contract
PPP Contract.
education sectors are summarized
below:
Article 50:
Article 13: Rights of The Labor Law
The Private Party
Subject to approval from the Ministry
Non-interference by the
Article 12: Government of Labor and Social Development the
Governmental Entity with the business of
PPP projects may enjoy exemption
Financial Support the Private Party, except as stipulated in the
from the Labor Law and the Nitaqat
for PPP Projects PPP contract and the Kingdom’s laws.
Guide in relation to employment in
>P
rotection of the property of the Private any PPP with respect to employment
The Government will have established Party from nationalization or any other of Saudis in the PPP projects.
procedures and is expected to provide measures.
financial and economic support to PPP
>T
he right to freedom of ownership, use
project to ensure their success. There Article 56:
and disposal of the investments made in
are 19 such initiatives highlighted in the
document. Some of key initiatives are
the PPP project in accordance with the Ownership of
PPP contract. Healthcare Companies
summarised below;
>T
he freedom of disposition of profits and
> Loans at preferential conditions The law indicate that non-Saudi
proceeds received.
> Bank guarantees. nationals will be able to wholly own
>T
he right to freely dispose of the financial health institutions, i.e. operating
> Contribution to the share of the
returns from the PPP project, including companies (OpCo), that are part
PPP Project.
repatriation. of a PPP contract. This seems to
> Guarantees on revenues.
> Provide support to commercially >T
he right to recover losses incurred as be contradiction to the statement
not viable but economically a result of any change in the Law or issued by governor of the Saudi
desirable projects unlawful action or the failure of public Arabian General Investment Authority
> Tariff subsidies. authorities to take appropriate actions. (SAGIA) in August 2017 by the KSA
> Provision of the financial resources ’s investment authority governor,
for implementation of PPP Project indicating 100% ownership for foreign
> Tax benefits and/or tax Article 28: Duration investors in the healthcare and
postponements and/or payment of education sectors.
of the PPP Contract:
tax by instalments Colliers view is that this will boost the
> Preferential customs duties The duration of the PPP Contract foreign investment in the healthcare
> Foreign exchange and interest rate shall be determined as agreed and education sector, especially from
fluctuation guarantees. between the Supervisory Committee many leading listed and not listed
> Providing rights, (including the right and the Private Party provided that regional operators who are looking to
to use or occupy), to movable or the original, renewed or extended, expand into KSA’s lucrative healthcare
immovable property duration of the Contract shall not sector. Additionally we expect that in
> Assisting in obtaining licenses, exceed (30) thirty years from the date the final law full ownership will not be
permits, approvals; of signing the PPP Contract. limited to PPP projects.
14 Kingdom of Saudi Arabia Healthcare Overview | The Pulse: 8th Edition | 2018Conclusions
Demand Gap Beds facilitator encouraging the provide sector to bridge the gap in
the healthcare sector in the KSA. In 2017, Saudi Arabian General
In 2016, KSA had 2.23 beds per 1,000 population, which was Investment Authority (SAGIA) announced that foreign investors
quite low compared to world average of 2.7 beds per 1,000 can have 100% ownership in health and education sectors, once
population. Number of doctors per 1,000 population ratios of 2.83 implemented this is expected to boost private sector investment
is quite impressive, however, the Kingdom has high dependence in healthcare in the KSA.
on foreign physicians.
Colliers has projected the demand for total number of beds based
Demand Gap Clinics
on the following scenarios: For projections of clinics required till 2050 we also used
>> Scenario 1 (Beds) – applying KSA’s ratio of beds of 2.23 per two scenarios along with the same approach for population
1,000 population, projections:
>> Scenario 2 (Beds) - applying world’s ratio of 2.7 beds per >> Scenario 1 (Clinics) – 75% of total doctors working in public
1,000 population. or private sector or having their own business run clinics on
full time or part time basis.
Each scenario was calculated based on pessimistic and optimistic >> Scenario 2 (Clinics) - 50% of total doctors working in public
projections of population growth between 2016 – 2050, namely at or private sector or having their own business run clinics on
a CAGR of 1.02% according to World bank and a CAGR of 2.65% full time or part time basis.
based on historical growth of the country’s population between
2010 – 2016. Currently a large portion of demand in the clinics market is in
residential buildings, offices buildings and retail shops. Colliers
The current cost of construction for a Grade A hospital is in the has observed a move away from the this historic preference
range of US$ 1,900 / sqm to US$ 2,700 / sqm, while the gross to the development of dedicated healthcare clinics / daycare
area per bed ranges from 90 sqm to 125 sqm with investment in surgery centers and centers of excellence as one of the main
medical fit-outs ranging between US$ 80,000 to US$ 120,000 growth opportunity in KSA.
per bed.
The following exhibits represent the number of additional beds
It is far too simplistic too take into consideration only population and potential investment in real estate and healthcare business
projections when looking at the Saudi healthcare market, other (medical fit-outs, medical equipment etc.), which are required
factors previously mentioned need to be considered. The Saudi to cater to the demand of the growing population during
government policy seems to be emerging as a regulator and upcoming years:
Kingdom of Saudi Arabia Healthcare Overview | The Pulse: 8th Edition | 2018 15DEMAND FORECAST 2.23 2.7
– Beds & Required Investment beds /1,000 population beds /1,000 population
in Real Estate & Medical Fit-outs
Pessimistic population Optimistic population
growth projections growth projections
(World Bank – 1.02%) (Historic growth – 2.65%)
2020F 2030F 2050F 2020F 2030F 2050F
150
178,000 150
100
110,000 102,000
100
Additional 77,000
50 50
Beds 28,000
50,300
29,300 51,000
Required 18,400 10,850
26,000
2,900 0 0
2020F 2030F 2050F 2020F 2030F 2050F
45 45
40 40
24.0 – 42.7
30 30
Investment 20
14.8 – 26.4 13.8 – 24.5 20
Required in 10.3 – 18.4
8.6–17.0
Real Estate 10 6.9 – 12.3 10
4.8–9.4 5.0–9.9
3.1–6.2
Billion USD 0.5–1.0
1.9–3.7
0
3.6 – 6.3
0
+ 2020F 2030F 2050F 2020F 2030F 2050F
16 16
15 15
14.2 –17.8
10 10
Investment
8.8 – 11.0 8.2 – 10.2
Required
in Medical 6.1 – 7.7
5 5
Fit-outs 4.0–6.0
4.1 – 5.1
2.2–3.4 2.3–3.5
Billion USD 1.5–2.2 0.9–1.3
2.1 – 2.6
0.2–0.4
0 0
= 2020F 2030F 2050F 2020F 2030F 2050F
60 60
50 38.2 –60.5 50
40 40
30 23.6 – 37.3 30
22.0 – 34.8
TOTAL 12.6–23.0 20 16.5 – 26.1 20
11.0 – 17.4
Billion USD 4.6–8.4
7.0–12.8 7.3–13.4 10 10
2.7–5.0 5.7 – 9.0
0.7–1.3 0 0
16 Kingdom of Saudi Arabia Healthcare Overview | The Pulse: 8th Edition | 201850 75
of Doctors of Doctors
IF % Having IF % Having
DEMAND FORECAST
Own Clinics Own Clinics
– Clinics & Required
Investment in Real Estate
Pessimistic population Optimistic population
growth projections growth projections
(World Bank – 1.02%) (Historic growth – 2.65%)
2020F 2030F 2050F 2020F 2030F 2050F
120 128,000
100
80
60
Additional
Doctors 37,000 40 39,600
Required 20
13,700 9,900
3,700 0
2020F 2030F 2050F 2020F 2030F 2050F
5000 5000
3,850–4,812
4000 4000
3000 2,566–3,208 3000
Clinic Space 2000 2000
Required
1,112–1,390 1,188–1,485
‘000 sqm 741-926
1000
792–990
1000
412–515 296–371
112–140 274–343
74–93 198–247
0 0
2020F 2030F 2050F 2020F 2030F 2050F
2000 2000
1800 1800
1,347–1,924.8
1600 1600
1400 1400
1200 898.2–1283.2 1200
1000 1000
Investment 800 800
Required 389.2–555.9
259.4–370.6
600 415.8–594.0
277.2–396.0
600
144.1–205.9
400 400
USD Million 39.1–55.9
96.1–137.3 200 103.7–148.2
69.1–98.8
200
26.1–37.3 0 0
Kingdom of Saudi Arabia Healthcare Overview | The Pulse: 8th Edition | 2018 17Opportunities
Increased demand for
Healthcare Quality
Demand for Private
KSA’s healthcare facilities in general and
Healthcare Riyadh and Jeddah in particular, are
Year on year the volume and share of observed to be accredited by international
private sector has been increasing. In case healthcare accreditation bodies such as
of outpatients, between 2010-16 the private Joint Commission International (JCI) and
sector share increased from 31% (40 million) Australian Council of Healthcare Standards
to 37% (51 million) a CAGR of 4.6%. For International (ACHSI).
inpatient services the share increased from
Long Term Care/
These accreditations are one of the key
32% (1.1 million) to 35% (1.3 million) at a factors patients consider while choosing
Rehabilitation
CAGR of 2%. This compares to negative a healthcare facility, as these assure high
growth in MoH facilities, due primarily to the With the changing age profile, KSA
quality of health standards. requires a large number of LTC facilities.
increasing number of insured expatriates and
increasing popularity of the private sector The government is seeking private sector
among Saudi nationals. facilities specialized in LTC to refer their
patients requiring rehabilitation and/ or
The public sector’s role is also gradually long term care.
transitioned to becoming more of a regulator Demand for Maternity and
rather than as a provider of healthcare
facilities. Pediatrics
Number of private health facilities,
especially in Riyadh and Jeddah are
focusing on maternity and pediatrics owing Increased demand for
to high demand for these specialties.
specialized services
Daycare Surgical Centres Hospitals such as Dallah Hospital, Specialist
Centers of excellence focusing on certain
Medical center and Dr. Sulaiman Al Habib
specialties such as ophthalmology, cosmetic
Due to advancements in healthcare have separate buildings dedicated for
surgery, IVF and orthopedics (sports
technology (for example laparoscopy) a mother and child services.
medicine) are expected to grow further,
number of daycare surgeries (treatments especially in Riyadh and Jeddah.
/ procedures) have significantly As per Colliers research, throughout the
increased, resulting in higher demand for KSA and especially Riyadh and Jeddah
Many General Hospitals also have
daycare surgery centers. there is a high demand for Maternity and
established dedicated wings to provide
Pediatric services supporting a business
highly specialized services in a single
The demand for daycare surgical centres case for developing stand-alone hospitals or
specialty this has often been a key factor to
has also increased regionally and in as part of a hospital complex.
the success of these facilities.
the KSA, due increase in prevalence
of number of lifestyle diseases;
diabetes, obesity, depression, strokes,
cardiovascular diseases, blood pressure,
etc., which does not require treatments in
traditional hospital set-ups..
Laboratory and Primary Care
Diagnostic Center
Dedicated purpose built daycare surgery Owing to the large population in the KSA
centers and Centers of Excellence can be Standalone laboratory and diagnostic and high occupancy rates of the hospitals,
part of a large office complex and retail centers are required in KSA to support the country requires more primary care
centers ; requiring from 3,000 sqm to the increasing volume of outpatient clinics and medical centers to meet the
5,000 sqm space. facilities. demand of the rising population.
18 Kingdom of Saudi Arabia Healthcare Overview | The Pulse: 8th Edition | 2018The Funding
Options
>> One of the key challenges faced while
establishing quality hospitals in KSA is the
high funding requirement.
>> Despite the fact that banks and other financial
institutions actively seek investments within
KSA’s healthcare sector, they often limit
their exposure by only servicing known
market paticpents with proven track
records. International or regional operators
contemplating entry into KSA’s market often
struggle to secure project finance unless
there is a recourse to alternative cash flows.
>> Further difficulties arise with the terms The Kingdom is moving towards
offered. Healthcare investments are typically
long term investments contradicting a bank’s
encouraging more private sector
risk appetite which typically extends to a participation in the healthcare sector,
tenure that ranges between 5 – 7 years.
however; the extent of investment
>> For the first time, entrants to the KSA’s
market, who don’t have enough financial required is significant.
resources or are unable to make significant
financial commitments due to a variety of
reasons, ultimately end up searching for
private investors to enter into a licensing In Colliers opinion, one way of bridging
and operating agreement, from which they the required investment is by way of
will extract a management fee. Alternative
options include; operators forming and creating more REIT funds. Based on
owning the operating company (OpCo)
with the investor investing in the land and Colliers estimate, REIT funds in the
property (PropCo), creating a Joint Venture Kingdom can unlock around US$ 7.5
(JV) with an investor. The various options
available to Operators based on availability of billion to US$ 8.5 billion property value
funds are:
from the private sector, thereby playing
• Outright Purchase of the Land;
a key role in augmenting growth in the
• Long-term Lease of the Land;
• Land as Equity Investment by the Landlord;
healthcare sector.
• Long-term Lease of the Land and
Shell-n-Core Structure from
Landlord/ Investor; Colliers is currently working with several
• Creating a JV with the Landlord/ Investor
market participants through traditional
in Equity Partnership;
or and emerging funding options to assist
• Signing a Management Agreement with them in their expansion plans.
the Landlord/ Developer/ Investor.
However, each of these options have
financial, operational and legal advantages
and disadvantages and Operators should seek
professional advice before entering into any
such arrangement.
Kingdom of Saudi Arabia Healthcare Overview | The Pulse: 8th Edition | 2018 19Operating from
For further information,
please contact:
69 countries Ian Albert
Regional Director | MENA
Valuation & Advisory
on ian.albert@colliers.com
6 continents
Mansoor Ahmed
Director | MENA
Development Solutions, Healthcare,
Education & PPP
mansoor.ahmed@colliers.com
$2.7 billion Imad Damrah
Managing Director
annual revenue Kingdom of Saudi Arabia
imad.damrah@colliers.com
2 billion
square feet under management
15,400 Colliers International | MENA Region
professionals and staff Dubai | United Arab Emirates
+971 4 453 7400
Colliers International MENA
Colliers International is a global leader in commercial real estate services, with over 15,400 professionals
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Copyright © 2018 Colliers International.
The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to
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