Improving Healthcare Quality in the Middle East
In the wake of political upheaval among Arab nations, a strong focus has emerged on the lack of quality healthcare in the Middle East and North Africa (MENA). In many countries of the Gulf Cooperation Council (GCC), Levant – a large area of Southwest Asia — and North Africa, the healthcare sector remains poorly developed.
Many of the oil-rich GCC states had not invested in new public healthcare infrastructure since the mid-80s. In the past five years, most GCC governments are spending to meet demands for growing healthcare services.
Amidst these heavy increases in capital expenditures and healthcare costs, the important question remains how these GCC countries can ensure proper quality control on their indigenous healthcare systems. As the basic microeconomic premise suggests, increased quantity does not necessarily mean increased quality.
This paper focuses on recent government initiatives in Kuwait, which is late to adopt a few trends sweeping the broader GCC, such as private/public partnerships sponsoring healthcare infrastructure projects as well as the separation of healthcare service provisions from regulatory arms of the government (i.e. by creating an independent healthcare regulator).
The paper then describes effects of increasing healthcare costs in the broader GCC, such as the swelling Ministry of Health (MoH) budgets, large marquee hospital projects and the focus on sending GCC patients abroad. The paper also describes innovative initiatives that curtail these same costs while improving the quality of healthcare.
MoH and other healthcare stakeholders in Kuwait are embarking on an ambitious reform plan as part of Kuwait’s 37 billion KD (110 bn USD), five-year Development Plan (2010- 2014), an amalgamation of 231 policies created by the Kuwaiti Supreme Council for Planning and Development. The Annual Plan (2010-2011) included more than 800 projects — 40 related to healthcare — divided according to three echelons:
- Establishment of New Companies — where joint ownership is shared between the state and private sector, usually according to a predetermined framework, such as the Privatization Law (Law 10 for 2010)
- Strategic Public/Private Partnerships (PPPs) — e.g. Build Operate Transfer (BOT) Projects
- Typical Tenders for Services – i.e. Government to Business (G2B) contracts
A further 1,200 projects are scheduled for the Annual Plan (2011 -2012).
The Kuwait government is set to tender approximately three bn USD worth of healthcare projects in the next year. These projects follow the similar framework used for the overall Annual Plan related projects and include:
“Many of the oil-rich GCC states had not invested in new public healthcare infrastructure since the mid-80s.”
- Establishment of New Companies – the Kuwait Health Assurance Company (KHAC), a 1,600-1,800 bed health maintenance organization, and the yet-to-be-established Private Health Insurance Company for Kuwaiti Nationals (PHICKN)
- Strategic Public Private Partnerships – a 500-bed new rehabilitation and physical medicine hospital (NPMRH) through a design, build, finance and maintain (DBFM) contract
- Typical Tenders – the 540-, 400- and 240-bed expansion of the Husain Maki Jumaa Specialty Surgery and Oncology, Amiri General and Razzi Orthopedic Hospitals; respectively
MoH maintains a solid-end state vision of the healthcare system; meaning separation of regulator from provider and payor functions with a strong dedication to improving quality and private-sector participation as done in the neighboring emirate of Abu Dhabi.
However, establishment of KHAC and PHICKN are strong contributors to the diversification of health system finance in Kuwait. The 2011-2012 Kuwait budget will mark the first time MoH spends more than one bn KD (3.3 bn USD) on the operational expenditure (OPEX) of the public healthcare system.
This figure does not take into account the aforementioned capital expenditure projects (CAPEX). With KHAC aimed at refinancing healthcare costs of the expat population of Kuwait and PHICKN addressing healthcare finance needs of the national population, the government is sending strong signals of cooperation to the private sector in an attempt to curb the exponential increases in public healthcare spending.
Kuwait Health Assurance Company (KHAC)
The Kuwaiti government has been pursuing finance mechanisms for its healthcare system since the 1980s. The Kuwaiti constitution guarantees its citizens free healthcare (Article 15 of the 1962 Kuwaiti Constitution can be confused for claiming that “the State cares for public health and for means of prevention and treatment of diseases and epidemics”; however, with regards to the Privatization Law of 2010, the Kuwaiti Parliament decreed that the sectors of healthcare and education should not be fully privatized, under the law dictating that any government entity/asset/corporation must be “privatized” according to the following framework:
- 50 percent will be offered to the public by means of a public joint stock holding company listed on the Kuwait Stock Exchange (KSE)
- 26 percent (golden operating share) will be offered to a private (technical/financial) partner/consortium. Strong preference is given to Kuwaiti companies; particularly, those already publically listed. The consortium is also encouraged to involve international technical partners and investors with exemplary track records
- 24 percent is retained by Kuwait through the stateowned investment vehicle, the Kuwait Investment Authority (KIA)
The KHAC project was initially championed by Dr. Ibrahim Al AbdelHadi, Kuwaiti undersecretary of health, in November/December 2009. A Request for Proposal (RFP) was issued, Dec. 23, 2009, for the Strategic Analysis and Feasibility of the Project.
The RFP was well received by the local and regional consulting community. A local consultancy worked on the feasibility from January 2010 until September 2010, and the results were received with mixed reactions from multiple private-sector investors.
Once KIA and MoH reviewed the consulting study results, preparations were made to establish a company by law through a decree from the Council of Ministers. The company was decreed during the meeting of the Council of Ministers, Monday, Jan. 3, 2011; thereby establishing the first of the Development Plan.
A KIA statement, released Feb. 28, 2011, announced that the project would be valued at 318 million KD (~1 bn USD); thereby, making it the largest private/public partnership in the history of Kuwait.
“The Kuwaiti government has been pursuing finance mechanisms for its healthcare system since the 1980s.”
Due to mixed reactions concerning the legal implications set forth by KIA and its advisors, the final bid date was extended three times and re-set by KIA according to the following new timeline:
- Oct. 27, 2011 – Last date to enter as a bidder for new entrants, last day the data room will be available, last day to integrate other companies into an existing consortium
- Nov. 13, 2011 — last date to submit bid bond (10 mn KD or 33.3 mn USD)
- Nov. 17, 2011 — Financial bid day and declaration of winner
KHAC plans to have the private partner/consortium bid for 26 percent of the operating share, which will guarantee management of the three hospitals as well as provide Health Maintenance Organization (HMO)-type plans for users. KIA makes the distinction between health maintenance and insurance; whereby, KHAC will be incentivized to management of the health (and prevention) of its patient population rather than the treatment.
The government of Kuwait will provide 140,000 squaremiles of land (at a minimal lease price) divided in three equal parcels in the growing governates of Ahmadi, Jahra and Farwaniya.
It will be the responsibility of the winning consortium to deliver at least three hospitals (1,600-1,800 beds) and 10-15 primary care clinics (at least one clinic in each of the six governates of Kuwait) in 36 months. Kuwait has also guaranteed the following benefits specifically for KHAC:
- Unique Designation of a Health System (only license in Kuwait) for 10 years
- Grace period for licensing and implementation
- Immediate patient flow (1.2-1.7 million) of expats
- Sharing of existing MoH medical records
- Staff designation before entry into Kuwait
- Free transfer of clinical staff within the system
- Use of generic prescriptions
- Unit Dose System
- Option for Group purchasing with the MoH
- Preapproved assurance plan premiums with inflation considerations
- Preapproved co-payments for primary care and emergency visits
- Heavily subsidized tertiary care for 5 percent of preapproved government premium
The target market for KHAC is the growing expatriate population of Kuwait. Whether it would be mandatory for expatriates to enroll in KHAC is not clear. It is believed that enrollment would remain optional. Kuwaiti citizens will also be able to enroll; however, it is not clear whether or not the Kuwaiti government would subsidize/take full ownership of the fees.
Kuwaiti citizens might have to pay-out-of-pocket since MoH would still operate 5-6 government general hospitals. Mubarak General Hospital is set to be transferred to Kuwait University, where it will operate as an Academic Medical Center once Jaber General Hospital is completed in 2014.
In March 2011, nine individual consortia paid the 15,000 KD entry fee for access to the KIA data room on KHAC. There were those that decided to pay the aforementioned 10 million KD bid bond in July 2011, with only a single consortium and eventual winner, Agility, a pan MENA logistics and project management company, remaining.
In February 2012, KIA rejected the single bid of Agility, which was only 0.001 percent higher than the par value determined by KIA and its advisors. The re-issue date for the tender has yet to be determined.
Private Health Insurance Company for Kuwaiti Nationals (PHICKN)
Just as KHAC is diversifying the financing of expat healthcare expenditures, the private health insurance company for Kuwaiti nationals is achieving similar levels of spending for the local population.
In August 2011, Kuwait Council of Ministers created a publicly owned healthcare insurance company with 50 percent of the shares to be equally distributed among the 1.15 million Kuwaiti citizens. The same was done with the other half to the Kuwaiti Islamic Bank, Warba Bank, a private-sector consortium with strong preferences for international technical partners which have proven track records in the delivery of health insurance products and solutions, both regionally and internationally.
The government is expected to subsidize the premiums of the nationals. Judging by the government’s previous lead-time on KHAC, PHICKN should be tendered by late 2013.
New Physical Medicine and Rehabilitation Hospital(NPMRH)
The project involves the design, build, finance and maintain of a 500-bed physical medicine and rehabilitation hospital located in Al Andalus, Kuwait. It includes the provision of facilities management services and will have a term of no less than 25 years.
The tender is currently managed by the Partnerships Technical Bureau (PTB) of Kuwait, formed in 2008 to streamline the procurement and tendering of strategic government projects. PTB is an independent government agency that operates under the political auspices of the Ministry of Finance. It is believed the Ministry of Health will be part of the final selection committee and will be involved in assessing the technical proposal.
The project aims to meet the following key strategic objectives:
- Build a center of excellence in rendering physical medicine and rehabilitation services
- Promote Kuwait as a regional and international center for physical medicine and rehabilitation services
- Increase and enhance the type and quality of services provided by MoH
- Provide a comprehensive rehabilitation program for Kuwaiti citizens with disabilities, within their own home environment without language and cultural barriers and, thus, curtail overseas treatment
MoH has been exploring the development of a new physical medicine and rehabilitation facility since the early 1980s. Concrete plans were put into place when Dr. Abdul Rahman Saleh Al Muhailan was appointed minister of health (1994- 1996), the only physical medicine specialist to ever to assume that post.
These plans were finally implemented in a Request for Qualification and Proposal Submission/Transaction Advisory Services by PTB, in August 2010. An international management consultancy and auditing company won the contract to lead PTB consultants. Results of the study are expected to be made public by Q4 2011.
MoH expects the new hospital to provide tertiary and geriatric rehabilitation; extended care for persons with physical disabilities; redevelopment of the prosthetic and orthotic manufacturing unit; building infrastructure and facilities; and facilities management services.
As of the writing of this report, 15 different consortiums have expressed interest in the NPMRH project.
Expansion of Ministry of Health Hospitals
Originally referred to as the “Nine New Medical Towers Project,” MoH has chosen instead to focus expansion projects on three hospitals:
- Husain Maki Jumaa Specialty Surgery and Oncology Hospital
- Amiri General Hospital
- Razzi Orthopaedic Hospital
These projects will include design, design verification and building. As of April 2011, 12 consortium — comprising both international hospital design companies and local contractors — have been pre-qualified to bid on these projects. When the remaining six expansions will take place is unclear.
Future Landscape of the Kuwaiti Healthcare System
Healthcare in Kuwait is as dynamic as the political landscape. For the past two years, MoH has enjoyed one of its most stable periods of leadership under His Excellency Dr. Hilal Al Sayer, who followed six different appointments in three years.
He is Kuwait’s longest-serving health minister and first physician to serve in this capacity since His Excellency Dr. Mohammad Al Jarallah, who assumed MoH leadership from 1999-2006. The new government of His Excellency Prime Minister Sheikh Jaber Al Mubarak Al Sabah has also selected H.E. Dr. Ali Al Obaidi, a young physician to the MoH post.
Momentum is strong within Kuwait to create an independent healthcare regulatory agency, which this report will refer to as the Kuwait Health Authority, which will lead policy development, licensing, quality assurance and the overseas healthcare functions in Kuwait.
Stakeholders in Kuwait hope this new authority will stabilize and structure the overall healthcare system in Kuwait, which, in turn, will increase private-sector investment in the nation’s healthcare; thereby, improving services and benefiting the most important stakeholder of the Kuwaiti healthcare system – our benevolent population.
The Arab Health Spring: The Need to Curtail Costs
Healthcare costs have received much interest on a global scale from strategic thinkers, such as Michael Porter and Robert Kaplan, in a New York Times article, to social commentators, such as Steve Lopez of the Los Angeles Times. Indeed, the main thrust behind Obamacare and the Accountable Care Act in the United States is the rising cost of healthcare.
The United States spends 17-19 percent of its Gross Domestic Product on healthcare while OECD spends 8-9 percent and GCC 3-4 percent. In fact, the problem is quite acute in the United States, where government-sponsored Medicaid and Medicare payment systems are projected to bankrupt the nation within the next 25-30 years.
As the world population swells to just more than seven billion, emerging economies along the Silk Road and ageing economies of the Old World alike are facing similar challenges of treating more people, for more diseases, with dwindling resources.
As governments in the Middle East pursue gains to the welfare of their citizenry and, particularly, access to enhanced quality of life measures, additional healthcare spending becomes a top priority. Kuwaiti MoH announced a record budget of 1.2 billion KD (~4 billion USD) for FY 2012-2013, which represents an 100 percent increase from the 600 mn KD (2 bn USD) budget of FY 2007-2008.
This spending accounts for more than 80 percent of the healthcare expenditures in the country. In Saudi Arabia, GCC’s largest healthcare market, MoH is responsible for close to 75 percent of healthcare services, according to Dr. Hamad Al Omar, whose budget this year reached SR 50 billion (~13.5bn USD); not including a further SR16 billion (~4.3 bn USD) for the large health cities projects spread across the Kingdom.
This results in approximately SR66 billion (~18 bn USD) toward Saudi healthcare spending. When another 25 percent is added for other healthcare providers — both governmental and private — the total Saudi healthcare budget comes to about SR80 billion ($21.3 billion) for the FY 2012- 2013.
Back in the fall of 2007, McKinsey and Co. calculated GCC’s expenditure on healthcare to reach $60 billion by 2025; however, this figure appears low when considering that both Kuwaiti and Saudi healthcare budgets are increasing.
Indeed, GCC governments continue to build costly cathedrals of care, such as the island hospital of Cleveland Clinic Abu Dhabi and the Sidra Medical Research Center, an arbores oasis of clinical excellence in Doha, Qatar, both multibillion- dollar medical titans in their own right.
While tertiary centers of excellence focusing on research are greatly needed in the Middle East, a strong emphasis needs to be placed on prevention that reduces the need for hefty investments in healthcare infrastructure.
Another large proponent of these exponential MoH budget increases is the continued dependency on overseas healthcare spending by GCC governments. MoH recently announced an increase in the number of companions and the stipends for patients under the age of 18, over the age of 65, and those with specials needs who now have the luxury of two family member companions instead of one.
Each of these people now stand to receive a handsome 30-50 percent increase in their daily stipend to cover lodging, food and transportation; (150 USD for patients in the United States, 150 Euros for patients in Europe – primarily Germany, France and Belgium — and 150 GBP for patients seeking treatment in the United Kingdom.
Kleos Healthcare recently calculated GCC spends roughly $12 billion: $10 billion from the public and $2 billion from the private sector, which includes patients paying from their own pockets or through private health insurance companies.
In fact, the generosity of most GCC governments extends beyond the healthcare of their citizens. Kuwait, for example, has expatriates living in the Pearl of the Gulf who are only required to pay a very low yearly assurance premium of 20-50KD (~70- 180 USD); pale in comparison to the 300-350 KD (1000-1200 USD) annual cost of their care to the government of Kuwait. Similar examples are across GCC, where both nationals and expatriates enjoy significantly subsidized specialty care.
“Moreover, the underlying issue behind these increases in healthcare costs is the unhealthy lifestyle most people in the Middle East choose to live.”
Moreover, the underlying issue behind these increases in healthcare costs is the unhealthy lifestyle most people in the Middle East choose to live. GCC is widely recognized as one of the most obese regions of the world, with more than 30 percent of the adult population registering a Body Mass Index (BMI) of 30 or more, with a further 30 percent registering a BMI of more than 25.
This means that close to two-thirds of the adult population of the Middle East is overweight. Recent studies by both the Mayo Clinic and Lehigh University suggest that obesity is an even larger driver of healthcare costs than smoking; whereby, obese patients tend to spend 2-3 times as much as the average patient on their healthcare needs.
Furthermore, the link between obesity and diabetes type II has also been documented extensively in medical literature; evident by the high percentage of GCC adults who suffer from diabetes type II (25-30 percent).
These chronically ill diabetes type II patients are also four times more likely to be hospitalized, a further cost burden on GCC health budgets. It should come as no surprise, then, that some GCC countries send as many as 10 percent of all inpatients abroad for emergency care.
However, there are reassuring programs across GCC to help reduce healthcare costs. In a meeting of GCC Finance Ministers and Health Ministers, in May 2012, the levy charged on tobacco imports was increased 100-200 percent; subject to an approval by the World Trade Organization.
This would mark the second doubling of tobacco taxes since the 50-100 percent increases in 2010. However, an increase in tax does not necessary mean a decrease in utilization, because prices per packs are still significantly cheaper in GCC (~1-2 USD per pack) than in the United States (~7-15 USD per pack).
Indeed, despite the heavy custom tariffs levied on tobacco products, Saudi Arabia tobacco imports increased by 57 percent, in 2011, compared to 2009, according to a report by the Saudi Customs Department. The Kingdom imported 57,838 tons of tobacco, in 2011, valued at SR3.3 billion compared to SR2.1 billion in 2009, according to research by Zawya.
According to statistics, 22,000 people die in Saudi Arabia each year the result of various diseases related to smoking. According to figures released by the World Health Organization, there are 6 million smokers in the Kingdom, 1.5 million of whom are women.
Saudi Arabia is still considered the world’s fourth largest importer of tobacco, with annual consumption averaging per individual at 2,130 cigarettes. Surprisingly enough, approximately 60 percent of all Saudi doctors smoke.
Another initiative focuses more on patient perceptions. Certain clinical centers of excellence in Saudi Arabia are piloting an interesting development that makes physicians aware of procedural and prescription costs before treating patients through a computerized physician order entry (CPOE) that prints out the associated cost of the procedure or prescription. This has a dual effect:
- physicians are less likely to prescribe unnecessary tests and psychological placebo medications; thereby, reducing the cost burden on their respective department
- patients accustomed to receiving both the treatment and prescription at no cost are made aware of the “value” of the service that the Saudi government is providing. This is an important segue to more accountable-care models; other GCC governments should take note.
About the Author
Dr. Mussaad Al-Razouki is the chief executive officer at Kleos Healthcare Corporation, a Kuwaiti WLL that provides excellence in strategic planning and management for Middle East healthcare entities including investment companies, clinical service providers (i.e. hospitals), payors (i.e. insurance companies) and government regulatory bodies.
Dr. Razouki has more than 10 years experience in healthcare, shifting his focus from excellence in clinical practice and research to the management and financing of healthcare systems. Dr. Razouki is the first Arab national to receive an M.B.A. in healthcare management and finance from the Columbia University School of Business.
An oral and maxillofacial surgeon by training, Dr. Razouki has completed clinical rotations at New York Presbyterian Hospital of Columbia University Medical Center, Harlem Hospital, Cleveland University Hospital of Case Western Reserve University and Massachusetts General Hospital of Harvard University.
In 2007, Dr. Razouki joined by the world’s largest and oldest management and strategic consulting firm, Booz Allen Hamilton, which, at the time, was operating in more than 100 countries across six continents with $4 billion in revenue. Dr. Razouki was recruited from New York to the Dubai office, where he built the Middle East healthcare practice by leadings a wide variety of projects across all five dimensions of the healthcare economy that includes investors, service providers, payors, suppliers and regulators.
In addition to his work at Kleos, Dr. Razouki serves the central Kuwaiti government, which he advises its senior leaders on both healthcare and education reform as part of the nation’s $100 billion development plan.