Harnessing the power of public private partnerships in Healthcare

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  • 1. Perspective Gabriel ChahineJad BitarDr. Nikhil IdnaniHarnessing the Powerof PublicPrivatePartnerships inHealthcareImperatives for GCCGovernments

2. Contact InformationAbu Dhabi DohaRichard Shediac George AtallaSenior PartnerPartner+971-2-699-2400 +974-44026-777richard.shediac@booz.comgeorge.atalla@booz.comBeirutDubaiGabriel Chahine Dr. Karim SabbaghPartner Senior Partner+961-1-985-655+971-4-390-0260gabriel.chahine@booz.comkarim.sabbagh@booz.comFadi MajdalaniDr. Nikhil IdnaniPartner Senior Associate+961-1-985-655+971-4-390-0260fadi.majdalani@booz.com nikhil.idnani@booz.comJad BitarPrincipal+961-1-985-655jad.bitar@booz.comDr. Samer Abi Chaker and James Saliba also contributed to this Perspective.Booz & Company 3. EXECUTIVEThe Gulf Cooperation Council (GCC)1 countries will face a significant challenge in managing future healthcare costs.SUMMARY Healthcare spending is accelerating, in part because of the rising incidence of chronic diseases. Thanks to systemic transformation, strategic planning, and population screening programs, governments understand that the current model, in which the state shoulders most of the direct financial burden and other social costs, is unsustainable over the long term. Governments need a different approach that invites the pri- vate sector to play a role as a means of taming costs, improv- ing quality of service, and providing access to expertise. The GCC should use the public GCC governments will need to private partnership (PPP)remove institutional hurdles to the mechanism, which has beendeployment of PPPs and create an successfully applied globally, toenabling regulatory, operational, and increase private-sector participation. financial environment. This requires Governments can shape PPPs the correct legal and institutional depending upon the different framework for PPP governance and capabilities and appetites for riskoversight, followed by a structured of the public and private partners.process for identifying and executing PPPs come in many varieties anda pipeline of PPP healthcare projects. they can be customized for eachThe careful and rigorous introduc- countrys circumstances. Healthtion of PPPs into healthcare can systems in the GCC provide a range provide citizens with three mutually of opportunities for private-sectorsupporting healthcare improvements: players, including care provision, greater accessibility, higher qual- financing, healthcare supplies, andity care, and an affordable price for health education.patients and governments.Booz & Company 1 4. KEY HIGHLIGHTSFUTUREcapacity gaps and provide recom-mendations for developers, investors, GCC countries can use PPPsDEMANDS ONand healthcare providers. Qatar has as a means of managing GCC HEALTHCAREdeveloped its National Health Strategy20112016 around a comprehensive rising healthcare costs, asprogram of reforms that are aligned a mechanism to enhancewith the Qatar National Vision 2030, the capabilities of thethe countrys long-range national healthcare system, and associal and economic development part of a program of systemicprogram. The Dubai Health Authority transformation of the sector.GCC healthcare systems have (DHA) is implementing a 2011-2013 PPPs need to be structured significant accomplishments, includ-health sector strategy to establish a so that they are customizeding widespread provision, risingworld-class integrated system that to the specific requirements professional standards and regula-promotes the emirate as a destination of the particular GCC member tion, generous funding, and grow- for healthcare services. state and its healthcare ing levels of investment. Among the system. Wholesale adoption most important advances have been Major expansions in care provision of PPP models from abroad is population screening programs and are occurring across the GCC. These inappropriate. long-range strategic planning efforts state-funded investments will meet cur-that are putting these countries at the rent and future demand for inpatient Services that are the furthest forefront of the healthcare industry, and outpatient services, will reinforce from patient contact and withalong with impressively rapid system- trust in local healthcare provision, and the greatest commercial valuewide transformation programs. These reduce outbound medical tourism. As are well suited for PPPs. Thoseforward-looking initiatives will be part of its healthcare transformation services with mostly social value, most effective if the region can find a program, Saudi Arabia is building such as health education for the new way to pay for its future health- healthcare services hubs, so-called population, should be retained incare needs and build its health sys-medical cities, as well as hospitals and the public sector. tems capabilities. The current model,primary healthcare centers. In Octoberin which the state absorbs most of the2012, Saudi Arabia inaugurated 420cost, is unsustainable in terms of both health projects and laid the founda-financing and healthcare delivery.tions for another 127 health facilitiesat a cost of SAR 12 billion (US$3.2As part of their national development billion). GCC countries have alsoprograms, governments are currently begun to introduce mandatory healthengaged in major efforts to improve insurance to meet the growing cost ofaccessibility and quality of care. Thesehealthcare provision. A compulsoryhealthcare changes and investmentsinsurance scheme already operates inhave the ambitious goal of putting theAbu Dhabi as of 2006 and there isGCC on the top rung of the healthcare mandatory private insurance in Saudiindustry for care provision and quality.Arabia. Qatar began introducing aCentral to the upgrading of healthcareprivate health insurance plan in 2012,in the region is the formulation of to be fully implemented by 2014.long-term strategic plans, an exercisethat only governments can undertake.Despite these increased resources andFor example, Saudi Arabias Ministryinsurance schemes, GCC healthcareof Health has developed a 10-year systems are still struggling with capac-strategy that takes an integrated,ity gaps and inconsistent quality ofcomprehensive approach to care provi- care. There is a shortage of healthcaresion, a transformation that is instilling professionals and limited availabilitycoherence into a previously fragmentedof competent specialized services. Forsystem. Similarly, the Health Authority example, the quality of so-called qua-- Abu Dhabi (HAAD) has developed aternary services, the most specialized10-year master plan to identify futurelevel of care, is diminished because2 Booz & Company 5. of suboptimal distribution. There are health services and there is limited ernments to spend more on healthcaresometimes too many hospitals in a differentiation among providers. services. Expenditure is currentlysmall area offering qua ernary services,t Finally, increasing healthcare spend-below international benchmarks whenwhich prevents each of them froming cannot cope with the regionscompared with developed countriesaccumulating the necessary volume ofelevated rate of non-communicableon a per capita basis. However, thiscases that would build its competency diseases. The GCCs incidence of car-will change and the fiscal burdenand quality of care. For example, Abu diovascular disease, diabetes, cancer, on governments will increase. TheDhabi island has three cardiac surgeryand mental and respiratory ailmentsstate in the GCC already foots a verycenters, even though the volume ofare among the highest in the world.high proportion of healthcare costsadult cardiac surgery cases is only 500 Of the worlds 10 worst countries forby global standards (see Exhibit 1).to 700 per year, requiring just one diabetes, five are in the GCC (OmanIncreased expenditure will furthercompetent program.is the exception).2 This chronic strain public budgets, rendering thedisease profile is already consuming public-dominated model unsustain-Overall quality of care is also lower considerable resources, a pattern that able. Some governments are alreadythan it should be. There are few cen- will worsen over time. taking a more stringent approach,ters of excellence in the GCC that are with federal ministries in the Unitedon par with leading international pro-These ongoing healthcare challenges, Arab Emirates (UAE) practicingviders. By contrast, developed coun-and in particular the aging of the cur-aggregate fiscal discipline and zero-tries on average have higher qualityrent young generation, will force gov- based budgeting.Exhibit 1GCC Governments Pay More of Healthcare Costs than Most CountriesHEALTHCARE SPENDING 2010, PERCENTAGE OF PUBLIC VERSUS PRIVATE100% 15% 21%22% 23% 25% 30%36% 38% 49%51% 51% 63% 85% 79%78% 77% 75% 70%64% 62% 51%49% 49% 37%KuwaitOmanQatar UAEBahrainSaudiEuropeanWesternEastern African Americas SoutheastArabiaRegion Pacic Mediterranean Region Asia Private PublicSource: World Health Organization, Global Health Observatory Data Repository; Booz & Company analysisBooz & Company 3 6. Governments will logically seekThe result would be lower quality ofGiven the complexity of the GCCsmore private-sector participation, care and excess capacity. As the CEOhealthcare challenge, and how itbut this must be introduced in a of a private hospital group in thediffers among the six countries, it ismanner that uses regulation to GCC told us, The public sector isimportant to recognize that there isprevent private players from cherry- competing with the private sector (rather no silver bullet. Instead, the carefulpicking profitable patients andthan cooperating with it) for scarceand targeted use of partnershipsservices. Without proper regulation, resources such as talent. To avoid between public and privateprivate companies will also competesuch difficulties, governments can take stakeholders can begin to addresswith each other and the government a regulated, multidimensional, multi-