The governemnt is looking to share the burden of healthcare provision, and the costs too, with the private sector- presenting a wide raft of investment opportunities in the coming years.
The increasing wealth and size of the population in Oman is placing an ever-greater strain on the healthcare system, not only in terms of cost, but also in terms of capacity.
The government is increasingly looking to share the cost burden and meet this rising demand by involving the private sector. Not only does this look set to increase the quality and availability of health care in the sultanate, but it will also provide a number of interesting investment opportunities for local, regional and foreign investors.
The increases in health care costs are driven by two main factors. Simple mathematics tells us that a larger population will require a greater health care resources, and thus incur higher costs and increase demands on medical facilities. The Sultanate’s population has grown rapidly over the past decade, with a National Centre for Statistics and Information bulletin in April putting the population at the end of February 2013 up some 38 per cent from the last census in 2010. While in large part due to a rapid increase in the number of expatriate workers entering the country, the population of nationals also grew by 9.7 per cent in the same period.
Further to this, increase in wealth and the resultant lifestyle changes in the country are widely accredited with the sharp rise in the prevalence of chronic diseases. Such diseases accounted for some 50 per cent of outpatient morbidity in the sultanate in 2011, up from 42.4 per cent in 1996, according to Ministry of Health data. The current health of young people does not point to this figure reducing. In fact, some 15 per cent of the population suffer from diabetes (compared to a global average of 8.3 per cent), 20 per cent are clinically obese and around 20 per cent of all Omani and expatriate children between the age of 5 and 15 are overweight, making them more likely to develop the disease as they get older. Diabetes is often not fatal and requires long term, expensive treatment. A study in the US put the annual cost of treating a diabetes patient with complications at over $20,000, compared with $4,400 in the rest of the population.
The increased costs associated with, and prevalence of lifestyle diseases in the population already, combined with indicators suggesting that such diseases look set to rise further, are paving the way for even greater increases in the demand for, and cost of medical care. An issue the government is understandably keen to address, and they are currently enacting plans to this end.
Despite the unexpected oil windfall in 2012 and subsequent budget surplus of some RO3.22bn ($8.4bn) which has given the government a certain amount of leeway to finance the implementation of the plans outlined in the 2011-2015 five-year plan, it has made it clear that going forward, they are looking to share the burden of healthcare provision, and thus the costs too, with the private sector- presenting a wide raft of investment opportunities in the coming years.
Projects such as International Medical City (IMC) in Salalah, slated to open in 2016, and the Sultan Qaboos Medical City (SQMC) in Batinah, are prime examples of this desire to push ahead with plans to expand medical facilities. Such projects, which are not just providing hospitals, offer a broad variety of investment opportunities, ranging from consultancy tenders to construction contracts for mall, residential properties and commercial spaces, in addition to the number of contracts required to build, furnish and supply an operational hospital.
The SQMC project, for example, is expected to cost roughly $1.5bn and cover some 5m square metres. In August tenders were offered to build five new general hospitals. Bidding was due to finish on October 7th. These included four general hospitals in Al Najat, Sumail, Al Falah and Khasab, and one 300-bed general hospital in Suwaiq. Beyond the obvious impact of expanding the capacity of the system and increasing the quality of care provided, such projects also boost foreign investment and lead to diversification of the economy; a key goal for all governments whose main revenue stream is based in finite hydrocarbon resources.
Capacity boosting
As part of health care modernisation and expansion, policy makers are also looking further afield, to other countries in the Gulf and places such as India, where ‘medical tourism’ has been a success. This will not happen overnight. However, decisions are being made with this in mind, to ensure that the appropriate building blocks are in place, as they will help establish the Omani medical industry in the long term as a stand-alone contributor to employment, revenue and economic sustainability. While these numerous capacity-boosting projects have been commissioned in large part to meet the rising demands imposed by a growing population, it has been recognised that addressing the issue of chronic diseases requires more than simply boosting capacity. At the heart of these strategies lies prevention. within a number of other countries the private sector is already playing a large role in this regard, which can be broken down into three main areas: insurance, research and development and private health clinics – all of which present interesting investment opportunities in Oman.
In Abu Dhabi and the US for example, insurers and other businesses are running “pay for health” programmes, by which patients are rewarded, either financially or by other means, for reducing various indicators that are linked to developing such diseases. These include reducing weight and cholesterol count, encouraging healthy eating, exercise and so on. Directly, such programmes provide investment opportunities in terms of building and operating private clinics from which they could be run. Beyond these, strategies for educating the population, encouraging sport and even increasing the “walkability” of cities all offer potential for investors.
An important part of any preventative health strategy is research and development. Institutions such as the College of Medicine and Health Sciences at Sultan Qaboos University are looking to drive this. However, there is considerable room for expansion in this area, both in terms of university departments and at clinical learning hospitals. Potential for foreign investment in this sector was demonstrated by a recent visit from Lord Howe, British Parliamentary Undersecretary of State for Health, and his delegation, during which British expertise in this field, and the opportunities for cooperation between the two countries was discussed.