Developing World Healthcare Blog

Price Leak Causes Oil Slick That Reaches Bangkok

We wrote about the Gulf Cooperation Council (GCC) countries’ favorable demand dynamics in our December 2014 post, “Middle East: Oil Prices May Rise and Fall, But Demand for Healthcare Will Grow”.

At that time, we wrote that demand for healthcare would continue to be robust despite the sharp decline in oil prices (and government revenues). While the data are anecdotal and it is too early to draw conclusions, it is clear that governments are tightening their belts relative to healthcare spending. In addition, the effects of these changes are surfacing in places as far away as Bangkok.

Recent Developments Across the GCC

Oman has started laying off foreign nurses in its public health system to save money and increase the mix of Omani employees, particularly recent nursing school graduates. In addition, the Ministry of Health intends to replace other professionals (physicians, technicians) over time, but many are in short supply.

The Health Authority of Abu Dhabi (HAAD) instituted a 20% co-payment for Emirati patients covered under its Thiqa and Abu Dhabi Basic plans (which together cover roughly 2 million people) for treatments in private hospitals and clinics effective July 1. Previously HAAD’s health plan(s) paid the total bill regardless of facility ownership. Services provided in public hospitals remain fully covered. The new policy has caused issues for patients in long-term care hospitals or receiving dialysis. HAAD is willing to work with families who cannot afford co-payments, but the details aren’t clear. Some private facilities have laid off staff in response to the changes. Others have started screening patients based on their ability to pay.

In addition, HAAD implemented a 50% co-payment for patients who receive care outside the emirate in specialties already available in Abu Dhabi. The UAE’s government used to send 3,000 patients a year to foreign countries such as Germany, UK, US, and Thailand for treatment. We think this change not only reflects budget realities, but also the addition of new hospitals with higher-acuity services.  The most noteworthy example is the opening of the 364-bed Cleveland Clinic Abu Dhabi in May 2015. At least two private hospitals should open in the UAE over the next year, continuing the trend.

Qatar introduced a mandatory health insurance plan in 2013 with a five-part phase-in. The plan applies to residents and visitors and requires employers to provide coverage for basic healthcare services for all non-Qatari employees, including their dependents. The Qatar government would pay the insurance premiums for Qatari nationals. The government intended to fully implement the plan by 2015, but there have been a number of delays and there are press reports that implementation is currently suspended.

In Bangkok, hospital companies Bumrungrad International Hospital and Bangkok Dusit Medical Services have reported drops in patient visits from the GCC. The timing of Ramadan this year (started June 6 versus June 18 last year) was a factor, but Bumrungrad’s management has noted that there are long-term trends at play too. Patients from GCC countries represent 17% of Bumrungrad’s revenue, and volumes have declined so far this year (-8% outpatient/-14% inpatient). Bumrungrad’s management has cut their revenue growth outlook for this year to 0% from +8-10% previously. Bangkok Dusit has a much lower mix of GCC patients, so the effects are not as pronounced.

The news is not entirely negative. Despite the pressures, Dubai has completed the phase-in of mandatory health insurance this year effective June 30. Saudi Arabia has opened its healthcare sector to foreign investment, providing a new market opportunity for regional companies such as VPS Healthcare, NMC Health, and Mediclinic (owner of Al Noor Hospitals). 

Look for Further Adjustments by Governments and Healthcare Providers

The healthcare sectors in the GCC and elsewhere are starting to adjust to the new environment. Many of the changes discussed here are recent, so we have only limited information about their effects. GCC governments have become less generous with healthcare benefits, and have targeted the “premium” elements of spending first such as international travel, private care, and IVF. Additional trimming is possible depending on trends in oil revenue and popular reaction. From the provider side, Bumrungrad has accelerated efforts to attract patients from Cambodia and Myanmar to offset lost GCC patients. As mentioned earlier, GCC-based providers are entering new countries and service lines.