Lack of legislation putting operators off in Saudi

At HBI 2018, talk about opportunities in MENA largely focused on Saudi Arabia, with Crown Prince Mohammed bin Salman’s “Saudi Vision 2030” expected to privatise or outsource vast swathes of the country’s healthcare system. So why haven’t we seen much interest from private operators yet, and why is a flood of contracts not being signed?

As we entered 2018 our contacts generally expected quick PPP tie-ups with pilots already underway in primary care, hospital management, pathology and radiology underway. An imminent PPP law was also expected –  though some thought it might not be needed.

Now we hear that the various ministries involved in drafting a PPP law, including the Ministry of Health (MOH) and the Ministry of Labour (MOL), cannot agree on what it should look like, and this is holding up the outsourcing process as private players want the security of a legal statute. Advisors on the ground warned us of this possibility.

Basic questions like who the players should be, whether first opportunities should be given to domestic or international operators, and what payment mechanism will be set up, have yet to be answered, a source tells us, adding that there are discussions around bundling visa payments for expats and healthcare premiums, which involves other departments.

A law in Q4 this year is possible – but the second half of 2019 may be more realistic.

Even the biggest players are cautious. NMC Health was touted as an early mover in the race for outsourcing contracts before reports surfaced of possible contractual disagreements between NMC and the MOH over the proposed management of the 750-bed Saad Specialist Hospital in Khobar. The London-listed company is understood to have baulked at the prospect of just a seven-year tenure given the capex requirements of turning around a business which has been closed for a year. This is a private facility but the process is seen as indicative of the country’s failure to encourage foreign investors to take part in privatisation.

The situation for the public facility contracts the government is putting out there doesn’t seem any better. A source tells us: “Frankly, there have not been many takers. There’s been a lot of encouragement from the government but not many want to come in. The Ministry of Labour has pushed for outsourcing of rehab but the response has not been very good.

“Trust issues are one thing and but also payment mechanisms. There are already players that haven’t recovered outstanding payments from the government,” he suggests, mentioning Aster DM’s Sanad Hospital which has had payment from the MOH delayed for over a year.

The Saudi government is looking for big, well-resourced players to step in and run swathes of its healthcare system. Those players want to make sure they will be paid the right amount, on time. Unless and until they receive the legal reassurances they need, it’s all very well having a vision for 2030 but even that date looks ambitious.

We would welcome your thoughts on this story. Email your views to Cameron Murray or call 0207 183 3779.