Population growth in Kuwait fuels rapid development of health services

 

Over the last five years Kuwait’s health care industry has gained significant momentum, adequately responding to rapid population growth by simultaneously addressing capacity constraints and improving the quality of health infrastructure.

Despite the decline in oil prices and a budget deficit of over KD12bn ($39.7bn), health care spending remains a priority for the government. Although the state has traditionally acted as the main payer in the health care system, covering roughly 86% of expenditures in the country in 2014, government objectives are now aimed at increasing private sector participation to meet the growing demand for health care and reduce the burden on the state budget.

As a result, Kuwait’s private health care market is expected to grow by 15-20% in the medium term, with several new private hospitals opening, and over 20 large-scale health care projects currently in the pipeline. The Kuwait Direct Investment Promotion Authority (KDIPA) projects private sector investment will rise from $900m in 2013 to $1.3bn by 2019. Though the country faces significant challenges addressing issues with bureaucracy and management, particularly in the public sector, opportunities to invest in health care are abundant, some driven by demand and others by future considerations.

Growth Drivers

Demand growth in Kuwait’s health care services market is driven by increased life expectancy in the country, rapid population growth and changing lifestyle risk factors – a natural consequence of increased household income. From a total of 4.2m in June 2015, the population is expected to increase at nearly 3% per year to reach 4.8m by 2019, according to KDIPA. The rapid rise is partially attributable to growth in the expatriate population, which makes up roughly two-thirds of the country’s population, and also to significant improvements in the country’s overall health indicators. This includes lower infant mortality rates and higher life expectancy. The average life expectancy at birth in Kuwait in 2015 was 74 years for males and 76 years for females, up significantly from around 60 years in 1960 for both genders. With people surviving for longer, and four-fifths of a person’s health care needs generally incurred after the age of retirement, the public health sector has been forced to expand to keep pace with demand.

Health problems requiring hospitalisation in Kuwait are commonly linked to non-communicable diseases (NCDs), which account for a considerable and growing share of public health expenditure in both Kuwait and the overall GCC region. Driven primarily by a drop in physical activity and changing dietary habits, chronic NCDs such as heart disease, cancer and diabetes accounted for approximately 73% of fatalities in the country in 2014, according to the World Health Organisation (WHO). The Dasman Diabetes Institute in Kuwait identifies coronary heart disease as the single leading cause of death, responsible for 41% of all fatalities, followed by cancer at 14%.

As Kuwait has transitioned to a high-income society over the past 50 years, increasingly sedentary lifestyles and the expansion of fast food outlets have also given rise to some of the highest obesity rates in the world and a closely related Type 2 diabetes epidemic. Results of the latest Ministry of Health (MoH) survey on risk factors for NCDs indicate that 15.8% of men and 13.4% of women between 18-70 years, constituting 15% of the population, suffer from diabetes. Average annual treatment costs for a patient with diabetes in 2016 were roughly $2040 in Kuwait, according to the International Diabetes Federation, making diagnosis and identification of pre-diabetes symptoms a priority for the government.

Sector Structure

The government has traditionally financed Kuwait’s health care system through block budget funding of MoH hospitals and smaller clinics, as well as a generous outbound medical tourism programme for Kuwaiti citizens. While 80-90% of capacity is still provided by the state, the decision to open the insurance market to the private sector is expected to gradually move the health care system towards greater privatisation over the next five to 10 years. “There is currently a redirection of patients from public to private health care facilities driven by lack of resources and the rate of population growth. Private health care can help to relieve the burden on the government while playing a role in diversification,” Abdullah Al Abdullah, owner of Synergy Health, told OBG.

Health services in Kuwait are broadly structured into primary, secondary and tertiary care categories, with small local service providers offering primary care in each area of the country as a means of reducing the burden on hospitals. Today the private sector in Kuwait is almost entirely restricted to primary and secondary care provision, with government hospitals offering more specialised tertiary care and advanced treatment, including intensive care unit admissions and major blood transfusions, for example.

At the level of secondary care – including necessary treatment for brief but serious illness, injury or other health condition – location, cultural concerns and price largely dictate whether a patient visits a public or private hospital. Despite having substantially more personnel and facilities for special treatment than the private sector, government hospitals have a reputation for being less efficient, struggling with effective resource management and operating at a loss.

Government hospital directors have control over a nominal budget to spend as petty cash, but do not control large-scale funding for expenditure on equipment, salaries or supplies. Salaries, job ranking and salary scale are all defined by the Civil Service Commission. Equipment procurement is done through a dedicated budget authority at the MoH, and every individual department in every government hospital must apply for funding. Procurement is a lengthy process, incentivising doctors to over-order, contributing to inefficient spending. Adel Ashkanani, CEO of Dental 8 Clinic, told OBG “Bureaucracy surrounding procurement is not only an issue for public hospitals, as private sector approvals still come through the MoH.”

Improving The System

Reform elements proposed by health care consultants at MMI-Kuwait focus on improved efficiency and resource management. “To fix the problem requires improving the system organically, by sending doctors and managers for training outside of the country and providing greater budgetary responsibility to hospital executives to manage their budget,” Kamran Lari, president of MMI-Kuwait, told OBG. The country has also been contracting international institutions since 2010 to assist with ongoing management issues at several hospitals in Kuwait, signing agreements with McGill University, University Health Network, Johns Hopkins University, Great Ormond Street Hospital for Children and the University of Stuttgart. New management training contracts with international teams are under consideration in light of planned new openings, but no strategy to control or monitor performance has yet been finalised. “The approach we are advocating to the government is to hire international auditing firms and let them define the key performance indicators – from financial to operational to quality human resources,” Lari told OBG. “Let unbiased third-party contributors control the monitoring process. Who should be in charge of accurately measuring progress is an issue that needs to be addressed; having independent experts is the perfect solution.”

Medical Tourism

In addition to domestic services, the government has a long-standing policy of covering all costs for nationals, their spouses and family members for outbound medical treatment covering complex procedures. Almost all of Kuwait’s cancer patients are treated abroad, as well as many nationals with diabetes and heart disease. The cost to the state is considerable, with the Kuwaiti government spending KD441m ($1.5bn) to fund 11,000 medical trips abroad in 2014, according to the State Audit Bureau. The issue of spending overruns reached a crisis point in the summer of 2016, when the programme became oversubscribed and the MoH was forced to request additional funds from the Ministry of Finance.

From a development perspective, sending citizens abroad also has the unintended effect of depriving local health care of necessary funding and training required to improve human capital. “From one side, they need to provide their citizens with the best care possible, so they send their patients to some of the highest-rated institutions abroad,” Lari told OBG. “The other priority is providing care inside Kuwait. Sometimes these two views are contradictory, when the budget that you have to spend inside Kuwait, to improve surgeon skills for example, is instead being spent sending patients outside of Kuwait.”

To bring down the national health care bill and reduce the state’s obligation to Kuwaitis travelling out of the country for treatment, the government recently announced plans to limit daily allowances for patients and their spouses. New facilities and regulations governing specialised hospitals are also intended to reduce the number of outbound medical tourists by providing more specialised treatments locally. In 2015 the MoH reported that new regulations introduced the previous year, which included boosting the standards of local medical facilities, successfully reduced the number of Kuwaitis travelling abroad for treatment by more than 50%.

Performance

Hospital beds per 1000 people in Kuwait were last measured at 2.2 in 2012, according to the World Bank, compared to 2.9 in the US and 8.2 in Germany, according to EY data. This figure includes inpatient beds available in public, private, general and specialised hospitals and rehabilitation centres. Physician density in 2014 was reported to be 2.4 per 1000 people compared to 2.8 in the UK – with a total of 9789 physicians divided between the MoH, with 7640, and the private sector with 2149, according to the Kuwait Central Statistical Bureau. A total of 23,710 nurses – 18,075 with the MoH and 5635 in the private sector – was reported to equal 5.9 nurses per 1000 people in Kuwait, compared to 6.3 for Singapore and 9.8 for the US.

Kuwait depends on expatriates to fill nursing roles in health care. Issues of technical quality and training in this context are important in informing the perception of health care consumers at the primary points of contact in a hospital – nursing, secretarial work, administration and infection control. Because of the salary scales, there are proportionally very few Western-educated nurses in Kuwait who work at government hospitals or clinics. Most arrive from India, Sri Lanka, the Philippines and other Asian countries, some hired directly by the government and others through tendering contracts with private sponsoring companies. An industry has sprung up in Kuwait to bid on these service contracts, with domestic companies earning commissions as high as KD500 ($1650) per head in major recruitment drives of up to 1000 nurses, for example. “This approach creates different types of challenges because sometimes what is important is continuity. So even if you bring in good nurses, they are being changed after two or three years. By the time they begin providing the right type of output to the organisation, they finish their contracts and leave the country,” Lari told OBG.

Spending

Kuwait health care expenditure was approximately $5.2bn in 2014, according to the WHO, up 15.5% from expenditure in 2013. According to KDIPA, that figure is projected to rise to $6.4bn in 2019. Kuwait recorded the third-largest total health care expenditure across the GCC region, following the UAE and Qatar, and demand for health care is expected to increase significantly in the near term.

Sector expenditures in 2014 equalled roughly 5.8% of total spending in the country, below the regional average of 7.6%, as well as the developed world average of 15.2%. Government spending accounted for 85.9% of total health care expenditures in the country in 2014, up from 79.8% in 2005, according to Kuwait-based Global Investment House (GIH). The percentage was the second-highest in the GCC region, after Oman. Private expenditure as a percentage of total sector spending decreased from 20.2% in 2005 to 14.1% in 2014. Though sector expenditures are relatively low as a percentage of total spending, measured per capita expenditure on health care more than doubled in Kuwait, rising from $618 in 1995 to $1385 in 2014, according to GIH. “If you look at the history of data regarding expenditures in health, the increase is phenomenal. The rate of growth is probably one of the highest worldwide. This is understandable because of the growth in population and because of the pricing. If you have a resource that is given free to the people, the people will demand more,” Siddig Abdelmageed Salih, principal research specialist at the Kuwait Institute for Scientific Research, told OBG.

Government Objectives

In 2010 the state launched its KD30bn ($99.2bn) National Development Plan. One important objective of the plan was to modernise and reform the health care system and health infrastructure in the country to meet the needs of the growing population, and address a sudden and significant rise in NCDs. To achieve these goals, the country is investing in boosting standards, developing better screening and treatment options for chronic diseases, and increasing the number of hospital beds, among other initiatives.

For the past five years, the MoH has been moving forward with major planned extensions to government hospitals. Al Amiri Hospital in Kuwait City, for example, treats 400,000 people per year and is currently undergoing expansion to double its capacity to more than 900 beds. The hospital, among the oldest in the Gulf, is one of nine across the country being refurbished and expanded by the MoH in line with the National Development Plan. As part of the MoH’s plan to improve the country’s standards of diagnosis, staging and monitoring of a diseased patient, some of the world’s leading medical technologies, services and solutions are also being deployed in specialised hospitals to help improve outcomes for patients suffering from critical diseases in oncology, cardiology and urology. For example, GE Healthcare products and technology are in use across the country, with MR systems deployed at Sabah Al Ahmad Urology Centre, digital radiography x-ray solutions at Al Razi Hospital and hybrid PET/CT imaging systems at a new wing of Kuwait Cancer Control Centre.

One significant improvement that should be implemented to raise the standard of care across the entire health system is the adoption of electronic medical records or unified background records. Conversations have not moved beyond early planning stages, and any project will require the direct support of the minister of health, but the benefits in efficiency and quality of care make this an initiative worth pursuing. “Kuwait is not a big country, it is a medium-sized city,” said Lari. “We think there’s a strong possibility that the government can adopt an electronic records systems and keep everybody’s health record in the system. The advantages are enormous. Even if the patient is going outside of the country, the file can be transferred electronically for treatment abroad.”

Health Infrastructure

Guided by government development objectives – of meeting demand from the growing population and of more effectively allocating resources – the health infrastructure market is developing rapidly in Kuwait, with various high-value construction projects under way across the country. New construction in this segment is intended to enable Kuwait to offer more specialised treatments locally, helping to bring down the national health care bill by reducing the number of outbound medical tourists, while also providing high-quality, specialised facilities to boost the inbound medical tourism market. Increasing private sector participation will support even faster growth in infrastructure and expertise across speciality market segments that have developed over the past five years, including gastroenterology, obstetrics, gynaecology and cardiology. These segments present opportunities for the establishment of speciality hospitals and clinics catering to lifestyle diseases (see analysis).

Insurance

Insurance coverage is a key demand driver for the new range of specialised hospitals, with rising levels of insurance penetration driving demand for speciality medical procedures and treatments within the country. The government of Kuwait is in the process of establishing a mandatory health insurance system for expatriates living in the country by developing a comprehensive provider network under the Health Assurance Hospitals Company (Dhaman). This will allow them to go to the private sector as an alternative to the overburdened public system.

Simultaneously, the government is working on introducing health insurance coverage for all Kuwaitis, beginning with retired citizens. The retiree health insurance programme, titled “Afia”, became operational in mid-October 2016, with 270 centres in hospitals, laboratories and pharmacies offering services, and a total of 2254 doctors available to provide medical services in those centres. By the end of 2016, 85,000 health insurance cards had been distributed to retirees, and over 120,000 requests had been received as part of the programme, according to assistant general manager for life and health insurance at Gulf Insurance Group, Ali Al Hindal. The other major initiative in health insurance is operated under the Dhaman, and aims to provide health care services to expatriates separate from those provided to Kuwaitis. The Dhaman was established by the government in 2011 as a public-private partnership (PPP) initiative to manage the health care needs of insurance-paying expatriates, who account for some 70% of Kuwait’s total population of 4.4m.

The Mandatory Health Insurance system for expatriates is meant to replace the current system, whereby expatriates must have government health insurance in order to receive a residency permit. Higher premiums will be required, but expatriates will in turn gain access to private health providers in a more modern and efficient hospital system. Companies in Kuwait will be compelled to provide health care for their staff under the new system, and treatment of expatriates will be prohibited at public hospitals once the health insurance hospitals are ready, according to a report in the Kuwait Times.

The insurance scheme will come with its own dedicated health care network infrastructure, including three new hospitals and a series of primary clinics. Two of the hospitals in the Al Jahra and Al Ahmadi districts will be built under a KD162m ($531m) Dhaman deal signed with the China Metallurgical Group Corporation in December 2016. Both projects are expected to be completed within a period of 36 months and will open by the end of 2019, according to Dr Ahmed Al Saleh, CEO of Dhaman OUTLOOK: Kuwait’s health care sector has enjoyed robust growth over the past five years, with the country’s demographics and high income bracket driving demand for better facilities and infrastructure, including lifestyle clinics and specialised hospitals to diagnose and treat lifestyle-related diseases.

The country has 40 upcoming health care projects, which account for approximately 6% of the total upcoming projects in the GCC region, and nearly 17% of the total value. Though the new PPP law is providing the foundation for a more investor-friendly and streamlined private sector landscape, the public sector must continue to prioritise the ease of doing business and access to quality human capital in order to transition Kuwait’s health care sector from a cost centre to a revenue generator.

With state funding for overseas medical treatment at an unsustainable level, the public sector must improve its services inside the country, to a standard where patients feel confident that they can get premium care in Kuwait and see no need to travel abroad. Though building this confidence takes time, even basic changes can make a tremendous difference in improving perceptions of quality of service.

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The Report: Kuwait 2017

Health chapter from The Report: Kuwait 2017