David Hadley, CEO of Emirates Healthcare Limited (EHL) and Medi-Clinic Middle East, on why the Gulf region’s medical industry is in rude health.
Hands up anyone who thinks he is immune to the downturn?
“What can I say?” says David Hadley, the charismatic boss of Emirates Healthcare Limited (EHL) and Medi-Clinic Middle East. “There has been talk of how people are spending less [but] one thing they’re spending more on is healthcare. We’re not recession-proof but we’ve avoided the worst of it.”
Those sound like confident words. “Very,” he says, and laughs.
Hadley has good reason to be chipper. At EHL, a joint venture between South Africa’s Medi-Clinic, which operates more than 60 hospitals worldwide, Dubai’s Varkey Group and General Electric, the world has turned in its favour. The global crash means a string of multimillion-dollar hospital projects in the UAE have been swiftly moved to the back burner, thinning out the herd, and leaving EHL’s newest venture, the 210-bed The City Hospital in Dubai, to reap the benefits.
Patient volume across the firm’s Dubai facilities — two hospitals and five clinics — is up 37 percent on the year. A matching bump is expected this year. The City Hospital, launched in 2008 and EHL’s priciest venture to date, broke even on its multimillion-dollar price tag in less than twelve months.
“We’ve done well,” Hadley allows. “There was an over-demand in the market here, which helped. Obviously, if some of the other hospitals had opened as planned, our business might have looked a little different. Surely there would have been more competition, price wars perhaps, which would have had a negative impact.”
For private equity firms scenting out the markets, healthcare looks temptingly like a prescription for profit. In June, Dubai’s Ithmar Capital announced a $272.2m strategic equity stake in Al Noor Medical Company; its largest capital injection to date. The same month saw TechnoGroup, a portfolio company of the Abu Dhabi private equity firm Gulf Capital, snap up a strategic stake in the Saudi Arabian-based diagnostic imaging chain, Consultant Radiology Centres.
Bolstered by government spending, the healthcare market in the Gulf is expected to grow fivefold by 2025. Analysts valued the GCC healthcare sector at between $15bn and $18bn last year.
“It costs millions of dirhams to open a business, but investors see healthcare as recession-proof and want to enter the business,” Hadley says. “We’ve met with many of these firms — they want to develop a facility that we partner with them to manage. Everyone wants to be in healthcare and many of them have no experience in it, which is a good opportunity for us. But the key thing is not to overextend ourselves.”
It’s wise to be cautious. Healthcare’s status as a cash cow is not completely assured. The business may be recession resistant, but the firms that back it aren’t. Dubai is dotted with the relics of hospitals that were planned in the boom years, but have since mothballed due to lack of funding.
A deal between Thailand’s Bumrungrad International and Dubai investment house Istithmar — a unit of the debt-troubled Dubai World — to build a 125-bed hospital was an early victim of the downturn. Sharjah’s Al Zahra group is reportedly searching for a potential buyer for its Dubai hospital, which is nearing completion.
Perhaps the highest profile victim has been the state-backed Dubai Healthcare City (DHCC), home to EHL’s City Hospital. Initially billed as a cutting-edge medical hub, a lack of funding has seen building work on the project’s flagship 400-bed University Hospital grind to a halt. Plagued by high rents and a lack of patients, a number of clinics have been forced to shutter.
Eight years since DHCC’s launch, The City Hospital remains the project’s only operating multidisciplinary hospital.
“Healthcare can be a big risky business. Many hospitals in Dubai have been put on hold or cancelled — Bumrungrad, the University Hospital, and the Mayo Clinic,” Hadley says. “Many staff have moved to facilities that have survived. But there has been less investment in these projects, and healthcare is an expensive business.
“[DHCC] definitely hasn’t achieved its goal; there are a hell of a lot of coffee shops and retail outlets. The plan was to attract medical tourism, but I think the strategy should have been to look at healthcare here rather than medical tourism.”
Other branches of healthcare are also feeling the pinch.
“Employers have started to put pressure on the medical insurance companies to reduce costs, this is despite it being extremely low for this part of the world,” Hadley says. “Healthcare costs per capita here are around $800, compared to the US where it is $6,000 and the UK where it is about $2,500 and even South Africa at $1,600. It is very, very cheap. Medical insurers are battling to provide the same care at a lower cost — which means we are also being squeezed to lower our tariffs.”
The pressure is, in part, to blame for the scrapping of Dubai’s planned universal health coverage scheme. The state-backed plan, which aimed to offer employer-funded medical cover to every resident in Dubai, was scheduled for a 2008 launch. Two years on, there is still no firm date for its introduction.
A survey by Dubai Health Authority last week revealed that about 75 percent of Indians, other Asians and Arab workers in Dubai have no medical insurance.
Still, there is a bright side to the slowdown. The speed of growth in the healthcare market has outpaced regulation, resulting in a mix of cumbersome red tape for providers — and also loopholes in law that allow exploitation.
“There needs to be more policy on the ethical aspects of doing business here,” Hadley says. “Kickbacks are rife. We do not allow it. We do not condone it, and if anyone is caught doing it in our facilities, they are instantly dismissed.
“It is absolutely rampant in Dubai; and as long as that system is there, certain facilities that otherwise wouldn’t, will survive. It’s radiology departments paying doctors, labs paying doctors. Specialists paying GPs for referrals. There needs to be more policy on that. We don’t do it, and we’re still growing. You can do business ethically and profitably.”
Behind the screen of healthcare’s rapid growth, the sector is also struggling with a lack of data. There are no firm figures on the rate of chronic diseases and other conditions in Dubai — meaning that healthcare providers are building blind. As a result the market is oversupplied in some areas, such as cardiology, and significantly undersupplied in other specialties such as paediatrics.
“There are more Lasik [eye] surgery centres in Dubai then there probably are in New York,” Hadley says. “Then it becomes a cut-throat business.
“The government needs to focus on that [overall planning] of who gets to do what, where. So they’ll say; ‘We will grant five licences, but you need to demonstrate X, Y, Z in your mortality and morbidity rates.’ [The lack of planning] is a sign of an immature and under-regulated market.”
So what’s next on the horizon for EHL? Aside from a rebrand in September, the group is well poised to take advantage of the fresh capital edging into the medical sector. But the scaling will be steady, says Hadley.
“It’s about growing but keeping our costs in line as we grow, so we don’t overextend ourselves. We’re going to see consolidation within the industry.
“At EHL, we’re looking directly at our borders. There is enough opportunity for us in Abu Dhabi and in the other emirates. We’ve got a lot of room to grow.”
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