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Fri 16 Jan 2009 04:00 AM

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In rude health

Abu Dhabi investment fund Mubadala aims to reshape the emirate's healthcare landscape.

Abu Dhabi investment fund Mubadala has high ambitions to reshape the emirate's healthcare landscape by matching its capital with best-in-class medical expertise. Mark Erhart, executive director of the healthcare division, tells Arabian Business why outgoing medical tourism will be a thing of the past once Mubadala's investments take hold.

Located on the sixth floor of a tightly secured building, Mubadala's offices are starkly minimalist. Muted walls are flanked by ceiling-to-floor glass doors, creating an icy elegance. As décor goes, it's a neat reflection of the investment fund's discreet business strategy, which is equally sparse on details.

Established by the Abu Dhabi government in 2002, Mubadala is a smaller and more agile counterpart to the emirate's $875bn behemoth, the Abu Dhabi Investment Authority.

Despite its smaller size, Mubadala has caused a stir by brokering high-profile deals with brands such as Ferrari and General Electric, but has chosen to stay largely silent on the details of its investment portfolio. Little is known about decision-making at the top, a tradition that Mark Erhart, executive director of Mubadala's healthcare division, looks unlikely to break within the next 40 minutes.

Our aim is to address the needs of patients, both UAE nationals and expatriates, who are going abroad for treatment to see how we can target those needs here.

"I can't disclose numbers," he says hastily, in response to an early question. How about future investment areas? "No, I can't discuss that."

What does emerge is that Mubadala, whose sole shareholder is the government of Abu Dhabi, objects to being referred to as a sovereign wealth fund (SWF). Characteristically cagey, Erhart declines to clarify what, if anything, differentiates it from other such state-owned vehicles. If this is an attempt to distance Mubadala from the secretive image historically attached to SWFs, then its PR team may want to reconsider its approach.

Still, there is one topic Erhart is more forthcoming on: the untapped potential of the UAE's healthcare industry. "Abu Dhabi and the UAE has grown at a tremendous pace over the last few years, but healthcare has not really been able to keep pace," he says carefully. "There is a huge need here for healthcare services. It's a relatively immature market."

Mubadala's remit is to fill the gaps in the system, Erhart says, simultaneously tackling the problems of poor access and poor quality care, while stemming the tide of outgoing medical tourism.

"Our aim is to address the needs of patients, both UAE nationals and expatriates, who are going abroad for treatment to see how we can target those needs here," he explains.

Mubadala barged into the medical market in 2006, poaching Erhart from his post with Singapore hospital chain Parkway Health soon after to run the show. With a stint at investment firm Ganley Group and seven years as a lawyer under his belt, Erhart admits that he had the sector expertise to hit the ground running.

The state-backed fund has quickly made a name for itself, inking deals with a slew of global healthcare providers, including top US brands Cleveland Clinic and Johns Hopkins.

The fund's pitch is this: it buys in global quality to overhaul the local healthcare system, encouraging Abu Dhabi residents to spend their healthcare dollars at home. It's a double win for Mubadala's only shareholder: government figures show an estimated $2bn is spent annually ferrying UAE nationals abroad for treatment.

Mubadala's first two ventures, Imperial College London Diabetes Centre (ICLDC), Abu Dhabi, and Abu Dhabi Knee & Sports Medicine Centre, have proved an almost instant hit.

"To give you an idea, ICLDC has over 12,000 patients on its books and has screened over 50,000 people in the UAE for diabetes," Erhart says. "The Knee & Sports Centre has conducted almost 1300 surgical procedures in the last two years alone."

With only two functioning facilities, the bulk of Mubadala's healthcare portfolio is still pending. The fund is slated to open a molecular imaging facility in Al Ain later this year, in partnership with Johns Hopkins, while Cleveland Clinic Abu Dhabi, a 360-bed hospital, is scheduled to open for business in 2011.

Both will bring previously unavailable healthcare services to local patients. Also in the pipeline is a spinal injury facility, on course to open in 2010, with a reference laboratory and a wellness and diagnostic centre planned for the same year.

A run of projects across the Gulf have fallen victim to the global downturn, but Erhart insists the credit crunch will have "no impact" on his raft of launches. He describes healthcare as a "defensive" industry: "In good or bad times people fall ill and they will always need healthcare."There is tremendous demand for the businesses we are implementing and, regardless of the fact that there has been a slowdown in many economies around the world, the demand for our services has not slowed down. We are going full-speed ahead."

The idea of healthcare being a recession-proof industry is slightly misleading, however. Backed by almost limitless state capital, Mubadala is undeniably in a better position than most to ride out the credit storm and in a bull market, most investments win.

But there are drawbacks to having to factor in government policy to your investment decisions. Erhart admits it can be a struggle keeping one eye on the bottom line, and the other on state priorities - particularly in a sector where the capital outgoings are high and returns rarely immediate.

Regardless of the fact that there has been a slowdown in many economies around the world, the demand for our services has not slowed down. We are going full-speed ahead.

"It's certainly a challenge to achieve both strategic and financial objectives [in healthcare], but that's why Mubadala is in the business it is in," he says matter-of-factly.

He credits his time at Parkway Health with teaching him to walk the line between the two successfully.

"Parkway was a private player in a very competitive market, and one with strong governmental support. Being part of an organisation that successfully manoeuvres in that kind of environment gave me quite a few lessons I've used here."

It has also given him first-hand experience of the pitfalls of the health sector. Erhart has watched numerous hospitals make the mistake of offering end-to-end care, only to find they have spread themselves too thinly to deliver. He's savvier in favouring a niche approach, as specialist expertise is more likely to lure patients.

Once completed, the Abu Dhabi Spine Centre, for example, will be the first national unit of its kind. "It is easier to build quality in a niche area than by being all things to all people," Erhart agrees. "It allows you to focus and be very tight in your strategy."

He's also unfazed by the rapid changes taking place in the UAE's - now semi-private - national health service. The introduction of mandatory health insurance in Abu Dhabi two years ago has thrown up a steady revenue source for private hospitals, meaning Mubadala is now jostling with a clutch of other providers.

One of which is Erhart's former employer, Parkway Health, which last month signed a deal to manage the upcoming Danat Al Emarat Women and Children's Hospital in Abu Dhabi.

"I think competition is good," Erhart smiles. "I welcome it. In that environment, patients get the best care at the best possible price.

But it's no secret that the UAE's medical market has caught the attention of the private sector for financial rather than philanthropic reasons. Will toeing the government line force Mubadala to sacrifice competitiveness? Erhart shakes his head.

"Mubadala is an investment company and all our investments are profitable," he says pointedly. Relenting slightly, he admits his ties to the top often work in his favour.

"We have very open discussions with the Health Authority Abu Dhabi (HAAD); we view them as our partner. We don't do anything without their approval," he says. "We want to avoid duplication and building excess capacity... in some cases they are able to point us to certain areas where there's a need to be filled that we perhaps haven't seen. It's certainly a very positive relationship."

So positive, in fact, that two of Mubadala's key partners, Johns Hopkins and Cleveland Clinic, also run HAAD's largest public hospitals. Though Erhart is too sharp to admit it, it's an added perk for him as the outsourcing contracts will, in the next few years, run out. In a show of brand loyalty, any existing patients are likely to pursue their doctors to Mubadala facilities.

The next 12 months will be a year of "delivery and execution" for the healthcare unit, Erhart says. In a briefly candid moment, he reveals the fund is set to announce "some new areas of development" towards the end of 2009, but is typically short on details.

"It won't be anything that's surprising," he says guardedly. "It's all in line with our strategy."

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