Knock-on effects: Growth in the health care sector is providing a range of opportunities

With a growing population and increasing incidence of lifestyle-related conditions, the government of Abu Dhabi and the private sector have embarked on an ambitious strategy to add over a dozen new medical facilities to the emirate’s health care sector over the next several years. Offering services that will ease capacity constraints and potentially retain revenues that might otherwise be spent on outbound medical tourism, new hospitals in Abu Dhabi have also provided investment opportunities to a host of management firms, construction companies and contractors.

With a number of hospital construction tenders awarded in 2013, the government has shown that property developers and builders can reap the rewards of large-scale construction projects outside of the residential and retail segments. The economic benefits of new hospital construction extend far beyond patient care and represent a prime market segment for new development and investment.

New Capacity

 In January 2012 the Abu Dhabi Executive Council approved the construction of 14 new health care facilities, including six hospitals, which are expected to boost bed capacity in the emirate by up to a third. Set to be home to 23 medical facilities by 2018, Sheikh Khalifa Medical City (SKMC), which is owned by Abu Dhabi Health Services (SEHA), will benefit most from the ambitious health care expansion, with planned facilities including a kidney dialysis centre, a general hospital, a trauma centre, and a women’s and paediatric hospital, offering a combined capacity of 826 beds.

Outside of SKMC, a host of projects are planned for the next five years. SEHA is currently building a 739-bed replacement for the existing Mafraq Hospital, opening in 2014, which will include 139 outpatient clinics, and a new 719-bed Al Ain Hospital, which is set to replace the existing facility in the Al Jimi area of Al Ain, with construction completing in 2015. Other SEHA facilities in development include the Ghayathi and Al Sila hospitals in Al Gharbia, which are also being replaced, increasing bed capacity per facility from 30 to 80.

Other upcoming projects include the construction of a new military hospital, announced in September 2013 when the Abu Dhabi Command of Military Works revealed it will replace the Zayed Military Hospital with a new facility that includes a 260-bed medical and surgical hospital, a 40-bed psychiatric hospital, a women’s services building and a utility plant.

With certain specialties within the emirate’s hospitals frequently operating at maximum capacity, new public medical facilities will go a long way towards easing existing bed and space constraints.

However, the private sector could offer even more opportunities for growth and care provision in Abu Dhabi, particularly in specialised medicine, where limited treatment options exist domestically.

Specialised Services

 The Health Authority - Abu Dhabi (HAAD) has identified some services for which the current supply does not meet demand, including obstetrics and gynaecology, paediatrics, neonatology, cardiology, oncology, emergency and intensive care medicine, and psychiatry. Women’s health in particular has experienced an increased shortage of beds and medical professionals in recent years; in December 2013, consultancy firm Booz & Company reported that the current bed shortfall for both normal deliveries and caesarean sections stands at 600 in Abu Dhabi.

Outbound medical tourism has been increasing as a result, with Emiratis and expatriates travelling to Europe and North America for specialised medical procedures.

According to a 2011 report by consultancy firm Deloitte, the UAE is one of the biggest markets for outbound medical tourism in the Middle East. The report found that a substantial number of UAE residents will leave the country for medical treatment, drawn by lower prices in India and South-east Asia, or specialised care at top European and American facilities.

Private specialty clinics and “five-star” hospitals could help keep high-end patients in the emirate when they seek medical care. While the Cleveland Clinic Abu Dhabi, a 364-bed facility scheduled for construction completion in April 2014, is perhaps the most notable, other private facilities and specialised centres will also have a significant impact on the local health care landscape.

For example, facilities including the Danat Al Emarat Hospital will help ease the pressure on women’s health services. The Dh700m ($191m), 150-bed site will feature labour evaluation and high-risk pregnancy units, delivery rooms, a special care nursery, intensive care units, surgical suites and a 24-hour emergency department. The hospital is now set to open in March 2014.

Other new facilities, including the 100-bed BrightPoint Maternity Hospital from NMC Healthcare, expected to open in the first half of 2014, and the women’s health hospital in SKMC, will help address bed shortages in the short term. However, Booz & Company still projected that the shortage of paediatric and obstetric beds will stand at 200 in 2017. Indeed, in December 2013, HAAD officials announced that the emirate will require an additional 1300 hospital beds and up to 1700 doctors by 2021 to meet the growing demand.

Significant Profitability

 The benefits of operating a private hospital in Abu Dhabi are substantial; consultancy firm Colliers International estimated that high-quality, efficient private hospitals can achieve 15-20% net profit margins annually in the UAE. SEHA’s financial performance has also shown promising investment indicators, with the company reporting that annual net patient revenue increased by 18.4% in 2012 over 2011’s Dh3bn ($816.6m), and across Abu Dhabi health providers, average revenue per claim rose by 9% for inpatient admissions and 4.5% for outpatient visits.

Overall Impact

 Private facilities offer patients services for which they might otherwise need to travel overseas, but the overall economic impact of new facilities is greater than simply better patient care and social benefits. Architectural firms are already benefitting from new construction projects including: HKS; Burt Hill, designer of the new Al Mafraq Hospital; and AE7, a local firm currently working on the new military hospital. Private firms have been quick to capitalise on the emirate’s health care boom. HealthPlus, a subsidiary of Abu Dhabi-based UEM edical, whose investment portfolio includes Danat Al Emarat Hospital, announced in 2010 that it would invest Dh120m ($32.7m) in health care construction in the emirate over the next four years. HealthPlus CEO Majd Abu Zant has said the company plans to establish 14 luxury family clinics and six speciality centres over the next several years.

Government tenders also offer new opportunities for construction firms. In November 2013, Musanada, the government’s shared service company, signed an agreement with Al Fara’a General Contracting for the construction of the 66-bed dialysis centre at SKMC, which is due for completion in 2016. A month later, Musanada signed another contract, worth Dh4.03bn ($1.1bn), with a consortium including UAE-based Arabtec Construction and Sanjose Constructora for the new Al Ain Hospital. As demand is only projected to increase over the next decade, new hospitals and health facilities represent a major and sustainable opportunity for service provision, construction activities and investment.

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The Report: Abu Dhabi 2014

Health chapter from The Report: Abu Dhabi 2014

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