The health care market in Kuwait is set to receive a fiscal boost over the next five years, as rising public investment and private demand keep growth at double-digit levels. Health care provision and facilities are already expanding at a faster rate than most Gulf countries, reflecting Kuwait’s affluence and the government’s determination to prioritise the sector as part of the Kuwait Development Plan (KDP) 2015-20.
The coming years are likely to see growing opportunities for private and foreign investors as the authorities look to ensure that provision keeps pace with demand. Developing specialist care for chronic conditions, and better preventive care, are priorities, while securing universal coverage for the large expatriate workforce is a long-term goal.
Kuwait spent 3% of GDP on health care in 2014, the last year for which figures were available from the World Bank. This represented a significant rise compared to 2.6% for the previous three years. Of health care spending, 85.9% came from the government, a sign of its commitment to investing in health provision, even in a country where many have the disposable income to pay for private care. Health expenditure per head has risen strongly, reaching $1386 in 2014, up from $1244 at the beginning of the decade, and from just $756 in 2004. Per capita spending is now around 50% higher than the average of GCC member states, according to the GCC Health Care Industry report published in February 2016 by Alpen Capital. Overall health care spending grew by an average annual rate of 12.4% between 2008 and 2013, surging from $2.8bn to $5.1bn, the second fastest rate of the GCC member states, behind only Qatar with 15.4%.
Room For Growth
By the end of 2016, the market is expected to be worth $5.7bn, of which $3.4bn will be from outpatient expenditure, and $2.3bn from inpatient care. In 2013 Kuwait, though home to just 7-8% of the GCC’s population, accounted for 10.3% of its health care spending, according to the World Health Organisation (WHO). Nonetheless, according to the WHO, the country’s health care spending as a proportion of GDP is 2.9%, slightly under the GCC average of 3.1%, and well below the global average of 10% and that of other developed countries such as the UK (9.1%) and Germany (11.3%). Expenditure per capita is well below the average of $8800 in North America. Given Kuwait’s relative wealth, rising population, its government’s commitment to investing in health care, and its evolving needs as demographics change, the health care market is likely to grow as a proportion of GDP in the years to come.
Most of Kuwait’s health care indicators are comparable to those of developed nations. Life expectancy at birth is 74 for men and 76 for women, according to the WHO. By comparison, life expectancy in North America is 79.
Rapid improvements in health care provision are also supported by other figures. This includes the neo-natal mortality rate, which has almost halved from 6.2 per 1000 live births in 2002 to 3.2 in 2015. The under-five mortality rate, meanwhile, stood at 9 per 1000 live births in 2014, slightly above the level of many developed countries, but down from 13 per 1000 in 2000 and 25 in 1984. The small gap between Kuwait’s health indicators and that of highly-developed countries remains, and closing it is likely to be a priority for the sector over the coming years. Substantial investments in provision, improvements in preventive care, and ensuring care coverage for the least advantaged in society, will all play a part in this.
Improving care for all residents entails investment not only in new hospitals and clinics, but also in back-office functions, education and management. Private investors in the sector in particular see systemic reform as a rising priority. Kamran Lari, president of MMI - Kuwait, a medical and health care services company, told OBG that the sector faces some structural challenges. He says that the health system as a whole would benefit from better ICT infrastructure, development of integrated health care education systems to build a bigger local workforce from the ground up, better management to improve efficiency, greater use of insurance, and expanded data collection.
As of 2014, the most recent year for which figures were available, Kuwait had 32 hospitals, according to the 2016 Statistical Review published by the Central Statistical Bureau. Of these, 17 were government-run hospitals, 12 were in the private sector and three were run by oil companies. The government segment is expanding, with a new hospital added in 2013 and 2014, and it also operated 91 health care centres for general practice in 2014, down slightly on 2012-13.
The number of beds in the government sector has grown steadily in recent years, from 6714 in 2012 and 6756 in 2013 to 6962 in 2014. Similarly, the number of physicians employed in state-run health institutions has grown from 6473 in 2012 to 7151 in 2013 and 7640 in 2014. However, the number of dentists has fluctuated, with 1363 employed in 2014, down from 1540 in 2013 and 1425 in 2012. As the population has grown, so has demand on its health facilities. Outpatient numbers in the government segment rose from 2.50m in 2012 to 3.23m in 2013, falling back slightly to 3.2m in 2014. The private and oil company segments have remained steadier, reflecting little growth in their capacities and modest growth in demand. The private sector had 1058 beds in 2014, up from 1041 in 2012. This reflected a steady uptick in outpatient numbers from 2.21m in 2012 to 2.32m in 2013, and up to to 2.35m in 2014, figures which are notably high given the relatively limited facilities.
The three hospitals run by oil companies had 210 beds in 2014, up by just one bed from two years before, while the number of physicians and dentists employed rose from 201 to 235. Outpatient numbers have stayed fairly steady, reaching 487,905 in 2014.
Kuwait’s health sector is one of the best-staffed in the region. In 2013 there were 35 physicians (including dentists) and 56 nurses per 10,000 people, the highest and second-highest in the GCC, respectively, according to Alpen Capital, compared to developed-country averages of 35.2 and 88.2. Mental health staff are also increasing: psychiatrists per 100,000 people reached 3.33 in 2014, up from 2.62 in 2012. Of course, staffing density is not directly correlated with quality of care; training, efficiency and allocation of human resources are key factors, as are quality of facilities and equipment. While staff shortages may not be as pressing in Kuwait as in some of its neighbours, as the health system grows and the number of physicians remains below developed-country norms, recruitment remains an urgent priority.
Although nearly half of all medical staff in Kuwait are nationals – a high proportion by Gulf standards – many are recruited from abroad, particularly Arab countries, South Asia and the Philippines. Kuwait has one medical school, the College of Medicine at Kuwait University, yet many Kuwaitis opt to study medicine abroad in places such as the UK and the US.
Recruiting and retaining staff is in fact the biggest challenge facing the sector, Yousif Zahr, CEO of the private Al Seef Hospital, told OBG. Many professionals head to other parts of the Gulf or elsewhere where quality of life is seen as better. Obstacles to getting foreign experts to work full-time, he said, are pay levels, living standards and a commitment to specialised work, research or continuous education. To overcome such constraints, some hospitals hire specialists for a few weeks a year to carry out operations, often paying above the market rate. Others invite foreign experts to work on a visiting basis when needed.
Strong Growth Ahead
Alpen Capital forecasts that Kuwait will have the fastest-growing health care market of the GCC member states between 2015 and 2020, racking up a compound annual growth rate (CAGR) of 13%. Kuwait’s stake in the GCC health care market is thus expected to rise from 12.6% in 2016 to 12.9% in 2018 and 13.1% by the end of the decade. This will take the overall health care market to a value of $7.3bn in 2018 and $9.4bn by 2020, up nearly two-thirds over just half a decade. Alpen Capital estimates that the outpatient market will be worth $5.5bn, and the inpatient market $3.8bn by 2020.
The brokerage forecasts that demand for hospital beds will jump – driven by population growth and rising incidence of risk factors for chronic disease – from 8579 beds at the end of 2015 to 8819 in 2016, and then to 9316 in 2018, and 9844 in 2020 – requiring hospital capacity to increase by more than 1200 new beds over five years. With the government committing large sums to meet this demand, opportunities remain for contractors to build, manage, equip, and, in some cases, own new hospitals. “As part of the KDP, hospitals will add 7000 new beds for patients. However, the sector must proceed with caution as extra beds does not translate into improved services or greater efficiencies,” Lari told OBG.
Alpen Capital forecasts that inpatient admissions will rise from 327,100 in 2014 to 345,500 in 2016 and 385,700 in 2020, with outpatient visits growing from 18.1m in 2014 to 19.1m in 2016, and 21.3m by 2020.
Several factors are predicted to drive the growth of the health care market and shape the changing demands on the system over the coming years. Demographic growth is one of these. Population growth is on course to reach a CAGR of 2.8% between 2015 and 2020, with market research company Euromonitor estimating that the population will hit 5.1m by 2030, up from around 4m currently.
The growing prevalence of chronic conditions such as diabetes is another issue. This is expected bring up the rate of residents’ interactions with the health care system for check-ups and treatment, while stimulating demand for pharmaceuticals and equipment used for treating these conditions. The government will also invest increasing amounts in promoting the prevention and early detection of cancer, cardiovascular disease and diabetes, among other diseases. A third factor is public investment. Kuwait’s hospital building programme is a boon to both the system and residents in the country, upgrading capacity. It also catalyses demand for health care providers and suppliers. The budding public-private partnership (PPP) model in Kuwait should draw investors and contractors to the health care sector (see analysis).
The Ministry of Health (MoH) foresees meeting the WHO target for hospital bed density of 22 beds per 10,000 people by 2030, and is committing large sums as part of the KDP to developing capacity over the next 15 years. The government has awarded contracts worth upwards of KD1.5bn ($5bn) on new hospital projects since 2008, according to local press reports, and is set to allocate a further KD881m ($2.9bn) in 2016. Projects due to be awarded include the KD220m ($727.7m) New Maternity Hospital, a 780-bed institution which has attracted bids from companies including Italian construction firm Pizzarotti, and the KD152m ($502.8m), 1168-bed Jaber Al Ahmad Al Jaber Al Sabah Hospital. The latter is set to be the largest medical facility in the country, and one of the biggest in the region, serving a 600,000 population in the South Surra area.
Ongoing projects include the KD390m ($1.3bn), 1171-bed New Jahra Hospital, which is on track for completion in 2018. The new hospital will function as a trauma centre for the area, and include outpatient clinics, a renal dialysis centre, a dental clinic and a radiology centre. The Farwaniya Hospital expansion, awarded in 2014, will add 925 beds, while the Al Adan Hospital project will boost capacity by 800 beds once completed in 2018. In October 2015 Prime Minister Sheikh Jaber Al Mubarak Al Hamad Al Sabah inaugurated the newly expanded Al Razi Hospital in the Al Sabah area. The KD31.4m ($103.9m) project is due to lift bed capacity by 80% to 540 beds.
Similar to other countries that have developed rapidly in recent decades, Kuwait has seen a drop in the rate of deaths from communicable diseases and from maternal and nutritional conditions, but a rise in the incidence of non-communicable diseases (NCDs). The four major NCDs – cardiovascular diseases, cancer, diabetes and chronic respiratory illnesses – account for over 60% of deaths in Kuwait, according to Alpen Capital. While the fall in other causes of death are welcome, factors that elevate the risk of NCDs – including poor diet, lack of exercise and smoking – have risen. As with other Gulf countries, tackling these risk factors through preventive care and education, and treating NCDs when they occur, has become a major focus of public health policy.
Cardiovascular disease is the most common cause of death, accounting for 41% of mortalities in 2012, according to the WHO. This is higher than in all other GCC member states except Saudi Arabia (46%), with considerably lower rates in Qatar (24%) and Oman (33%), for example. The second biggest cause of death by NCDs is cancer, accounting for 14% of mortalities. Some 4% of deaths are caused by diabetes – the second lowest in the region – and 12% from other NCDs. Communicable diseases account for 16% of all deaths in the country, with maternal, prenatal, and nutritional deaths the second highest rate in the region, while 11% are caused by injuries.
One of the biggest challenges faced by the health care system is the prevalence of obesity, which carries with it increased risk of chronic conditions. As much as 78.1% of the Kuwaiti population over the age of 20 was overweight or obese as of 2013, according to Alpen Capital. While the global obesity rate – defined as a body mass index of over 30 – is 12.9%, and that for high-income countries is 23.5%, in Kuwait it is 39.7%, above the GCC average of 36.7%. Despite efforts to tackle the problem, Kuwait’s obesity rate crept up from 36.8% in 2010.
Kuwait has one of the world’s highest rates of diabetes, with 23.1% of the adult population affected, according to the International Diabetes Federation (IDF). Diabetes is a common problem across the Gulf, with rates ranging from 14.5% in Oman to 23.9% in Saudi Arabia. The prevalence of diabetes is linked to a rapid change over few generations to a more sedentary lifestyle with less exercise, an increasingly high-sugar diet and overeating. It is thought that genetic factors may also be behind the particularly high rate in the Gulf.
One of the leading bodies in the management of diabetes in Kuwait is the Dasman Diabetes Institute (DDI), a subsidiary of the Kuwait Foundation for the Advancement of Sciences. It has a range of functions, including education, research and treatment. Educational programmes include schemes for schoolchildren, existing diabetics and community figures such as teachers, with a focus on diet and exercise as lifestyle choices to help lower the risk of diabetes. It also funds postgraduate programmes for health care professionals and others working with diabetes patients, in partnership with the University of Dundee in Scotland. The programmes aim to promote a sophisticated, modern approach to diabetes care, education and management, as well as training those working in diabetes research. The institute’s research functions include ongoing projects on national well-being, hereditary disorders and clinical diabetology. The DDI’s fitness and rehabilitation facilities are tailored to diabetics, and also provide support in the form of check-ups, consultancy and training.
Public & Private
The MoH is the sector’s sole regulator and single largest provider, but other authorities also play a role, such as the Public Authority for Agriculture and Fish Resources, which works with the UN to minimise pandemic risk and prevent outbreaks. There is also a thriving private sector, which has long offered a broader range of services and shorter waiting times than the public segment, though substantial investments have narrowed that gap.
Private expenditure on health care rose by 50% between 2008 and 2013, from $600m to $900m, according to Alpen Capital. Of this, 90.4% is out-of-pocket, with just 9.6% covered by pre-paid insurance plans, according to the WHO, indicating substantial scope for health insurance coverage to expand. There is already some movement in this direction: Kuwait Oil Company, for one, provides private coverage to employees, and a contract to provide health insurance to local retirees was recently awarded to Gulf Insurance Group, effective from mid-October 2016. Even so, the range of care that is free at point of use is broad, and is likely to remain so.
The government is seeking private and foreign investors to become partners in developing the public domain and to continue to grow private provision. It has also established the Kuwait Health Assurance Company (KHAC), a joint-stock entity that will take responsibility for the provision of non-emergency health care for expatriates employed in the private sector. It is 24% owned by the government through the Kuwait Investment Authority (19%) and the Public Institution for Social Security (5%), while Arabi Holding Group maintains 26% as a strategic investor. The remaining 50% is due to be floated in an initial public offering on the Kuwait Stock Exchange.
The KHAC’s plan is to construct three hospitals and 12 primary care centres for the use of expatriates, with the land provided by the government on 20-year leases. Expatriates will be obliged to take out insurance through the KHAC to cover the costs of their treatment, and will be channelled to KHAC facilities. This will free up public sector capacity for Kuwaitis and strengthen coverage for expatriates, many of whom do not currently have adequate access to health care. In emergency cases, MoH hospitals will continue to treat expatriates without charge.
The KHAC will draw on international expertise – in December 2015, Dr Ahmed Al Saleh, a former senior MoH official with clinical experience in the UK, was appointed CEO. Al Saleh’s specialisation in PPPs and health management bodes well for the company.
However, the KHAC’s development has not been without delays and questions regarding its business model, with some critics suggesting that competition between providers could be more sustainable.
Kuwait’s growing population, strong economy, significant public investment and changing health care needs will drive and shape demand in the sector in the years to come. The programme of building new facilities is expected to provide opportunities for private sector partners and foreign investors to play a role in boosting capacity and potentially managing the new assets. With ICT infrastructure and management efficiency in need of improvement, private sector expertise has an important role to play. Likewise, specialist health facilities – and the medical professionals to staff them – are increasingly important as Kuwait looks to tackle rising NCD incidence. The scope to improve preventive care to lower risk factors is also considerable. While the KHAC’s development has not been without challenges, the government’s keenness to bring in private investors and expand insurance coverage bode well for the future.
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