Boosting Saudi's healthcare system with private sector participation

27 July 2023 4 min. read
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The healthcare sector is occasionally subject to unanticipated shocks. While the nature and timing of these shocks cannot be predicted, the recent pandemic has prompted governments to invest more in their healthcare systems, write Boston Consulting Group leaders Jad Bitar and Jad Najjar.

A sea change in Saudi Arabia’s healthcare sector is already underway in alignment with Vision 2030’s national priorities. The Kingdom accounts for 60 percent of the Gulf Cooperation Council’s healthcare expenditure, and the sector remains a top priority for the Kingdom’s government.

In 2022, the government spent $36.8 billion on healthcare and social development – 14.4 percent of its annual budget.

Jad Bitar and Jad Najjar - BCG

During this time, the private sector became an important strategic partner for the government in achieving its vision to accelerate economic development, optimize the state budget by contributing capital, develop new and innovative solutions and help tackle challenges in improving access to quality care.

More recently, private providers proved critical in the Kingdom’s health system’s fight against Covid-19, including testing, vaccination, vital intensive care unit capacity and pioneering the use of telehealth to ensure the continuity of access to care.

Over the past years, the private health sector exhibited robust growth. Today, the private sector covers a third of the population compared to 10 percent ten years ago. The private health insurance sector is estimated to have exceeded SR30 billion ($8 billion) in 2022, doubling in the past ten years.

The growth in demand fueled an expansion in the private sector health provision capacity, which today contributes to about 20,000 beds or about 24 percent of total hospital beds in the Kingdom and added about 7,000 beds in the last decade.

Despite the remarkable growth, the private sector contributes less than 15 percent of the spending, with 75 percent of the funding coming from government expenditures and the remainder from direct consumption. However, the outlook is promising in light of the Vision 2030 ambition for the private health sector.

The art of collaboration

As the Kingdom moves to accelerate the rate of improvement and innovation deployed in the health and healthcare industry, greater collaboration is needed to deliver outcomes greater than the sum of its parts.

The private healthcare sector can immensely benefit from catering to the growing demand in healthcare. Moreover, the number of visitors is expected to double with an increase in travel, leading to a rise in privately insured individuals resulting in the sector’s growth.

Public-private partnership also puts the sector in a favorable position. Private stakeholders could collaborate with government authorities to transform the public health system throughout its value chain.

Investing in the localization of healthcare and life science could also go a long way in transforming the industry. The private sector is crucial in making the healthcare systems resilient by providing over 30 percent localization of engineering and technical professions in medical appliances and 40 percent Saudization in the sales and supplies of medical appliances throughout the Kingdom required in the coming years.

Venturing into technological advances in artificial intelligence, augmented and virtual reality could open a window of opportunity for the emergence of the metaverse and play a significant role in advancing telemedicine.

The private sector is striving to put the consumer at the center of its services. Yet, a recent survey revealed that private investors in healthcare face several challenges across their investment journey in the sector.

These challenges start with the investors’ ability to identify opportunities in the sector due to the lack of holistic understanding of the opportunities and availability of data critical for conducting a feasibility study for their potential investments.

Further, survey respondents highlighted challenges in the current regulatory landscape with multiple regulators and complex processes from licensing to operations. Beyond the current landscape, investors also highlighted the lack of predictability on the sector changes and the expected impact on their businesses, especially given the rapid pace of change.

In summary, there is an ambitious goal and a large potential to make this a success in Saudi Arabia, bringing the various players into the ecosystem and creating a successful strategy. The long-term goal, however, must be to improve the quality of life of Saudi residents.

About the authors: Jad Bitar is Managing Director and Senior Partner at global management consulting firm Boston Consulting Group, where Jad Najjar is a Principal.