a sustainable privatization · government & private health insurance & some contracts with...

A Sustainable Privatization

Model of “ “ Transformation of a Traditional Past into an Integrated Future (A Saudi Experience)

Ahmed S. Al-Amri, MBChB, FRCPC, PMP, MBA President & CEO National Medical Care Company Advisor, Modern Healthcare strategy and delivery model innovation Expert, World Health Organization Consultant Neurologist, Neurocritical care/Stroke/Pain

What is

Privatization?

The concept of privatization is linked to the ownership and operations of assets

Full Government Control Government & Private Health Insurance & Some Contracts with Private Hospitals Full Privatization

Privatization refers to the transfer of ownership and management of publicly owned assets to the private sector. Privatization has been described as a tool used by public sector agencies to improve efficiency or lower costs (Gardner & Scheffler, 1988).

Most ownership by private sector

Rural areas and selected services by government

Full Public Healthcare Sector ownership

Government Shares ownership and several services

Full ownership by private sector Most funding by private sector

Private sector operates independently Government may off load certain services

Privatization Mainly Impacts Ownership of Assets – This May or May not Influence Funding for Healthcare

Country Providers Payers Public vs Private Expenditure

Almost all private (80%)with some specific government agency providers

Private (Cash, Insurance) Public (MEDICAID, MEDICARE)

Private non for profit (48%)& subcontract of NHS

Services

Public Private Insurance (minimal) and cash

Mainly Private -Non for profit management of hospitals (80%)

Public-Medicare Some private insurance

Public (26%) private 74% Mostly not for profit ,Some for profit

Public Mandatory Insurance Private Insurance for self employed

Public (35%) private (65%) Non for profit

Public Private insurance is supplementary

Mainly publicly owned (99%)– however privately operated

Cash and insurance Public funding for government

employees

Mostly publicly owned (69%) Private sector mostly in urban areas

Public funding for Saudi nationals and others

Private funding through cash and insurance

Private (79%) , public (21%) Mostly public

Public (55%), private (45%) Mostly public

Private 94% Public and private almost equal

Public Private 2016, 7; Last updated: Oct World BankData from

52% 48%

17% 83%

29% 71%

23% 77%

22% 78%

48% 52%

25% 75%

34% 66%

23% 77%

46% 54%

https://www.google.com/url?q=http://www.worldbank.org&sa=D&usg=AFQjCNHyD2vTDfK_Bzx8hZLTGzlGZKok5Q

The concept of privatization is linked to the ownership and operations of assets


Privatization of the Healthcare Sector Ownership: privatization refers to the transfer of ownership and management of publicly owned assets to the private sector. Privatization has been described as a tool used by public sector agencies to improve efficiency or lower costs (Gardner & Scheffler, 1988).







Switzerland (2013) US (2016) Germany(

2012) Canada (2014)

UK (Public2016; private

1998)

France (2012)

Korea (2007)

Turkey(2012)

Russia(2013) KSA(2016)

publicly owned hospitals 21% 20% 26% 20% 52% 35% 6% 55% 99% 69% Private non for profit hospitals 28% 58% 32% 58% 16% 26% 94% 7% 0% 0% private for profit hospitals 51% 21% 42% 21% 32% 39% 0% 38% 1% 31%

0%

20%

40%

60%

80%

100%

120%

Hospitals Ownership

publicly owned hospitals Private non for profit hospitals private for profit hospitals

May be Sultan Bin Abdulaziz Humanitarian city

[CELLRANGE]

[CELLRANGE]

[CELLRANGE]

[CELLRANGE]

[CELLRANGE]

[CELLRANGE]

[CELLRANGE]

[CELLRANGE]

[CELLRANGE]

[CELLRANGE]

0%

10%

20%

30%

40%

50%

60%

0% 20% 40% 60% 80% 100%

Least privatized but privately funded Mostly privatized and privately funded

Least privatized but publically funded Mostly privatized but publically funded

Priv

ate

Expe

nditu

res

Private Ownership

Reason to move to privatization • Lack of funding • Significant public burden • Negative health outcome • Low efficiency

Planning • Significant use of time and effort • Occurrence of abandonment • Lack of accountabilities • High operational risks

Implementation • Moving back & forth • Loss of motivation • Learning from experience • Teams realignment

Success • Synergetic teams • Ample data • Innovative models • Integrated concepts • Sustainable organization

Needs Identification Chaos Learning Flow

Privatization is a significant challenge to accomplish

Closer Look at

HEALTHCARE in the Kingdom

Similar Sized Economies Tend to Have Larger Healthcare Expenditure –KSA Spends Half of what it Could be Spending on Healthcare

HC E

xp./

Capi

ta in

US$

GDP/Capita US$

Norway

Size of the bubble represents HC.Exp

as % of GDP

Korea Cypru

s Bahrain

Brunei

Italy

Spain Portuga

l Estonia

Oman

Switzerland

Luxemburg

United States

Qatar

Sources: World Bank Country Classification 2014, World Bank Healthcare Expenditure/Capita US$ Current Prices 2013, World Bank GDP /Capita US$ Current Prices 2015e. 108 countries chosen for analysis. 1Comparable counties are defined as nations with GDP/Capita ranging from ~US$14,500 to ~US$30,000 with KSA GDP/Capita as a median

US $ 1,500 HC. Exp in countries with similar GDP/Cap

US $ 800 Current HC. Expenditure in KSA

KSA

• Lower healthcare expenditure may be result from a lower requirement of care – meaning healthier/younger population, or a lower provision of care.

• If the former is true than KSA would be significantly healthier/ than comparable countries.

• In fact, KSA sees some of the highest prevalence rates of diseases and a population which is ageing rapidly.

Healthcare resources in KSA would have to double in the next decade to manage the current burden of disease

France Germany

Hungary

Netherlands

Slovenia

Czech Average1 KSA Gap

Physicians/YLD 29 31 21 28 19 18 30 15* ~44K

Nurses/YLD 78 103 76 139 61 85 94 34* ~166K

Beds/YLD 55 65 49 39 34 54 57 22 ~110K

• Currently in comparison, the KSA healthcare sector provides only half of the physicians, one-third of the nurses and 40% of the beds required to serve the current burden of disease in KSA.

• This shortage also confirms our prior observation that the lower HC Exp./Capita is primarily driven by the lack of supply which limits the use of healthcare services in KSA.

~63% of the burden of disease is associated with 45% of the population (30+ years) which is the highest growing segment – with limited supply of care, this is expected to even worsen the current healthcare outcomes in the near future

5

4 3.5

5 3

2.5 1.3

0.6 0.5

0.15 0.13

Population millions

KSA population by age groups

Sources: CDSI Population and Labor Force 2013, United Nations Population Estimates, WHO DALYS 2012

2%

6%

6%

2%

1%

1%

Growth Rate Broad cause of YLDs

Communicable Diseases and Prenatal Conditions Non Communicable Diseases Injuries

63%

37%

% of Total Burden of Disease (YLD)

• Burden of disease is defined as the years of life lived with a disease (YLD). • 63% of the Years lived with the disease (YLD) is related to 45% of the population (30+ years age) and this is growing at 3-4% annually. • Most of the disease burden is associated with non-communicable chronic illnesses including diabetes, cardiology, neurological

conditions, orthopedics etc. • With current rates, the burden of disease will increase significantly – placing significant pressure on the healthcare sector

CAGR 2010-2014

45% of population

Age

7% 4%

9% 7%

6% 11%

39% 2%

89%

84%

83%

56%

Out

patie

nt v

isits

/Phy

sicia

n N

urse

/Phy

sicia

n

• Implementation of mandatory insurance and a general shift towards the private sector has led to a higher utilization of healthcare resources.

• In comparison with some other countries (albeit with more mature healthcare sectors), the healthcare sector in KSA sees much more utilization of both private and public sector resources.

Source: MOH Annual reports and SCH, OECD Database The number of physicians was taken as the average between numbers reported by MOH and Saudi Commission for Health

Country OP Visit/Physician Czech Republic 3,042 France 2,030 Germany 2,428 Hungary 3,825 Netherlands 1,998 Slovenia 2,525 Average 2,363

Country Nurse/Physician Czech Republic 3 France 3 Germany 3 Hungary 4 Netherlands 5 Slovenia 3 Average 3.5

Private sector is around 30% more utilized as compared to the public sector

Private sector has around 26% less nurses as compared with public sector

KSA 2030 vision is significantly geared towards increasing private sector participation and privatizing major

government services Healthcare being one of the key areas

To rise from our current position of 25 to the top 10 countries on the Global Competitiveness Index

1

To increase foreign direct investment from 3.8% to the international level of 5.7% of GDP 2

To increase the Public Investment Fund’s assets, from SAR 600 billion to over 7 trillion 4

To raise our global ranking in the Logistics Performance Index from 49 to 25 5

To raise the share of non-oil exports in non-oil GDP from 16% to 50% 6

To sell less than 5% of oil giant Aramco in IPO

7

To set up a military industry

Improving the business environment

Aramco to become a holding company and subsidiaries will be listed

All infrastructure projects in Saudi will be implemented

Aramco’s partial IPO to be biggest in history

Reduce Saudi unemployment from 11.6% to 7%

King Salman Bridge will link Europe and Asia & will provide vast building /investment chances

Saudi Arabia will open up for all tourists within our beliefs and values

Green Card project for expats living in Saudi Arabia will be ready within 5 years

Increase the competitiveness of Saudi’s energy sector Privatizing Saudi’s

government services

10

8

9

17

15

14

13 12

16

11 19 18

Mining industry target ninety thousand jobs, and to achieve 26 billion US Dollar a year

Sources: KSA 2030 Vision

To increase the private sector's contribution from 40% to 65% of GDP. 3

MOH key strategic themes include pushing significant portion of the healthcare expenditure on the private sector

Source: Ministry of Health – KSA Health System Transformation

• One key area where private sector is expected to see massive change is mandatory insurance for all citizens and expats.

• The roll-out is expected to be around 2017 under a National Health insurance program.

• This would mean ~60%-80% of Saudis would be now be insured and can utilize private healthcare facilities.

• Private sector participation will need to increase through ownership or management of current MOH facilities.

• According to some sources, whole cities (e.g. Yanbu) are to be allocated to large care providers on contract basis and measured against health outcomes which will be implemented by a new regulatory body.

Economic slow down

Inequitable distribution of

resources

Low Healthcare Expenditure per capita

Shortage in Healthcare Resources

Negative health outcomes

Shift of burden of disease toward

chronic conditions

Healthcare transformation driven by Vision

2030

Preference shift toward private

sector

Healthcare Issues necessitating Transformation

558 522

217 192

160

105

40

21

-

200

400

600

800

1,000

1,200

2015 2016

Others

Education and Training

Health and social development

Municipality

The current economic slowdown will lead to lower Government Expenditure on Healthcare ..

-19b -48%

-55b -34%

-25b -12%

-36b -6%

SAR

Billi

ons

Source: JADWA Investment – October 2016 Quarterly Update

KSA Fiscal Budget SAR Billions

• Significant decrease is seen in government healthcare expenditure where it is expected to be cut by ~34% in 2016 (in comparison to 2015).

• One major areas where this is expected to have an impact is MOH patient referrals to the private sector.

• Almost all major private hospitals serve the MOH patients

Our past, present and future

GOSI established

CNH

1966 RCH built to take

care of OHG cases

1990

National Medical Co. announced as

closed stock company

2003 National Medical

Co. is a public listed company

2013 2015 2016

Commissioning of 1st Family Healthcare Center (FHCC 1);

New strategy, Ru’ya 2020 is

released

2020

CARE doubles in size by 2020 as the 2 new

healthcare systems bolster current operations

CNH expansion

2012 Occupational medicine & LTC in CNH Hospital

launch of Care’s Prosthetics &

Orthotics Center


Privatization of the Healthcare Sector Ownership: privatization refers to the transfer of ownership and management of publicly owned assets to the private sector. Privatization has been described as a tool used by public sector agencies to improve efficiency or lower costs (Gardner & Scheffler, 1988).







Care in the privatization matrix Pu

blic

Exp

endi

ture

s

Strong Shareholders Long Experience & History Exclusive Contracts / Stable

Customers State of the Art Facilities & Med Tech Competitive Prices Supportive Leadership

Lack of Competent Staff Weak Customer Care (Behavior) Weak Patient Flow Management (Process) Lack of Leadership & Succession Planning Low Productive Employees Lack of Cost Analysis & Decision Support

System at Micro level Lack of Market Intelligence thus resulting

in Failed Projects Organization Structure Lack of Unified & Competitive Salary Scale Distorted Image Lack of HMIS Master Plan

Growing Population Increasing Awareness about Life Style Business to Business Selling Outsourcing Healthcare Market Trends International Collaborations

i.e. Clinical & Nursing Education Waste Management - Resources Utilization Home Care Services Self Paid / Uninsured / Cash Patients Operations Support to other Hospitals

(Converting CMO as a Profit Center) Building on & expanding our Core

Competencies (Pedia, Ortho, ICU)

Strong Bargaining Power of Patients & Staff

Strong Bargaining Power of Insurance Cos

Govt. Regulations Going Public Losing Exclusivity / Difficulty in

maintaining Long-term Contracts (ARAMCO, OHG)

Political & Economic Volatility in the Region

Increasing Cost in terms of Manpower & Supplies

Expansion of Competitors

Was privatization enough to solve all the issues ..?

Why CARE had to transform in 2015 toward Innovation & Corporate Integration

S W

o T

Why CARE moved on in 2015 toward ICI

Focus primarily on Patient/Client Experience and staff engagement

Patient services and hospitality were negatively impacting patient experience due to the legacy of being a public hospital dealing with Occupational Injuries

Sustainability through profitability plus quality of care

The customer segmentation was leaning more toward government funded patients and away from private payers

Regain Market Place

The relatively newer emerging competitors were noted to be progressing much faster than our existing hospitals

558 522

217 192

160 105

40

21

-

200

400

600

800

1,000

1,200

2015 2016

Others Education and Training Health and social development

Client Mix of care is 64% Governmental .. Target is to drop it to 30% (but keep the volume)

-19b -48%

-55b -34%

-25b -12%

-36b -6%

SAR

Billi

ons

Source: JADWA Investment – October 2016 Quarterly Update

KSA Fiscal Budget SAR Billions

CARE revenue mix by client

70% 50%

36% 36%

20% 28%

34% 28%

8% 16%

18% 23%

3% 18%

12% 13%

0% 20% 40% 60% 80% 100%

2020T

2016H1

Cash & Insurance GOSI Gov Aramco & Others

• Significant decrease is seen in government healthcare expenditure where it is expected to be cut by ~34% in 2016 (in comparison to 2015).

• One major areas where this is expected to have an impact is MOH patient referrals to the private sector.

• Almost all major private hospitals serve the MOH patients

Our transformation process was driven by significant factors that influenced our journey massively

From To

We still aspire to accomplish much more than what we have already gained through the privatization process

Static Dynamic

Operation Centric Patient Centric

Traditional Innovative

Disintegrated Integrated

Reason to move to privatization • Healthcare management is

not the core business of GOSI • Cost was increasing • Low efficiency • Traditional management style

Planning • Closed Stock Company • Look at cost benefit and cost

effectiveness analyses • Lack of services integration and

a lot of redundancies • unclear accountabilities • High operational risks

Implementation • Get more staff

engagement • Build competent team • Faster decision making • Clear authority matrix • New matrix organization

chart • Better communication

Success: anticipated • Integrated healthcare

systems • Innovative business

model, services & processes

• Integrated patient care..self-care & care away from hospitals

• Digital health • Build new standards for

healthcare

Care Privatization has been a significant challenge to accomplish

<2003 2003-2012 2013-2014 2015 -2016 Ruya 2020& ICI

Old Management style followed by Public Sector

Closed Stock Company: First Step Towards Privatization

IPO: Next Step toward privatization & transparency

Transformational Strategy toward Innovation & Corporate Integration

Ruya 2020: CARE Strategy 1. Business Growth

• Grown organically (Internal) and new investment (External) • Improve service value & Optimize operational & financial performance • Centers of excellence for specialized service lines • Introduced new lines of health and innovative medical services

2. Operational Excellence

• Hospitals to have improved through Transformation and enhance the operations up to best practice based on already established good proven procedures (JCI / CBAHI)

• Improved Patient Satisfaction • Improved Staff Satisfaction

3. Human Centric • Focus on the total health of the human being and be patient centric (the human being from cradle to

grave) as well as the internal staff • Delighted patients with high Patient experience satisfaction (+25% on current level) • Motivated staff with high engagement • Saudization Program and Development • Education Programs and Green Policies in place

4. Organizational Health • Clear Vision and strategy supported by internal culture and good governance • Ensures the business continues irrespective of conditions • Excellence in executing the strategy and delivering performance • Achieved high Compliance with all internal and External requirements • Aligned organization in well structured organization with clear lines of responsibility and Seamless

operations

Honeycomb model’s timeline and outcome by 2020

28

Feasibility

Riyadh Hospital Construction

2016 H1

2016 H2

2017 2018 2019

Clinics Jeddah

Clinics Riyadh

Jeddah Hospital Construction

1 PMO Bid &

Procure

Design

2

4

5 6 7 8 9

Milestones: 1- Back-to-back meetings with 2EAC (engineers, architects and contractors) 2- Concept design 3- Schematic design 4- Detailed designs 5- 9 Biannual progress reports

Clinic Hospital

Milestones (High Level)

In order to offer a patient-centric care model, NMC Co. wishes to deploy a honeycomb hub and spokes (ICI) model with ambulatory polyclinics serving each hospital. This would include one hospital and four ambulatory polyclinics in Jeddah and a replica in Riyadh

3

Fund raising

PMO as an extension of NMC Co.

Although the results are significantly “good”- the process is not without

pain/challenges

Cultural Difference

Loss of Synergy

Disintegrated

process

Lack of scientific process

Lack of Authority

Lack of accountability responsibility

Availability of Accurate

Data

Total score

Low staff satisfaction

Low patient satisfaction

Low client satisfaction

High operational risk

Disruptive Decision making

Unethical conduct

Higher financial risk

Challenging nature leads to a significant time/effort going towards putting out fires on a day to day basis

Low impact Medium Impact High Impact

Privatization is painful

Lack of accurate data allows for significant gaps in performance measurement which leads to higher operational risk

• Most people do not take responsibility of decisions that have been made

• Lack of authority or formalization causes a significant slow down in major decisions that need to be made urgently

Blind decisions or heavy reliance on external parties for support which causes further disruption in operations

Lack of authority allows gaps in operational performance that can go unchecked for significant amount of time

CARE Achievement since 2015 St

ruct

ure •Family Healthcare

Center •Mobile Clinics

•Expansion of CNH •Addition of

Services in CARE Hospitals

•IT infrastructure redesign toward digital health

Stra

tegy

Ruy

a 20

20

•ICI Model •Growth Strategy

•Operational Excellence

•Private Private Partnership (CPO)

•New Authority Matrix

•Change management

•Internal & External Communication Strategy

Prog

ram

s •CARE Academy •CARE Hospitals

Certified by SCHS •Patient Experience •Occupational Health

program •Innovative Pay for

Performance •Modern Performance

Management system •Coding in preparation

to DRG related regulations

Privatization Advantages

•More efficient & Cost effective • Faster and data driven decision making •Accessible to patients •Better patient experience, patient centered care •Performance oriented •Better quality of care (to attract more patients) •Coordinated care • government will focus more on public health issues

Privatization Disadvantages

•Private healthcare systems are more loaded •Profit oriented to ensure sustainability and business success (profitable services, push toward targets,

refrain from tertiary & quaternary services due to high running costs) •Ethical considerations in performance •Disappearance of free health service at the point of delivery • Fragmentation of health services and processes broken down into additional steps (intermediate steps

between patient and hospitals)

Lesson Learned from Privatization: Pros & Cons

What CARE Has to Offer? Honey Comb Model

Patients

Innovation & Corporate

Integration (Honey Comb)

Integrated healthcare

systems Focus on

Family medicine,

occupational medicine &

Long term care

Efficient Corporate

Governance+ org. structure

Successful authority

matrix Stakeholder Experience

(patient, client, staff,

shareholder)

Staff engagement Staff capacity

building Integrated teams

Performance Management System + pay

system

Organization Model (Design & Structure)

Human Capital Management

Market Identity & Brand

Service Diversity and scope/ segments

Operational Performance

International/National Recognitions & Awards

Response to Market Needs

Befo

re Traditional

Hierarchical/vertical management

model

Focuses on operations and

Finance

Confusion between GOSI &

Insurance Hospital and Care

Hospitals

Government funded Patients under GOSI Low Insured patients

Absence of monitoring output and

process measures

Absence of awards or

accreditation

Focus more on Occupational

Health

Now

Transitional between

traditional and ICI

Moving toward human centric for both patients and

staffs

Private with transition to new integrated Brand

Increasing self paid and insurance patients and

safeguarding Gvt. clients

Transition into performance

culture

CBAHI & JCIA Transition into more services

as per the market need

Futu

re

ICI model of administration

Low attrition rate High engagement

level “Human Centric”

CARE brand identity

Reaching the optimum balance

between patient care and business sustainability

Pay for Performance

and performance

Rewarding culture

Globally recognized

Excellence model

Flexibility to expand quickly

and strategically to

cater for an ever growing

demand

Although challenging we have accomplished a lot over the last decade – we aspire to reach new heights in the future with a new model of administration

and governance – “ICI”

Initiatives

Family Health CARE Center

• Establish new healthcare concepts such as Family Healthcare Center

Mobile Hospital

CARE Prosthetics &Orthotics Center

What Is Innovation & Corporate Integration (ICI)

ICI Model • The establishment of a disruptive innovative business

operational model at hospitals with the adoption of the concept of learning organization that brings the re-focus on patient and families

• This model should have a positive impact on patient care, process efficiency & integration, corporate innovation, budget containment, and service value perceived.

• ICI model functions through matrix/hybrid organization structure.

CARE is the only

existing privatization model in Saudi Arabia that is being under major

Transformation since 2015

Thank you

a sustainable privatization · government & private health insurance & some contracts with...

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