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
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A Sustainable Privatization · Government & Private Health Insurance & Some Contracts with ... of publicly owned assets to the private sector. Privatization has been described as
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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
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 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).
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
publicly owned hospitals Private non for profit hospitals private for profit hospitals
May be Sultan Bin Abdulaziz Humanitarian city
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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
Full Government Control Government & Private Health Insurance & Some Contracts with Private Hospitals Full Privatization
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).
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
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
• 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)
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
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