Wholesale reform of a healthcare system with a 2018 budget of US$40bn and serving almost 30 million people doesn’t happen overnight. There have been reports of delays and uncertainty – but we hear those inside the system have more confidence than foreigners looking for an opportunity. Who is right?

This week one well-placed source told us he is seeing a hive of activity in Saudi Arabia around healthcare reform driven by “seriously impressive” ambition, combined with the money to make it happen. But we hear those expecting big announcements of partnerships with international operators this year will be disappointed, although a law on PPPs is more likely.

Massive ambition but slow progress 

Why is progress so slow? One source tells us: “The government’s attitude is: can we change the world today? If not today, tomorrow? But the reality is more complex. I don’t think there is anything massively going wrong, the issue is one of complexity. This will take longer than initially imagined.”

We recently heard there was disagreement between Saudi ministries over what healthcare PPPs would look like. Our source says it might look turbulent to outsiders but delays are understandable, and probably wise. A law could happen this year but it’s hard to know.

“You’re better off working out the model rather than going headlong into the whole thing. Building things and accessing kit are easy, it’s about people and governance and getting that right. Otherwise you have sporadic progress with people doing little things in their own siphons. To get volume and quality you need to be able to centralise and create the right model for you and the operator coming in, so that they can make a profit and upgrade your system and quality, without costing you a fortune.”

Problems remain on corporatising healthcare assets to make them privatisation-ready: “You are putting corporate and economic discipline into something that has never had it. That’s not a criticism; you could say the same about some healthcare systems in Europe.”

First movers 

Unsurprisingly, some big players are watching this developing market with interest. We hear big European suppliers such as Siemens are looking for operators to partner with to offer outsourced lab and imaging services alongside the equipment they are selling.

Our source adds: “Siemens have put a lot of kit into Saudi so they’ve got an interest in making it work properly. To structure and organise and get the best value from these outsourced services like labs/imaging, the starting point is discussions with those who’ve done it in other countries, know how to work with governments how to build good systems and drive good performance. As the supplier you get a big bang effect by having a partner come in with you rather than a local group but you don’t just come over with a load of your fellow countrymen.”

When asked who else would be looking to Saudi, they point to groups who’ve entered the region already: Labcorp, Synlab, Cerba and Unilabs are all in neighbouring UAE, with reports that the latter is effectively doing public lab services by working with Diaverum in Saudi who provide dialysis services to the government. Other large international operators such as Affidea are also examining the sector closely. And the country is already a big exported specialised lab test market for most of these operators.

“Most internationally-focused operators are at least aware of the opportunities down the line, with some actively following them. People are looking at the Middle East and Saudi is the jewel in the crown. They are waiting to confirm that they can get a good deal.” So if one enters, the others will follow. In other services, NMC and Air Liquide have been buying in the country’s existing private sector.

Mutual benefits 

Making sure these partnerships work for both sides is key, and there are dangers in rushing into partnerships in a race to get big names in. If you burn your relationship with the first few operators who enter, whether by underpaying or not delivering on promises, you risk turning everyone else off and then being forced to fork out huge amounts for the remaining companies who are willing to come in.

But eagerness to move things along can lead to opposite problems like overpayment which may have happened in dialysis: “You also want to make sure that you are not giving excess value to an operator either.”

Those seeking opportunities in Saudi should look at it as a long-term game. If it’s successful, other countries in similar positions will have a blueprint for wide-scale healthcare reform that heavily involves the private sector. That’s a much better prospect, for all healthcare operators, than lucrative opportunities in the short-term.