Chapter 2
Review of Relevant Literature
Introduction
The concept of privatisation falls into the doctrine of disaggregation and decentralisation of public services, and the promotion of competition in the provision of public services. Privatisation as ‘an umbrella term that has come to describe a multitude of government initiatives designed to increase the role of the private sector. Privatisation includes different forms of alternative service production and delivery schemes. In general, there are nine forms of privatisation (Ascher, 1987), however, privatisation of hospitals falls into the public-private partnerships. This literature review aims on analysing the current privatisation of public hospitals in KSA.
Health System in KSA
Mufti (2000) describes the health system in Saudi Arabia in terms of classification system that has been found to be useful in terms of both understanding the performance of the system as well as focusing on the key policy control levers. In general terms, health care is regarded as a right for all Saudi citizens and pubic sector expatriates. According to the Cooperative Health Insurance Council (2002) Saudi Arabia has universal coverage and there are two different coverage groups: the Saudis and expatriates working in the public sector and the expatriates working in the private sector. Saudis and expatriates working in the public sector have the opportunity of a free health care in Ministry of Health (MOH) facilities as well as other public specialised facilities. The new privatisation of hospitals which is being phased-in requires employers to purchase private healthcare services for their employees. There are certain benefits are indicated in the context of Saudi Arabia universal coverage. Saudis and public sector expatriates are eligible for a comprehensive package of benefits including public health, preventive, diagnostic, and curative services, and pharmaceuticals with few exclusions and no cost-sharing.
Most services including state of the art cardio-vascular procedures, organ transplants, and cancer treatments (including bone marrow transplants) are covered. Sponsors/employers are responsible for paying for an extensive package of services for private sector expatriates. However, in reality Saudi Arabia health sector in terms of the establishment of a large private and cooperative health insurance industry, higher health care utilisation and expenditures for expatriates as a result of a more formalised insurance coverage, an effective insurance policy or structure, and the need to develop accreditation standards for hospitals. Hence, the government of Saudi has been able to consider privatisation of their hospitals.
Privatisation of Hospitals in KSA
Saudi Arabia and Privatization of health care sectors
Similar to other countries, Saudi Arabia has been employing its own system of healthcare provision. Issues and reforms about healthcare provision have been observed in the country. In 2002 (Agence France Presse English), the Saudi health ministry has implemented the bylaws of a compulsory scheme of Islamic healthcare provision to be provided in the kingdom. The bylaws become effectual after three months but the healthcare provision, specifically privatisation has been applied gradually over the next years.
In this privatisation, private entities will be responsible for the people, but the amount has to be settled between employers and insurance companies. Private Hospitals will demand insurance from different individuals which would cover most medical services except AIDS treatment. Mental disorders, excluding chronic cases, transplants, needless cosmetic surgery and other insignificant medical services are not part of the program either. The system, which is patterned after the interest-free system in Islam, will relate to companies with greater than 500 expat workers within a one year, companies with over 100 employees within two years, and other within three years. Every foreigner residing in the country must be included under the system excluding government employees. The healthcare provisions a requirement in attaining a legal residence permit. A number of specific insurance companies will be pre-qualified by the ministry of health to render the medical services.
The utmost financial coverage for a person under the scheme is 250,000 riyals, which is about 67,000 dollars, based on the bylaws. Most affiliates of the Gulf Cooperation Council, which includes groups from Qatar, Saudi Arabia, Bahrain, Kuwait, United Arab Emirates and Oman, impose compulsory healthcare provision on foreign employees. Housemaids and foreign civil servants are the only ones allowed to obtain medical action at the public hospitals in Saudi, while the rest of the foreigners must be directed to the private sector.
According to Reece (1997), the country had also merged with other foreign countries so as to improve the country’s healthcare provision system. Bupa, the biggest health insurer in Britain, had made a joint venture with the Saudi Arabian market although the concept of healthcare provision at that time was not recognized by Islamic practices. The insurer has signed a deal with the Nazer Group, chaired by Sheikh Hisham Nazer, the ex-oil minister of Saudi Arabia, to sell a range of healthcare provision policies to the kingdom's 19m people of whom 6m are ex-pats. These include policies for the very rich and those less well off. The 50/50 joint venture involves the setting up of Bupa Middle East in Bahrain which can then establish operations in Saudi under the sponsorship of the Nazer Group.
The present market for private healthcare provision in Saudi is small - pounds 58m was spent in 1995, accounting for 37 per cent of Saudi total healthcare spend - however only 2 percent of the population is included. The Saudi national health system has suffered cut backs and does not cover ex-pats. People with healthcare provision are believed to be 330,000; there are 80 private hospitals providing 7,000 beds. However, despite the cultural problems with insurance, the concept is gaining acceptance. From 1991 to 1995, the overall insurance market grew from pounds 290m to pounds 500m. Bupa now covers more than 1m people outside UK mainly in Ireland, Spain, Hong Kong and Thailand. It recently made a site visit to India but last week said it had made no obligation to the country (Reece, 1997).
Similar to other countries, developments of the privatization of health care sectors in Saudi Arabia has progressively developed in scope and financing. It
has facilitated the entire populations to receive conventional health care in place of the class-based disparities of the private market. In the following chapters, the benefits and effects of the healthcare provision systems in the country will be further analyzed.
The government of KSA faces new issues as it continues to finance health services for their rapidly growing population of approximately 23.9 million. Accordingly, the government has earmarked .48 billion of healthcare and social care in their 2004 budget, which make KSA the largest market for healthcare facilities and equipments and services in the Arabian Gulf, with the MOH, accounting for 65% of the market (Hartoqa, 2005). The Saudi’s MOH has been and still considered as the largest provider with 193 hospitals which represents close to 58% of the total number of hospitals. On the other hand, the private sector (healthcare) came in the second position with 101 hospitals and other government organisations possessing 39 hospitals.
In year 1999, the government passed various regulations which restrict residents and expatriate access to public hospitals with their intention of passing on the financial burden to private insurance companies through the cooperative medical insurance. In June 2002, the Council of Ministers has approved a new health bill that established an intensive network of health services in KSA, which include the privatisation of some state or government hospitals as well as the imposition of mandatory health insurance on the approximated six million expatriates in KSA. Such move of the government has been the growing issue in the Kingdom.
According to Reece (1997), the country had also merged with other foreign countries so as to improve the country’s health insurance system. Bupa, the biggest health insurer in Britain, had made a joint venture with the Saudi Arabian market although the concept of health insurance at that time was not recognised by Islamic practices. The insurer has signed a deal with the Naser Group, chaired by Sheikh Hisham Naser, the ex-oil minister of Saudi Arabia, to sell a range of health insurance policies to the kingdom's 19m people of whom 6m are ex-pats. These include policies for the very rich and those less well off.
The 50/50 joint venture involves the setting up of Bupa Middle East in Bahrain which can then establish operations in Saudi under the sponsorship of the Naser Group.
The present market for private health insurance in Saudi is small - pounds 58m was spent in 1995, accounting for 37 per cent of Saudi total healthcare spend - however only 2 percent of the population is included. The Saudi national health system has suffered cut backs and does not cover ex-pats. People with health insurance are believed to be 330,000; there are 80 private hospitals providing 7,000 beds. However, despite the cultural problems with insurance, the concept is gaining acceptance. From 1991 to 1995, the overall insurance market grew from pounds 290m to pounds 500m. Bupa now covers more than 1m people outside UK mainly in Ireland, Spain, Hong Kong and Thailand. It recently made a site visit to India but last week said it had made no obligation to the country (Reece, 1997). Similar to other countries, developments of the insurance systems in Saudi Arabia has progressively developed in scope and financing. It has facilitated the entire populations to receive conventional health care in place of the class-based disparities of the private market
Reasons for Privatizing
One of the complexities which need an extensive consideration is the issue with regards to the management of change. Gauld (2003) predicted that following the lead of ‘managerialism”, public would gain the general recognition as the next guide paradigm for public administration and policy. He further contends that nearly all government activity would be designed so as to formulate policies and services that will promote the health of the general public (Gauld, 2003). Primarily, public health policy would address the need to develop policy across government for healthy population as opposed to the present situation where the individual government agencies develop sector-specific arrangements often with minimal consideration of health impact.
Managerialism effects on public heath are two-fold. It has both advantages and disadvantages. The adoption of independent Ministry of Health has incurred significant changes in the status of public health in the country. Thus, its de-commissioning underscored a downside of managerialism; that governments often like to maintain central control over potentially contentious areas, and that some public health strategies, at least in the short-term, worked against the narrow emphasis on economy (Bandaranayake, 1994; Hutt and Howden-Chapman, 1998). Meanwhile, researchers are at odds in coming up with a conclusive findings about the effects of managerialism in KSA’s organisational configurations. Such effects involve “proliferation of government agencies and corresponding fragmentation of services and policy capacity, and incapacity to provide timely responses to policy challenges (Mallard and Cullen, 2001).
For the previous decades, public administration in KSA has been marked with uneven change in its goals following constant change in the institutional arrangement. As early as 1980, KSA’s public governance and policymaking started to adopt the principle of “new public management” (Boston et al, 1996; Stretton and Orchard, 1994). It highlights the importance of the economic and managerial performance as then key indicator of the government’s overall performance. Gauld (2001) concluded that such co-existence of managerialism and the ongoing public sector restructuring has been overwhelming in the health sector. But it seems that, these changes do not even help the health care system.
Accordingly, KSA has been planning to privatize large parts of their health care sectors to be able to meet the surging needs for medical services better. The government of KSA believed that as the revenue of the oil trickles down into their economy which increases wealth of the household, the demand of having better healthcare service delivery is rising in the nation. However even oil-rich KSA s blanching at the spiraling t costs and is accepting private sector involvement. According to the Saudi Arabian General Investment Authority, there are plans to privatize or outsource healthcare sectors management, specifically the 218 government or public-owned hospitals.
Saudi Arabia is financing more than three-quarters of the healthcare sectors in the region, which is considered as unsustainable because of population growth projections, and also the spiraling healthcare costs that should be shouldered by the government. In addition, Saudi Arabia also considers another 2,000 clinics and hospitals under construction will be placed under the management of a fund controlled by the Ministry of Health. The government of KSA is discussing whether these healthcare sectors will be privatized or their management outsourced (Wigglesworth, 2008).
The considering of involving private sector is part of a trend in the region. As mentioned by Khaled Jaouni of Ithmar Capital, a Dubai-based private equity company, the authorities all over the Gulf region were gradually moving towards being a regulator of medical and healthcare services rather than a provider. It has been mentioned that within the next five years, the healthcare and medical or hospital sectors will grow exponentially in the region.
According to some studies, rising household wealth has also caused diseases to become epidemic such as diabetes and obesity, in which healthcare providers expect to be an increasing burden on healthcare providers as the population ages. With this trending, McKinsey, the consultancy, have been able to estimate that this will entail a fivefold increase in terms of the costs of the healthcare in the Gulf to almost bn, which is due to the costs of cardiovascular diseases. Such will have the potential to tax the already overworked hospitals, healthcare providers and medical centers in KSA. Furthermore, locals often go abroad and overseas for having advanced medical treatment because of the poor standards of regional hospitals. To be able to solve such dilemma, , KSA was undergoing “a massive overhaul and transformation with many opportunities to establish a leading competitive sector. Such idea of the as a welfare state, however, is culturally steadfast and is thus a potential obstacle and barriers to initiatives which promote the greater involvement of the private sector. By turning healthcare services into into publicly funded companies, the KSA government should try to expand the country’s economic operations and also activities beyond the oil sector. Private competition among these entities is believed to have a positive affect on costs and efficiency and quality or better service.
Problems of Privatising
People avail to development of healthcare system because of its many benefits and advantages. Probably, the most significant of these benefits is the service provided by physicians. However, access to the physician’s service, vary from each country. In some countries, the official fee is payment in full under statutory health insurance, particularly if the carrier pays the doctor directly. In a few, the doctor has the right to extra-bill patients, but nowadays the frequency and financial amounts are limited. At times, extra-billing becomes very contentious. Specialists rely on extra-billing private patients for a substantial part of their income, since they are now treating increasing proportions of the socially insured at fixed fees (Glaser, 1991). Accordingly, private hospitals tend to become more costly for the patients than the government.
Health care seekers and governments should be able to o review physicians' work in order to limit costs and prevent dangerous work, specifically in private hospitals where government controls are very limited. This is difficult to do, because of the fierce independence of the medical profession and because of doctors' claims to expertise. In this regard, medical associations now insist that utilisation review is one of the activities administered jointly with the sickness funds. The methodology and the criteria for judgment are still being developed. Statistical profiles merely identify deviation from the average—excessive rapidity or fraudulent billing, for example—but the method does not control excessive treatment by the entire profession. Guidelines for good practice are being defined and computerised only now, but they have not yet gained strong professional consensus. Some unorthodox practices may still be legitimate. Even under disciplined medical organisation and standardised statutory health development of healthcare system, practice styles may vary widely among localities within a country (Glaser, 1991).
Hospital care is another problem o issue that should be considered when it comes to privatising health care (Glaser, 1991). Since government will no longer own and manage hospitals themselves. Hence, since statutory privatisation of hospitals is indispensable to the survival and modernisation of hospitals, the industry becomes a principal political force for its enactment. Statutory privatisation of hospitals is usually committed to cover the operating costs of hospitals—with neither profits nor losses. Because of the complexity of hospital accounts, the rates are usually set by a neutral regulator employed by government.
In the early years, pharmaceuticals were often dispensed by office doctors and fit into privatisation of hospitals as one of many treatments. But the creation of pharmaceuticals has become a large and powerful multinational industry, the service providers have diversified, the relations of creators and providers with governments and insurance carriers have become complex and volatile, and countries vary in the management of drug benefits under insurance. Some characteristics of statutory health insurance, such as the payment of doctors, are remarkably similar across many countries. All countries are concerned about the costs of pharmaceuticals, but their responses differ widely. Regardless of insurance arrangement, all governments in developed countries regulate the drug market to protect the public from dangerous products and fraud. European governments are becoming more alike in their requirements for testing and licensing. Every country maintains a formulary of drugs licensed for
prescription by doctors and for sale in the private market. Patients reimburse for some or all, depending on methods peculiar to each country (Glaser, 1991).
The list of benefits has become much the same, but the design of
reimbursement varies among countries, specifically for patients using private hospitals. Many require less cost sharing for children or none at all, while adult patients must pay something. Some apply the same cost-sharing rules as in acute-care health insurance; others require more in dentistry. Long-term care requires supplying, combining, and financing non-medical and acute-care services. Countries vary in their understanding of the mix and in their supply of social and personal services. Need rapidly grows because of the aging of all populations and because of policies to keep the chronically disabled out of acute hospital beds. The elderly and disabled of every country are now fully covered by statutory privatisation of hospitals for all their acute-care needs. In the past they had to pay for long-term housing, maintenance, and personal services out-of-pocket, with the help of their pensions and families. The poor without enough money and family support had to rely on public charity (Glaser, 1991).
Reference
Gauld, R. (Ed) (2003). Continuity amid chaos: Health care management and
Delivery in New Zealand. Dunedin: Otago University Press.
Hartoqa, F. (2005). Privatization of Hospitals in KSA. Available at http://strategis.ic.gc.ca/epic/site/imr-ri.nsf/en/gr123734e.html. Accessed September 3, 2009
KSA Supreme Economic Council (2008). Privatisation Objective and Policies . Online available at http://www.sec.gov.sa/Privatisation_Strategy/Privatisation_Objectives_and_Policies.aspx?lang=en-US. Retrieve September 3, 2009.
Mallard, T. and Cullen, M. (2001). Report of the Advisory Group on the
Review of the Centre. Wellington: State Services Commission.
Mufti, M. (2000). Healthcare Development Strategies in the Kingdom of Saudi Arabia, Kluwer Academic/Plenum Publishers, New York
Reece, D. (1997). Bupa takes on Saudi Arabia. The Sunday Telegraph.
Schieber, G. (2000). Health System in Saudi Arabia, Health and Social Protection Sector
Speakman, L. (2002). Privatization and PPI in Saudi Arabia. Available at http://www.planning.gov.sa/home/Home/Arabic/ALL%20PAPERS/DAY3/Privatization,%20Pricing%20and%20Regulation/6.%20%20Privatisation%20and%20Private%20Provision%20of%20Infrastructure%20in%20Sau/Speakman%20updated%20paper%20on%20privatisation.doc (September 3, 2009).
Stretton, H, and Orchard, L. (1994). Public Goods, Public Enterprise, Public
Choice: Theoretical Foundations on the Contemporary Attack
on Government. Houndmills Macmillan Press.
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