Kuwait Report






Government to spend billions on major healthcare overhaul

 

The Kuwait Government has embarked on an ambitious and far-reaching healthcare reform plan for the benefit of its citizens. Dr Mussaad Al-Razouki looks at the scope and structure of the reform plan, which includes a wide array of healthcare projects totalling billions of dollars.

The Kuwait Ministry of Health (MoH) and other healthcare stakeholders in Kuwait are embarking on an ambitious reform plan as part of the Government of Kuwait’s 37 billion KD (about US$110 billion), five year Development Plan (2010-2014), which is an amalgamation of 231 policies created by the Kuwaiti Supreme Council for Planning and Development. The first Annual Plan (2010-11) included more than 800 projects (including 40 healthcare projects) divided according to the following three echelons:

- Establishment of New Companies – where joint ownership is shared between the State and the Private Sector, usually according to a predetermined framework, such as the Privatization Law (Law 10 for 2010)

- Strategic Public Private Partnerships (PPPs) – e.g. Build Operate Transfer (BOT) Projects

- Typical Tenders for Services – i.e. Government to Business (G2B) contracts

A further approximately 1200 projects are scheduled for the second Annual Plan (2011-2012).

The Government of Kuwait is set to tender approximately $3bn worth of healthcare projects over the next year. These projects follow a similar framework used for the overall Annual Plan related projects. These include:

- Establishment of New Companies – the Kuwait Health Assurance Company (KHAC), a 1600- to 1800-bed health maintenance organisation, and the yetto- be-established Private Health Insurance Company for Kuwaiti Nationals (PHICKN)

- Strategic Public Private Partnerships – a 500-bed New Rehabilitation and Physical Medicine Hospital (NPMRH) through a Design, Build, Finance and Maintain (DBFM) contract

- Typical Tenders – the 540-, 400- and 240-bed expansion of the Husain Maki Jumaa Specialty Surgery and Oncology, Amiri General and Razzi Orthopedic hospitals, respectively

While the MoH maintains a solid end state vision of the healthcare system (separation of regulator, from provider and payor functions, with a strong dedication to improving quality and private sector participation as was done in the neighbouring emirate of Abu Dhabi), the establishment of KHAC and PHICKN are seen as strong contributors to the diversification of health system finance in Kuwait.



The 2011-2012 Kuwait Government budget will be the first time the Ministry of Health spends over KD1bn (about $3.3bn) on the operational expenditure (OPEX) of the public healthcare system. This figure does not take into account the aforementioned capital expenditure projects (CAPEX). With KHAC aimed at refinancing the healthcare costs of the expat population of Kuwait and PHICKN aimed at addressing the healthcare finance needs of the national population, the government of Kuwait is sending strong signals of cooperation to the private sector in an attempt to curb the exponential increases in public healthcare spending.

Kuwait Health Assurance Company

The Kuwaiti Government has been pursuing different mechanisms of financing its healthcare system since the 1980s. However, there is some confusion as the Kuwaiti constitution guarantees its citizens free health care (Article 15 of the 1962 Kuwaiti Constitution states that “the State cares for public health and for means of prevention and treatment of diseases and epidemics”) but, with regards to the Privatization Law of 2010, the Kuwaiti Parliament decreed that the sectors of healthcare and education should not be fully privatised. The privatisation law dictates that any government entity/asset/corporation must be ‘privatised’ according to the following framework:

- 50% will be offered to the public by means of a public joint stock holding company listed on the Kuwait Stock Exchange (KSE)

- 26% (golden operating share) will be offered to a private (technical/ financial) partner/consortium. Strong preference is given to Kuwaiti companies, particularly those already publically listed. The consortium is also encouraged to involve international technical partners and investors with exemplary track records

- 24% is retained by the State of Kuwait through the state-owned investment vehicle, the Kuwait Investment Authority (KIA)

The idea behind the Kuwait Health Assurance Company (KHAC) project was initially championed by Dr Ibrahim Al AbdelHadi, the Kuwaiti Undersecretary of Health in November/December of 2009. A Request for Proposal (RFP) was issued in on 23 December 2009 for the Strategic Analysis and Feasibility of the Project. The RFP was well received by the local and regional consulting community. A local consultancy worked on the feasibility for KHAC from January to September 2010 and the results were received with mixed reactions from multiple private sector investors.

Once the KIA and MoH reviewed the results of the consulting study, preparations were made to establish a company by law through a decree by the Council of Ministers. The company was decreed during the meeting of the Council of Ministers on 3 January 2011, thereby establishing it as the first of the Development Plan companies. On 28 February 2011 in a press release issued by the KIA, it was announced that the project would be valued at KD318 million (about $1bn), thereby making it the largest private-public partnership in the history of Kuwait.

Due to mixed reactions on the legal implications set forth by the KIA and its advisors, the final bid date has been extended three times and has been recently re-set by the KIA according to the following new timeline:



- 27 October 2011 – Last date to enter as a bidder for new entrants, last day the data room will be available, last day to integrate other companies into an existing consortia

- 13 November 2011 - Last date to submit bid bond (KD10m or $33m)

- 17 November 2011 - Financial bid day and declaration of winner

The plan for KHAC is to have the private partner/consortium bid for the 26% operating share that will guarantee the management of the three hospitals as well as provide Health Maintenance Organization (HMO) type plans for users. The KIA makes the distinction between health maintenance and health insurance, whereby KHAC will be incentivised to manage the health (preventive medicine) of its patient population rather than the treatment.

The Government of Kuwait will provide around 140,000 sqm of land (at a minimal lease price) divided in three equal parcels in the growing governates of Ahmadi, Jahra and Farwaniya. It will be the responsibility of the winning consortium to deliver at least three hospitals (1600 to 1800 beds) and 10 to 15 primary care clinics (at least one clinic in each of the six governates of Kuwait) in 36 months. The Government of Kuwait has also guaranteed the following benefits specifically for KHAC:

- Unique Designation of a Health System (only license in Kuwait) for 10 years
- Grace period for licensing and implementation
- Immediate patient flow (1.2 to 1.7 million) of expats
- Sharing of existing MoH medical records
- Staff designation before entry into Kuwait
- Free transfer of clinical staff within the system
- Use of generic prescriptions
- Unit Dose System
- Option for group purchasing with the MoH
- Preapproved assurance plan premiums with inflation considerations
- Preapproved co-payments for primary care and emergency visits
- Heavily subsidised tertiary care for 5% of pre-approved government premium

The target market for KHAC is the growing expatriate population of Kuwait. It is yet unclear whether it would be mandatory for expatriates to enrol in KHAC. It is believed that enrolment would remain optional. Kuwaiti citizens will also be able to enrol, however it is not clear whether or not the Kuwaiti Government would subsidise/take full ownership of the fees. It is believed that Kuwaiti citizens would have to pay-out-of-pocket since the Ministry of Health would still operate 5-7 government general hospitals (Mubarak General Hospital is set to be transferred to Kuwait University to be operated as an Academic Medical Center and Jaber General Hospital is set to be completed by 2014).

There are currently nine individual consortia that have paid the KD15,000 entry fee for access to the KIA data room on KHAC.

Private Health Insurance Company for Kuwaiti Nationals

Just as KHAC is endeavouring to primarily diversify the financing of expat healthcare expenditure, the Private Health Insurance Company for Kuwaiti Nationals (PHICKN) endeavours to achieve a similar level of diversified healthcare spending for the local national population of Kuwait.

In August 2011, the Council of Ministers of Kuwait highlighted the government’s intention to corporatise the healthcare insurance for Kuwaiti nationals by creating a Kuwait domiciled company that will be 50% owned by the public (with the shares most probably set to be equally distributed among the 1.15 million Kuwaiti citizens as was done for Kuwaiti Islamic Bank – Warba Bank) with the remaining 50% offered to a private sector consortium with a strong preference for a consortium that includes an international technical partner with a proven track record in delivery of health insurance products and solutions both regionally and internationally.

It is believed that the Government of Kuwait will heavily subsidise the premiums of the nationals. Judging by the government’s previous lead time on KHAC, it is expected that the PHICKN will be tendered in late 2013.

New Physical Medicine and Rehabilitation Hospital

The New Physical Medicine and Rehabilitation Hospital (NPMRH) project involves the Design, Build, Finance and Maintenance of a 500-bed Physical Medicine and Rehabilitation Hospital located in Al Andalus area, Kuwait. The project will also include the provision of facilities management services and will have a term of no less than 25 years.

The tender is currently managed by the Partnerships Technical Bureau (PTB) of Kuwait which was formed in 2008 to streamline the procurement and tendering of strategic government projects. The PTB is an independent government agency that operates under the political auspices of the Ministry of Finance. It is believed that the Ministry of Health will be part of the final selection committee and will be involved in assessing the technical proposal.

The project aims to meet the following key strategic objectives:

- Build a centre of excellence in rendering Physical Medicine and Rehabilitation services

- Promote the State of Kuwait as a regional and international centre for Physical Medicine and Rehabilitation services

- Increase and enhance the type and quality of services provided by MoH

- Provide a comprehensive rehabilitation programme for Kuwaiti citizens with disabilities, within their own home environment without language and cultural barriers and thus curtail overseas treatment

The Ministry of Health has been exploring the possibility of developing a new physical medicine and rehabilitation facility since the early 1980s. Concrete plans were put into place when Dr Abdul Rahman Saleh Al Muhailan was appointment as the Minister of Health (1994 to 1996) and as the first (and so far only) physical medicine specialist to assume the post of Health Minister. These plans were finally implemented following a Request for Qualification and Proposal Submission Transaction Advisory Services by the PTB in August of 2010. An international management consultancy and auditing company won the contract to act as lead consultants to the PTB. The results of the study are expected to be made public by Q4 2011. The new hospital, as envisioned by the MoH, will provide: Tertiary rehabilitation, geriatric rehabilitation, extended care for persons with physical disabilities, redevelopment of the prosthetic and orthotic manufacturing unit, supporting building infrastructure and facilities; and the provision of facilities management services.

As of the writing of this report, 15 different consortiums have expressed their interest in the NPMRH project.



Expansion of Ministry of Health Hospitals

Originally referred to as the ‘Nine New Medical Towers Project,’ the Ministry of Health has chosen instead to focus its expansion projects on three hospitals:
- Husain Maki Jumaa Specialty Surgery and Oncology Hospital
- Amiri General Hospital
- Razzi Orthopedic Hospital

These projects will include the design, design verification and building. As of April 2011, 12 consortia (comprising both international hospital design companies and local contractors) have been so far prequalified to bid on these three projects. It is unclear when the remaining six expansions will take place.

Future landscape

The healthcare landscape of Kuwait is as dynamic as the political landscape. The Ministry of Health is currently enjoying one of its most stable periods of leadership with Dr Hilal Al Sayer at its helm (for the past two years). Dr Hilal was preceded by six different health ministers in three years and is Kuwait’s longest serving health minister (and first physician minister), since Dr Mohammad Al Jarallah, who was Minister of Health from 1999 to 2006.

There is strong momentum within the Government of Kuwait to create an independent healthcare regulatory body, which will lead the policy development, licensing, quality assurance and the overseas healthcare functions in Kuwait.

It is the hope of all stakeholders in the Kuwaiti healthcare system that this new health authority will contribute to the stability and structure of the overall healthcare system in Kuwait, which will in turn increase the private sector’s investment in Kuwaiti healthcare, thereby improving the overall quality of healthcare services in Kuwait to benefit the most important stakeholder of the Kuwaiti healthcare system – the Kuwaiti people.

About the Author

Dr Mussaad Al-Razouki is the Chief Executive Officer at Kleos Healthcare Corporation, a Kuwaiti WLL that provides excellence in strategic planning and management for Middle East healthcare entities including investment companies, clinical service providers, payors and government regulatory bodies.

 Date of upload: 15th Nov 2011

 

                                  
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