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A leading Saudi step in the health sector

Hospitals shift to companies and e-prescriptions are used in 800 health centers

In the framework of the ongoing development of the health system in Saudi Arabia, the Ministry of Health has confirmed that its hospitals and health centers started shifting completely to companies under the umbrella of Health Holding Company. The Ministry is awaiting the approval for the establishment of this company and stated that electronic prescriptions will be implemented in 800 health centers by the end of this year and the patient can use them in any private pharmacy. These steps fall within the context of an integrated plan to develop the health sector to better serve the citizens as part of a comprehensive strategy to promote all sectors in the Kingdom.

Saudi King Salman Bin Abdulaziz had previously agreed to adopt the transformation of government hospitals into companies, and making public health a policy and priority in all laws and regulations. This requires the work of all government parties to achieve this goal so that health becomes a priority in all policies. Accordingly, the Ministry of Health, represented by the Vision Realization Office, called for participation in the pre-qualification program for companies in preparation for the submission of proposals in the “Job Transfer Plan” project within the objectives and initiatives of the National Transformation Program and the framework of general competition.

The ministry explained that the project aims to establish a complete set of specifications required to manage the transfer of 220,000 employees from the current to the future health system, indicating that the transfer process would provide a clear approach and implementation plan for the job transfer, including linking existing employees to future jobs, determining staff options as well as areas with excess or shortage of staff,  preparation of evaluation methods and the establishment of a staff database.

The ministry said that the project will be presented later, noting that the deadline for the submission of the qualification files ended on March 14, 2019, making the beginning of the contract during the current year, with a 10-month duration. It also stressed that the plan should be implemented with a trial launch on specific segments of employees while using the trial results to improve the overall administrative staff transfer process. The ministry added that the objectives of the trial launch were to develop and plan the transfer of personnel and service providers from the current Ministry of Health, taking into account existing capacities, required competencies in the future and staff options.

According to the published data, it announced in 2017 that hospitals and health centers will be separated from the ministry and they will be converted into public sector companies to compete with one another on the basis of quality, efficiency, productivity, reducing wastage, speedy decision-making and decentralization. The ministry will focus on its supervisory and organizational roles once health centers and hospitals are separated from it.

Regarding the electronic medical file, Dr. Khalid Al Shaibani, Deputy Minister of Health for Planning and Director Vision Realization office, explained that this project is of interest to the Ministry. We aim by 2020 to have 40 percent on an electronic file, although we have so far achieved 21 percent, and we are working on this vital and important project. As for the electronic prescription and its use in private pharmacies, Al Shaibani stressed that the trial work started with the coverage of 80 health centers in the Eastern region. We will have 800 health centers in different regions by the end of the year, where the patient will be given the e-prescription “Wasfaty” to be used in any private pharmacy.

A New Economic Vision

Converting hospitals into government companies means separating health services from the ministry, which will focus on its supervisory and organizational roles. A statement previously issued by the ministry, explained that this decision “aims to apply the private sector methods in terms of efficiency, increasing productivity, reducing wastage, speedy decision-making and decentralization.” The provision of services will be through groups consisting of primary care, public and specialized hospitals serving a population. Companies in the Kingdom will manage these groups, which will increase the ministry’s focus on its supervisory role.

Saudi Arabia has recently started the implementation of a new economic vision aimed at reducing dependence on oil and rationalizing government spending. There were also clarifications to dispel fears of Saudi citizens that this would eventually lead to the privatization of the health sector. But Ministry of Health spokesman Mishal Al-Rubaian said that “the decision of the Ministry of Health to convert its affiliated hospitals into government companies means the shift of performance to the corporate system and not privatization,” explaining that the disbursement of financial budgets to these hospitals will change. 

Saudi Arabia has thus reinforced the steps of implementing its strategy of diversifying the economy by moving the health sector to a new stage through transforming health facilities into companies that resemble private companies but are managed by the state. Experts stress that this pattern will reduce the burden on the state budget and will increase revenues, create new job opportunities and contribute to the development of health services.

According to official statistics, there are 288 state-owned and 127 private hospitals. The Ministry of Health aims to improve the effectiveness of these facilities and increase their focus on the supervisory and regulatory roles to boost the entire health sector, with the government retaining full ownership. The important strategic objectives of the National Transformation include increasing the private sector share of spending through alternative financing methods and service provision, increasing the efficient utilization of available resources and improving the efficiency and effectiveness of the healthcare sector through the use of information technology and digital transformation.

“The shift in the health sector will make a quantum leap in the quality and speed of service and focuses on enhancing the health of citizens and preventing them from diseases,” said the Minister of Health Dr. Tawfiq bin Fawzan Al-Rabiah in a series of tweets on his official Twitter account. Minister Al-Rabiah says that the transition process in the health sector will be gradual over several years because it requires a change in many policies, procedures and regulations.

A local media had earlier quoted a source from the ministry as saying: “The program will be implemented in six phases, which will take three years, and the first phase will be implemented in Jeddah.” Saudi economists say this shift in the sector is one of the main objectives of Saudi Vision 2030, which is about changing the strategic methods of managing the country’s sectors in the future and increasing their efficiency.

Ongoing quality services

This new transformation will not affect the services provided to the Saudis as Mishal Al-Rubaian confirmed the continued provision of free treatment services to citizens following the plan to develop the public hospital management system in the Kingdom. He explained that the government companies that will own the hospitals under the new plan will be treated according to the system of outputs and not inputs and will receive their financial budgets from the state according to the performance and service provided to citizens. He said that the implementation of the transition into companies will take years and there are committees working at the moment to implement this plan. 

He also stressed that the concept of buying the service from government companies that will be established, reflects the budgets that will be paid to companies that will manage public hospitals, in relation to their performance in the service of citizens.

The government allocated 120 billion riyals ($ 32 billion) in the 2017 budget for healthcare and social development. The Ministry of Health stated that a “health insurance program and purchase of health services” will be established in order to implement a new mechanism for financing companies in accordance with the strategic procurement methods.

According to the National Transformation Program, the private sector’s contribution to healthcare is targeted to rise from 25% in 2017 to 35% by 2020, bringing new opportunities for private hospitals. A report issued by experts at NCB Capital considered the health sector a defensive sector supported by growth prospects and strong demand amid the increasing population. Healthcare spending accounts for 48% of the Saudi 2018 budget, according to ARDENT Advisory & Accounting. One of the main objectives of Saudi Vision 2030 is to increase the contribution of the private sector in various areas of the economy.

Benefits and profits

Economists stressed that this approach will raise the level of competition in the quality of performance, health services and buildings, while it will stop the waste of national wealth. Experts noted that there would be no place for health authorities that show no interest in quality in the presence of health insurance and mandatory health insurance. They pointed out that the management of hospitals will be through a holding company and about 5 subsidiaries in different regions. 

The Ministry of Health announced that it was determined to establish a health insurance program and to formulate and implement a new mechanism for financing companies through the purchase of health services. 

Experts welcomed the ministry’s new approach, which focuses on the concept of quality in service and reduces the waste of national wealth, pointing out that the Ministry of Health is one of the largest ministries that deplete the budgetary resources as a result of the spread of health services in all regions, cities and villages.

Health services in several hospitals did not meet the quality requirements as a result of inefficient hospital and health services management, despite huge spending on healthcare.

They pointed out that the statement of the Ministry of Health on the transformation of hospitals and health centers into companies, included the transition to practical application to what has been previously announced in this regard to promote competition in the health sector on the basis of quality that will be in favor of the consumer or beneficiary.

They said that the aim is to stop the major waste in the state budget allocated to this sector and remove part of the burden on the state to become the sector’s supervisor and observer, to work efficiently and effectively to achieve the best performance by adopting the quality in service. Insurance companies will be an important player at this stage, thus, insurance will be the basis of service provision. 

They pointed out that the idea of converting hospitals into public sector companies ​​came from the idea that services related to the citizen cannot be managed efficiently and effectively through the public authorities, not only in Saudi Arabia but worldwide, so countries that turn to the privatization in healthcare are progressing significantly in this field, because government hospitals that have recently turned into private-sector hospitals have found themselves competing with private hospitals.

Studies indicate that many investments have been directed to the establishment of state-of-the-art hospitals, in addition to the reconstruction and maintenance of existing hospitals and clinics to keep pace with the approach of ministries of health, as the quality of service and buildings should only be a top priority.

Economists have reached 9 benefits to guide the public health sector to work in the corporate system:

  • Reducing the major waste of state resources.
  • Raising the level of health and therapeutic services.
  • Competing on the basis of quality in favor of the beneficiary.
  • Improving the quality of medical buildings.
  • Reducing medical errors caused by low quality.
  • The Ministry of Health will focus on its supervisory role, which will help in efficient management.
  • Strengthening health insurance programs for an organized service provision.
  • Speed in decision-making, especially in urgent matters.
  • Decentralization gives freedom to compete between the health sectors in the regions.

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