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There is more to health care than building new hospitals

NMC Health sees the virtues from operating and managing others’ assets

Dubai: For the UAE’s leading health care companies, building new hospitals needn’t be their only plan of action. They can just as easily take on the operation and management (O&M) of existing health care assets owned by others. And that can prove quite a revenue generating option, according to Abu Dhabi headquartered NMC Health.

NMC Health is now aiming for full-year O&M revenues of Dh69.7 million, and a figure boosted by its recent deal with Emirates Healthcare, which operates a network of hospitals and specialised clinics in the UAE.

“We feel the O&M business provides a great opportunity for NMC to expand our footprint across the GCC,” said Prasanth Manghat, CEO and executive director at NMC Health. “We have been able to enter into O&M agreements that have provided strong corporate operational, financial, and back-office support and relieved the burden of having to go out and recruit talent. We do it because the relationships we have entered into have been mutually beneficial for NMC and for our partners.”

But O&M agreements also have other roles to plays. The UAE’s health care sector has not been immune to the general softness in the economy, and beyond a handful of leading health care operators, there aren’t too many new investments for high bed capacity hospitals. Even for brand new clinics, health care operators are not taking decisions in a hurry.

The upfront investments on new health care assets are sizeable, both in terms of the property to be built, the expenditure on equipment and recruiting personnel. So much so, some master-developers such as Dubai South have even come up with land lease agreements to ease the cost of building hospitals at its site.

In such an environment, O&M agreements turn into a win-win situation if everything goes to plan. For the new operator, it allows them to extend their reach into new sub-territories and that too through an existing entity. For the asset’s operator, this creates a chance to improve on their income stream.

Apart from O&M deals, NMC had earlier acquired Dr Sunny Medical Centre and Al Zahra Hospital Sharjah.

“Coming off of the success of these investments, we will continue to assess potentially accretive opportunities for further expansion and diversification,” said Manghat.

For those health care operators thinking long-term, it’s still a net plus.

“Health care in the GCC – and especially in the UAE – is marked by a rapidly growing population, improving life expectancies, and a rising predominance of non-communicable diseases. There remains a large capacity gap that needs to be addressed,” said Manghat.

“With a high prevalence of life style disorders – diabetes, cardiovascular complications and rising incidence of cancer – the Gulf’s private health care system is steadily transforming from general health care to specialised care. I visualise the priority agenda for private health care introducing highly specialised services to manage medical conditions of a higher complexity.”

But these days, health care operators need to spread themselves across geographies to better manage economic cycles. NMC is making that push into Saudi Arabia, by building a new hospital as well as acquiring a stake in another.

“We have learnt a great deal over the past year and our goal is to use this knowledge to better navigate the Saudi regulatory landscape,” said Manghat. “Just last month we have received regulatory approvals to operate a 220-bed chronic care speciality Medical Centre in Jeddah.

“In addition, we agreed to purchase two existing, multi-speciality hospitals in the southern city of Najran and north-western city of Ha’il. These new assets, along with the greenfield projects, bring the Saudi Arabia bed count to close to 700. We are aiming to expand in Oman as an area where a demand-supply gap exists. As we have developed specialised verticals within the broader health care delivery, and as and when opportunities arise at a global level, we are open to expansion across any of these verticals.”