Healthcare Development Strategies in the Kingdom of Saudi Arabia

Healthcare Development Strategies in the Kingdom of Saudi Arabia

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Healthcare Development Strategies in the Kingdom of Saudi Arabia Mohammed Hassan S. Mufti M.D., F.R.C.S., M.S., A.B.M.M. Consultant in Health Administration Saudi Arabia

KLUWER ACADEMIC PUBLISHERS New York, Boston, Dordrecht, London, Moscow

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0-306-47183-3 0-306-46314-8

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To my wife Afaf A. Aldakhil, and to my children Maram, Mishal, Majed, and Mansour with the greatest love and affection and with appreciation for their support, encouragement, and patience

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Foreword This book is very timely at the present stage of development of the health care system in the Kingdom of Saudi Arabia. Dr. Mufti has demonstrated, in a convincing manner, his thorough knowledge and mastery of the health care delivery system and current issues faced by it. The book essentially asks and answers the question; now that we have all the human, technical and physical resources in place, thanks to the strong and wise commitment of the government, what roles do we have to play as planners, managers, and health care providers, in sustaining the future viability and efficiency of the health care system. I sincerely hope that health care provider agencies will read this book and reflect seriously on the strategic issues raised and the policy actions recommended in it. Issues discussed, such as the problem of coordination and integration of activities among health care providers, are very timely and extremely pertinent in light of the fast evolving economic and social environment in the Kingdom. Inefficiency, wasteful use of resources, and needless redundancy of services should never be an excuse for promoting the status quo. At long last we have a health care system that we can justifiably be proud of. We must continue to improve the quality of this system in an efficient manner. The problems we face in doing this are not insurmountable. Overall, this book raises some major strategic issues faced by our health care system and contributes significantly to the literature on the provision of health care in the Kingdom. These policy issues and the recommended policy actions will hopefully increase awareness, stimulate thinking, promote discussions, and inspire necessary action.

Abdul-Wahab Bin Abdul-Salam Attar Minister of Planning

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Foreword Healthcare is one of the main priorities in Saudi Arabia and the government has provided several organizations for this purpose. The Ministry of Health is the main governmental agency with overall responsibility for health policies and planning for the Kingdom. The private sector receives substantial support from the government and, therefore, it is steadily growing.

The support and guidance the health sector has received from His Majesty the Custodian of the Two Holy Mosques King Fahd bin Abdulaziz, HRH Prince Abdullah Bin Abdul Aziz, the Crown Prince and the Chief of the National Guard, and HRH Prince Sultan Bin Abdul Aziz, the Second Premier and Minister of Defense and Aviation and General Inspector, is unlimited. This support and guidance motivates us to provide high quality preventive, curative and rehabilitative services. Dr. Mohammed Mufti has written an interesting book: he has illustrated the healthcare delivery system in the Kingdom and put forward strategic issues, which need to be considered in the future. An appropriate prospective to assist healthcare planners and executives is now available in one volume. This book emphasizes the best utilization of resources, the financing of the health sector and suggests contemporary solutions such as National Health Insurance, patient charges, certificate of need and the important topic of Saudization.

Professor Ossama Shobokshi, MBBS, M.D., CCST, PhD, FRCS (Hon) Minister of Health

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Preface The Saudi health system has made unprecedented progress within a short period of time. The commitment to providing high quality health care to residents, and the huge investment in health care by government and the private sector, have created a level of health care infrastructures and other resources comparable with the highly developed countries. This, and the general improvement in economic and social conditions, have, in turn, led to some very dramatic improvements in the health status of the population. As in the case with most health systems, a number of problems have arisen. While some of the problems result from a worldwide phenomenon of escalating cost, population explosion and technological innovations, a few of them stem from factors peculiar to our health system--funding, organization, delivery, utilization, etc. This book discusses what I consider the main strategic issues of the Saudi health system, and suggests I hope, some ways of tackling the problems. Our health system has done very well so far. There is, however, a growing awareness that, unless some drastic steps are taken in areas of our delivery system where changes are indicated, the long-term sustainability of the system may be in jeopardy. Some of the strategic issues I have discussed in this book are already being addressed in various quarters, while others are either largely ignored or are not taken seriously. My personal belief, is that the 8 percent of Gross Domestic Product (GDP) spent on health care in the Kingdom is more than adequate. The problem, as I see it, is one of efficiency in delivery and use of services. I have, therefore, devoted a good portion of the book to the discussion of cost-containment. Other strategic issues--contract management of public facilities, coordination of activities of health sector agencies, long-term care, etc., are discussed from the point of view of containing costs and increasing efficiency. The status of health informatics in the Kingdom is discussed in depth. Advancement in medical technology is seriously changing the way health care is delivered. Thanks to the government’s readiness to support all efforts at improving quality, a good number of health facilities have the latest medical equipment and are engaging in telemedicine and other high-tech techniques for delivering care. Close cooperation among health facilities in this area of high-tech medicine will be beneficial to all and significantly increase the quality of care provided in the Kingdom.

The Author

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Acknowledgements I am deeply grateful to God for the energy and support bestowed on me during my life and in the writing of this book. I am indebted to their excellencies Dr. Abdulwahab Attar, Saudi Minister of Planning, and Professor Osama Shobokshi, Saudi Minister of Health for their kindness in accepting to write a foreword. I thank Dr. Willy De Geyndt for his wise feedback and advice. I also thank my administrative assistant, Ms. Kathleen Banks, for her help as well as Ms. Suzanne McLees and Ms. Julie-Anne Graitge for their assistance in editing the book. Numerous people in Saudi Arabia have supported this effort and have provided me with data, such as the staff of the ministries of Health, Finance and Economy, Planning, Higher Education, and of the medical departments of the National Guard, the Ministry of Defense and Aviation, and the Ministry of Interior. I am very grateful for their assistance. I also wish to acknowledge the assistance from staff of the World Bank and the World Health Organization.

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Contents Page

xix xxi

Map of the Kingdom of Saudi Arabia Acronyms and Abbreviations Chapter 1

Chapter 2

Chapter 3

Introduction The Country and Its People Government Population History of Health Care in the Kingdom Origin of Major Health Providers Ministry of Health Saudi Red Crescent Society National Guard Medical Services of the Armed Forces Medical Services of the Ministry of Interior The Five-Year Development Plans Introduction to Subsequent Chapters The Health Sector in Saudi Arabia Health Policy Environment Organization and Delivery of Health Services Ministry of Health Regionalization MOH Primary Health Centers National Guard Health Services Medical Services Department of the Ministry of Defense and Aviation Medical Services Department of the Ministry of Interior King Faisal Specialist Hospital and Research Center King Khalid Eye Specialist Hospital University Hospitals The General Organization for Social Insurance Saudi Red Crescent Society Other Government Health Providers Private Sector Contract Management of Public Hospitals Evolution of Hospital Management Achievements over the Last Twenty Years Health Status of Saudi Population Human Resources Physical Infrastructure

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1 2

2 3 4

4 4 4 4 5 5 8 9 9 9 10 10 11 12 12 13 13 14 14 15 15 16 18 18 21 23 24

Chapter 4

Chapter 5

Chapter 6

Resources Facilities Growth in Hospitals and Hospital Beds by Sector Major Diagnostic Equipment by Sector Health Centers and Polyclinics Health Information System: Current Situation Security Forces Hospital Manpower Growth in Manpower by Nationality Future Supply and Demand Saudization of Manpower Progress in Health Manpower Development Closing the Resource Gap Physician Assistants and Other Auxiliary Professionals Saudi Council for Health Specialties

27 27 29 30 31 33 34 34 36 37 41 42 42 43

Expenditures and Financing Trends in Healthcare Expenditures Why the Rising Expenditures? Financing Public Financing Occupational Hazard Insurance Private Sector Funding Voluntary Insurance Health Maintenance Future Financing: National Health Insurance (NHI) Brief Background on NHI The Proposed NHI Program First Phase: NHI for Non-Saudis What to Expect Future Financing: User Charges in Public Hospitals

44 45 48 49 49 49 51 51 52 52 54 55 55 57

Strategic Issues and Recommendations Contract Management of Public Facilities Cost Effectiveness Quality of Service Future of Contract Management in Public Hospitals Recommendations Coordination of Activities by Health Sector Agencies Need for Integration and Cooperation Recommendations Cost Containment Cost-Consciousness amongst Physicians NHI and Cost Containment Deductibles and Co-Payments

61 61 63 64 65 66 71 72 73 77 78 79

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Utilization Management Provider Reimbursement Certificate of Need Recommendations Providers Consumers Long-Term Care Facilities Attitudes toward Institutionalization of the Elderly What Should Be Done? Physician Managers Chapter 7

Tables

Conclusions Recommendations of the National Symposium on Health Sector Development and Reform Session: Achievements and Challenges Session: Healthcare Financing Session: Healthcare Provider Payments Session: National Health Accounts Session: Human Resources Development Panel Discussion Main Recommendations Summary of Chapter Six Recommendations Health Priorities and Health Policy Financing National Health Information System (NHIS) Recommended Actions Saudization Healthcare Consultants Managed Healthcare in the Saudi System Establishing the National Health Insurance Scheme Reengineering the Saudi Health System Why Reengineering in the Saudi Health System?

80 80 83 85 85 85 86 87 89 92 94 94 95 95 96 96 97 98 98 98 99 100 100 101 102 104 106 106

1. Demographic Indicators in the Kingdom of Saudi Arabia, 1993-1997 2. Non-MOH Governmental Health Services Providers, KSA, 1996 3. Health Status Indicators for Saudi Arabia (most recent years) 4. Physicians, Nurses, and Allied Health Staff in KSA, 1996 5. Saudization Percentages, 2000-2025 6. Hospital Costs and Staffing in Selected Countries 7. Hospital Beds and Bed Utilization in KSA, 1996 8. Performance Measures of Hospital Systems in KSA, 1995 and 1997 9. Comparison of Health Expenditures and Hospital Use in KSA with OECD Countries, 1995-1996

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3 16 22 35 41 68 69 70 75

Box

1. Strategic Issues and Recommended Actions

Appendix

Figure 1. Figure 2. Figure 3. Figure 4. Figure 5. Figure 6. Table A1 . Table A2. Table A3. Table A4. Table A5. Table A6. Table A7. Table A8. Table A9. Table A10. Table A11. Table A12. Table A13. Table A14. Table A 15.

Health Regions in KSA Ministry of Health - Health Net Topology Percentage of Immunization Coverage in KSA (1996) Incidence Rates of Vaccine Preventable Diseases, 1987-1996 Number of Cases Transferred Abroad for Treatment, 1982-1992 MOH Organizational Chart Hospitals and Beds in all Health Sectors and Rate of Beds/10,000 Population (1992-1996) Total and Project Expenditures of MOH in 1st, 2nd,3rd and 5 Five Year Development Plans Hospital Beds in other Government Sectors by Specialty (1996) MOH Health Centers by Region (1992-1996) Physicians, Nurses, and Allied Health Personnel by Provider, KSA (1992-1996) Financial Appropriation of MOH in Relation to Government Budget 1990-1997 (SR 1,000,000) Comparative Health Status Indicators (Most Recent Years) Comparative Budgetary Resources Indicators (Most Recent Years) Hospital Costs and Staffing (Selected Countries) Development Plans for Physicians Through 2025 Development Plans for Dentists Through 2025 Development Plans for Pharmacists Through 2025 Development Plans for Nursing Staff Through 2025 Development Plans for Health Specialists and Technicians Through 2025 Directory of Health Care Organizations

62 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128

Notes

129

Bio for Dr. Mohammed Mufti

135

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The Kingdom of Saudi Arabia

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Acronyms and Abbreviations AABB AFMS ALOS AMI ARAMCO AT&T BCG CAP CT Scan CICS COBOL CON CSB DPT DRG OPV EPI FTE GAMA GB GCC GDP GNP GOSI GP HBO & Co. HCA HIS HMO HSCC IPA JCAHO KFSHRC KKESH KSA LAN MB MCBA MEDITEC MENA MHC MODA MOF

American Association of Blood Banks Armed Forces Medical Services Average Length of Stay Arabian Medical International Saudi Arabian Oil Company American Telephone & Telegraph Calmette-Gukrinbacillus (immunizing agent against TB) College of American Pathologists Computed Tomography Customer Information Control System Common Business Oriented Language Certificate of Need Civil Services Bureau Diphtheria Diagnostic related group Oral Polio Vaccine Expanded Program of Immunization Full-time employee General Arabian Medical and Allied Services, Ltd Gigabyte (unit of data storage equal to approx. 1000 megabytes) Gulf Corporation Council Gross Domestic Product Gross National Product General Organization for Social Insurance General Practitioner Huff, Barrington & Owens Company Hospital Corporation of Arabia Health Information System Health Maintenance Organization Health Services Coordination Committee Independent Provider Association Joint Commission on Accreditation of Health Care Organizations King Faisal Specialist Hospital & Research Center King Khalid Eye Specialist Hospital Kingdom of Saudi Arabia Local Area Network Megabyte Micro-computer Business Accounting System Health Information Provider Middle East-North Africa Region Managed Health Care Ministry of Defense and Aviation Ministry of Finance

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MOH MOI MOLSS MOP MPI MRI MSD NCCI NHI NHIN NHIS NHS NME OECD OS OPV PDS PHC PHCC PPO RCH RKH SANEQAS SQL SMS UN UNIX VAX WHO

Ministry of Health Ministry of Interior Ministry of Labor and Social Services Ministry of Planning Master Patient Index Magnetic Resonance Imaging Medical Services Department National Company for Cooperative Insurance National Health Insurance National Health Information Network National Health Information System National Health Service National Medical Enterprise Organization for Economic Cooperation and Development Operating System Oral Polio Vaccine Professional Drug System Primary Health Care Primary Health Care Center Private Provider Organization Royal Commission Hospitals Riyadh Kharj Hospital Saudi Arabian National External Quality Assurance Scheme Structured Query Language Share Medical Services United Nations Universal Interactive Executive (computer operating system) Virtual Address extension (line of midrange server computers) World Health Organization

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CHAPTER ONE

Introduction The Country and Its People The largest country in the Middle East, over 2.149 million square kilometers (850,000 square miles), the Kingdom of Saudi Arabia (KSA) is located on the Arabian Peninsula. It is surrounded to the east by the Arabian Gulf, and the Red Sea to the west. Yemen and Oman border on the south, and Jordan, Iraq and Kuwait on the north. The terrain is mostly desert with a mountainous region and extensive coastline; only 2 percent of the land mass is arable. Saudi Arabia does not have any rivers or lakes except dry ‘wadis’ or river beds, which contain water only during seasonal rains. The average rainfall is 3-5 inches annually with the Asir region in the southwest getting more rainfall about 10-20 inches. Saudi Arabia has a rich pre-Islamic past, the civilizations of which are only today being uncovered. Remains of ancient settlements unearthed in the Eastern Province of Arabia yield evidence of sophisticated settlements going back some 40.000 years, possibly making Arabia the “Cradle of Civilization”. As the twentieth century began, the number of nomads (or Bedouins, as known in the Kingdom) diminished substantially. Few nomads and semi-nomads, continued with their way of life, with little change in their traditional values, but many moved into urban areas where they found work in the emerging oil industry and such. Tribal distinctions became more obscured as populations migrated to city centers. Saudi Arabia as we know it today, was created only at the beginning of the twentieth century through the vision and leadership of King Abdulaziz AI-Saud (1880-1953), referred to as the Founding Monarch of Saudi Arabia. In 1902, he successfully recaptured the city of Riyadh (the first of many conquests), thus restored the fortunes of the House of Saud which, since the mid-eighteenth century, had ruled much of Arabia. King Abdulaziz succeeded in unifying the Kingdom of Saudi Arabia in 1932, and ruled till his death in 1953. Successor to the throne was his son, King Saud. In 193 8 with the discovery of oil, came economic power and recognition to Saudi Arabia and the Arab world; adding strategic and spiritual importance to the Kingdom. The traditional, isolated, poor and mostly Bedouin country began to modernize. A progressive and persistent evolution has touched every aspect of life in Saudi Arabia. Culturally, socially and economically, we have witnessed change on an enormous scale.

1

Government Saudi Arabia is an Islamic monarchy, which has been gradually developing from monarchical to ministerial rule. Its official name is the Kingdom of Saudi Arabia. The Constitution is the Holy Koran and Shari’a law. All laws and regulations are drafted then submitted to a commission of Ulema, or religious scholars, to ensure that they comply with the Islamic Shari’a. The executive and legislative branches of the Saudi Government are represented by the King, the Council of Ministers, and the Consultative Council (or Majlis Al-Shoura). The King (known as the Custodian of the Two Holy Mosques) is the Head of State, the Prime Minister, and Commander-in-Chief of the Armed Forces. The King is advised by the Council of Ministers, his advisors, and the Majlis Al-Shoura. He is assisted by the Crown Prince, or Deputy Prime Minister, and by the second Deputy Prime Minister. The King supervises and controls the cabinet, the ministers and government bodies, and observes the implementation of rules and regulations. The Council of Ministers is appointed by the King and assists him in formulating and executing his policies. The King steers national policy, guarantees coordination and cooperation between various government agencies and insures coherence, consistence and unity in the work of the Council of Ministers. The Council, as the direct executive authority, has full control over executive affairs and administration. Duration of the Council is four years, during which, or at the end of duration, it will be reformulated. The King’s role is to lead his nation, while at the same time keep in touch with the people. The Majlis Al-Shoura remains the cornerstone in government policy, for anyone can petition Saudi leaders; from the King to the governors or other prominent leaders in government. This policy contributes to the Government’s objective to safeguard Saudi traditions and the teachings of Islam. Members of the Consultative Council must be of good character, well educated, and well-qualified Saudi nationals by origin and birth.

Population The first comprehensive national census carried out in 1974 and published in 1977 put the official figures of the Saudi population at 6,939,642 persons. Eleven years later in 1985, the United Nations (UN) estimated the population of Saudi Arabia to be 11.6 million. This jump was attributed to the high birth rate among Saudis, the rapid decline in mortality rate due to improving economic and health situations, and influx of a large number of expatriates. The 1974 census showed that one out of five Saudi’s were less than five years old and one half of the population was under the age of fifteen’. The most recent (September 1992) census of the Saudi population showed that the population had more than doubled since the 1974 census, to 16,929,294, including Saudis and nonSaudis. Saudis accounted for 72.7 percent (12,304,835), while non-Saudis comprised just over 27 percent (4,624,459). The Saudi population was split almost into two, with 50.4 2

percent males and 49.6 percent females. On the other hand, the majority (70.4%) of the non-Saudis are male. The 1997 population of Saudi Arabia is 18,450,000. A World Bank estimate puts the population at 20.5 million for mid-1 997. Almost half the population is under 15 years of age while it is estimated that the proportion of Saudis over 65 is 3.3 percent. Most Saudis (70%) now live in urban settings. This compares with 1960 when only 30 percent of Saudis lived in urban areas. According to UN projections, the population of Saudi Arabia will reach 20.8 million by the year 2000, and 44.8 million by the year 2025. Table 1 below includes selected demographic indicators. Table 1. Demographic Indicatorsin the Kingdom of Saudi Arabia, 1993-97

Sources:

The World Bank: World Development Indicators 1998; World Health Organization (WHO): Demographic and Health Indicators for Countries of Eastern Mediterranean, 1996; KSA Ministry of Health, Annual Health Report 1996.

History of Health Care in the Kingdom Organized medical care began in the Kingdom in 1926, and started with the issuance of a decree establishing a “Health Department” by his majesty, the late King Abdulaziz. This department was charged with setting up hospitals and clinics at Makkah, Madinah, Jeddah and Taif. In 1927, the Health Department was renamed the “General Directorate for Health and Aid” and was appended to the Bureau of the Attorney General. A health council, comprising the director of health, the inspector general, the director of quarantine, commander of the Makkah police, the director of endowments, the mayor of the holy capital, and the chairman of Eid Zubaidah Commission, was set up under the presidency of the attorney general.2 The council met once a month to study reports from different districts, and would act to improve standards of health, take necessary decisions to avoid epidemics and maintain public health, especially during the pilgrimage season. The director of public health was the official responsible party for the execution of council decisions and would keep the government informed in all matters concerning the health of the population.

3

Because of very limited funds available, progress in health care was painfully slow. The total number of hospital beds before 1946 - in all hospitals in the Kingdom - was about 300. A relatively rapid improvement in health care followed the economic progress witnessed after 1946. By 1950, hospitals had been established in Makkah, Medinah, Jeddah, Taif, Riyadh and Al-Hasa, in addition to a good number of clinics. At this time, there were 1 11 physicians and about 1,000 hospital beds in the Kingdom. However, the available facilities were still grossly insufficient, and a major segment of the population, prior to the 1960’s, relied on traditional forms of health care.

Origin of Major Health Providers Ministry of Health The beginning of a new phase of health care in the Kingdom followed the conversion of the general directorate for health into a full fledged ministry under the leadership of his Royal Highness Prince Abdullah Al-Faisal in 195 1 .2Several directorates of health affairs were set up in different parts of the Kingdom, and each was responsible for the hospitals, clinics, equipment and technical and administrative staff under its jurisdiction. The Ministry of Health (MOH) became the main government agency charged with health care for the entire population.

Saudi Red Crescent Society The Saudi Red Crescent Society, deeply involved in emergency and other services, emerged from a charitable aid society which was established in 1935 during the reign of the late King Abdulaziz. The Society is a public institution entity with a charter that was approved by a royal order in 1966, and became the 91st member of the international Red Crescent and Red Cross Societies League.2

National Guard The medical services of the National Guard really took off after HRH Prince Abdullah bin Abdulaziz took command in 1962. Prior to this time, medical services for the National Guard were represented by a group of physicians dependent on the Management of the Guard in Riyadh, Jeddah and Damman.

Medical Services of the Armed Forces The services began with a clinic called the “Army Medical” treatment with a 10-bed capacity. The title was changed to ‘Military Health” in 1950, then “Medical Services Management”, and finally, the current title, General Department of the Armed Forces Medical Services (AFMS), in 1964. From their humble beginning, the medical services now extend to cover all land, sea and air forces, and the Armed Forces are now the second largest public sector health provider after the MOH, with a total of 4,189 hospital beds, 2,400 physicians and 5,961 nurses.3 4

Medical Services of the Ministry of Interior Medical services for the Ministry of Interior (MOI) has also had a very humble beginning. Medical services of the Security Forces began in 1968 when a small dispensary was established in Riyadh. The dispensary only provided first aid and checked eyesight, and employed only a few people. Progress was slow. It was not until 1973 that the Security Forces had their first hospital (a rented villa). This villa provided facilities for 10 male patients and 10 female patients, had three recovery rooms, a small operating room, a delivery room, pharmacy, laboratory and an inquiry section.

The Five-Year Development Plans Health services in the Kingdom are provided by a wide range of institutions covering many different functions. However, the MOH is the main government agency with the overall responsibility for health policies and planning for the entire population. The Ministry takes this responsibility very seriously, and planning is an ongoing activity. The Planning and Development Unit is headed by a deputy minister assisted by an assistant deputy minister, and a director general is in charge of planning, research and manpower development. The Unit is responsible for coordinating and planning activities with the Ministry of Planning (MOP) during the Five-year Development Plans. While taking into consideration the activities of other government and private sectors, the MOH focuses mainly on its own services. There is unfortunately little coordination in planning among health agencies. Prior to the introduction of the nation's first Five-year Development Plan in 1970, no health plan had systematically attempted to collect information and address health issues of the Kingdom in a strategic way.' Since their introduction, the series of Development Plans have formed the pillar on which activities are planned. All planning of activities in the MOH conforms to the planning schedule of the MOP, and as much as feasible, programs' objectives of development plans are strictly adhered to. Each Five-year Development Plan builds on the one preceding it and includes new situations that may arise. Any programs not completed in one plan are continued in the following plan. A review of the goals and objectives of successive Five-year Development Plans since 1970, gives a clear picture of how the health system has come a long way.2 The first Five-year Development Plan (1970-75) was drawn up when the financial resources of the Kingdom were still relatively stringent, and, therefore, its goal was modest compared to subsequent plans. The main objectives were to: • •

improve standards of sanitation, diet, services and to expand preventive health services; increase the number of health professionals and use them in a more effective manner; and

5

•

undertake studies of policies required for scientifically based plans for future development of health services that would improve the standard of health and reduce morbidity and mortality caused by infectious diseases and nutritional deficiencies.

The General Directorate for Coordination in the Ministry of Planning was created during the second Five-year health plan, indicating the importance accorded to planning, and assigned responsibilities for initiation, coordination, evaluation and implementation of health policy. This planning period coincided with the growing wealth of the Kingdom and was more ambitious in its goals than the one before. Much of the present infrastructure was built during this plan, including both preventative and curative facilities. With the expansion of facilities, shortages of health manpower became very acute. The Inter-Ministerial Health Manpower Planning Council, composed of ministers of planning, health and higher education, was created to formulate a strategy to deal with the shortage. However, the dominant priority of this plan period was construction of hospitals. The Third Five-year Development Plan (1980-85) was very much like the Second plan, in that expansion of facilities remained a high priority. The main objectives of the Third Five-year Plan period included: •

increasing medical manpower by encouraging more Saudis to go into medicine and related careers; •. improving the quality of medical care and efficiency in the administrative aspect of health science; and • continuing emphasis on preventative medicine and environmental health. Priorities of planners shifted significantly during the Fourth Development Plan period (1985-90) because much of the hunger for construction of health facilities had been quenched. The number of projects completed during the Second and Third Five-year Plans, in all sectors, was highly impressive. Other factors that helped define priorities of the Fourth Plan include the reducing availability of financial resources, and cumulative experience of success and shortcomings of the previous plans. The main objectives shifted to strengthening, maintenance and coordination. The private sector was highly encouraged to do more, while as in the previous plans, clear priority was given to primary centers. Development of medical services for the Hajj season was also a top priority. The Fifth Development Plan (1990-95) sought to address a number of important and challenging issues which have emerged from the Fourth and previous plans. Some of the issues include: • • • •

the emergence of new health problems, such as chronic health conditions and industrial and urban-related health conditions; the increasing pressure on government budget outlays by infrastructure expenditures on health; problem of an insufficient health data and information base; and coordination and utilization of health services.

6

The policies sought to offer an integrated response to the health care needs of the population, institutional issues and financial requirements for the health sector. A dominant theme of this plan period was efficiency. Primary health care was identified earlier on as the least-cost method of ensuring the good health of the population, and continued to be emphasized during the Fifth Plan. Financing health services, Saudization of manpower in the health sector, and regional balance in the distribution of primary health care centers, were the key issues of the Sixth Plan (1995-2000). With a growing population, an enormous number of health facilities and provision of high quality health services for the entire population, the burden of health services expenditures on the government budget was approaching an unsustainable extreme. That point has not been reached yet, but there is a general realization that other sources of funding are needed to complement government funding. In order to alleviate this burden on government and broaden the funding base, a system of health insurance for non-Saudis and their families is proposed in the Sixth Plan. Measures to encourage private financial institutions and insurance companies to establish health facilities are other measures to increase private source of funding. The Seventh Five-year Plan (2000-2005) is expected to be similar to the Sixth Plan. Priorities likely to be defined are the reduction in available funding and the need to increase pressures on public health providers to become more efficient. As an ever growing proportion of health budgets continue to go toward salaries and other employee (mostly non-Saudis) benefits, the objectives and strategies for Saudization of manpower, will, as in the previous plans, feature very prominently. The system of health insurance for non-Saudis and their families, proposed in the Sixth Plan, is likely to be pursued more vigorously to ease the burden of expenditures on health and government budgetary outlays. The Seventh Five-year Plan is therefore likely to be dominated by three main themes, viz: • • •

efficiency in production and use of services; increased effort at Saudization; and alleviation of financial burdens on government.

In summary, the series of Five-year Health Development Plans of the MOH reflect the prevailing situation in the country. It started with a modest goal of controlling infectious and communicable diseases, and providing preventative care to the population through the plan periods, which saw initial, massive expansion of infrastructure to the later stages when resources were stringent, necessitating efficiency in use of available resources.

7

Introduction to Subsequent Chapters Who are the key providers and how are these organized? The role and organization of the MOH, including regional primary health care (PHC) and the referral system, and other major government health providers, the private sector and contract management of hospitals will be discussed in Chapter II. What has been achieved in the last twenty years in light of the tremendous amount of investment in health sector resources? Some of the notable progress in the health sector such as the highly commendable improvement in health status indicators, the growth in the number of Saudi health professionals, and the huge number of facilities, which makes access to health care fairly easy for Saudis, will be discussed in Chapter III. Chapter IV will review the availability and utilization of health care resources, including manpower and facilities, in the Kingdom. Problems of duplication of resources among health providers and the issue of Saudization of health manpower will also be discussed. How do health expenditures now compare with three or more decades ago? Why have expenditures on health care in the Kingdom grown so fast? What are sources offunding and how has the method of financing affected efficiency in use of resources? All these and the proposed national health insurance scheme, together with the issue of introduction of user charges, will be examined in Chapter V. Strategic issues that will determine the long-term sustainability of the health system will be discussed in Chapter VI and recommendations are made. Finally, Chapter VII presents a summary of issues, recommendations and conclusions.

8

CHAPTER TWO

The Health Sector In Saudi Arabia Health Policy Environment Health services are regarded as a right of Saudi citizens. Government-funded health services, which account for about 80 percent of the total, are largely free to Saudis and public sector expatriates. Most social services, including education, health services, utilities, etc., are provided free or at a highly subsidized rate. Saudis have generally come to regard free services as their right, rather than a privilege, and expect the government to provide the highest possible quality of health care free of charge. This stems from the awareness of the enormous wealth of their country by most Saudis. The policy of free care by the government is probably in response to the acute shortage of health resources that existed before the advent of oil, when Saudis had very minimal access to modern medical care on one hand, and on the other, to the sudden increase in revenue from oil.

Organization and Delivery of Health Services Eleven autonomous government agencies and the private sector are involved in health care delivery in the Kingdom of Saudi Arabia. Each of the government health agencies provide services mostly to a defined population group and to all residents in a case of emergency. On the other hand, the MOH is the primary government agency charged with the planning and provision of services in the Kingdom. The proportion of total health services provided by the MOH is estimated at about 65 percent. Other major government health provider agencies include the National Guard, Ministry of Defense and Aviation (MODA) and the MOI, all of which provide all levels of care (primary, secondary and tertiary) to their employees and dependents, and other eligible and sponsored patients. The university hospitals provide primary and specialized level care, in addition to medical education, training and research. The two specialist hospitals, King Faisal Specialist and King Khalid Eye Specialist, provide highly specialized services to patients on a referral basis. The Royal Commission for Jubail and Yanbu provides health services to their employees and dependents at the two industrial cities. The presidency of youth welfare has a specialized sports medicine hospital. The Saudi Red Crescent Society provides emergency services to the population, and is highly active during the Holy Pilgrimage of Haj. A brief discussion of some of the more prominent agencies follows.

Ministry of Health It is the responsibility of the MOH to set plans and execute government policies on health care, and to advise other government health agencies and the private sector on ways of achieving government objectives on health. Intersectoral cooperation and coordination with sectors providing indirect health services, such as the Ministries of Agriculture, 9

Education, Labor and Social Services and Water and Waste Disposal Authority, are diligently maintained.

Regionalization The entire country is divided into sixteen health regions (Figure I). These regional health directorates are responsible for both individuals and populations, and for medical care of outpatients and inpatients. The MOH sets policy guidelines to be followed and supervises the activities of the health regions, but the regions enjoy autonomy in the day-to-day running of health affairs. Decentralization of MOH services into health regions reflects the realization that assessment and determination of resource requirements are most effective at the local level. Regionalization is also in keeping with the Kingdom’s firm commitment to the primary care approach which stresses community participation. The general directorate of the health regions started active participation in the national health planning process during the Fourth Five-Year Development Plan (1 985-90). Under the guidance of the MOH Planning Unit, the regional directorates formulate individual regions health plans. The regional health plans are combined and integrated by the MOH Planning Department to produce the health ministry component of national development plans. Participation of the regions in the planning process demonstrates a level of maturity in the system; from centralized and non-involvement to active participation by the health regions. As will be discussed in a subsequent section, the functioning of the regional directorates is adversely affected by the lack of individual budgets and spending authority. Most expenditures must be sanctioned by the MOH, in some cases requiring more than eight different signatures by MOH officials. Any reforms must seriously explore the possibility of changing current line item budgeting systems to a global budget system for flexibility.

MOH Primary Health Centers The adage “prevention is better than cure” is adopted by the MOH as the driving objective for meeting the health care needs of the population. Successive development plans have as objectives the strengthening of primary health care, as the basis of a comprehensive health services network, providing integrated health services of high quality for the people of the Kingdom. The policies pursued to achieve this goal are to provide primary health services through primary health centers established to serve both urban and rural areas. There are currently over 3,300 health centers scattered kingdom-wide6 that form the first point of contact with public health providers. For the purpose of the referral system, a group of primary health centers is linked to general hospitals which, in turn, are linked to tertiary-level care hospitals. In implementing a referral system, referral is required for secondary and tertiary-level care in all MOH facilities. The health centers have implemented most of the components of the primary care approach, have carried out population and family census within their catchment areas and opened family health files.

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The referral system is hailed as one of the most successful efforts by the MOH to control over-utilization of services. Annual rates of growth, in cost of services, slowed dramatically from up to 8 percent before implementation to as low as one percent. This is attributed to the decline in hospital outpatient visits which has decreased by more than 50 percent in some regions.7 Multiple visits to different health centers and hospitals, which took place in the past, have been eliminated or significantly reduced. At the level of primary health centers, proof of individual or family files is required before services are provided. On the other hand, files are only opened for residents of the area in which the center is located. Services in secondary and tertiary-level facilities require a referral from primary health centers, except in cases of emergency. Strengthening primary health care at the health centers and integrating services through a referral system have enabled the MOH to achieve the objectives of improving the health of citizens through greater accessibility and reducing costs of health care. The cost of services at the primary health centers is only a fraction of that incurred in hospitals.

National Guard Health Services Medical services of the National Guard are provided through the highly specialized hospital and the numerous health centers. The Guard adopted the principle of primary health care services, and has set up comprehensive medical facilities. Size and equipment of the clinics vary according to the intended number of patients. As in the case of MOH, patients must be referred from the polyclinics to the hospital, except in cases of emergency. The mobile field hospital units of the National Guard Medical Services are equipped to provide adequate medical services for national guardsmen at their training sites, and wherever they may be. Services are also provided to non-National Guard staff living in the vicinity of the clinics. Places that have few medical services, other than the National Guard service facilities, benefit from such facilities, and this is one of the factors that has raised the proportion of the population with access to medical care and the health standards of Saudi citizens. The main hospital of the National Guard, King Fahad Hospital for National Guard, located in Riyadh, is a tertiary care, highly specialized referral facility. The hospital is equipped with the latest in diagnostic and other medical equipment and has highly renowned international medical professionals on its staff. It has a helipad which is directly connected to the emergency wing. The Medical Services of the National Guard are also annually involved in the provision of medical services to pilgrims traveling to the Holy places. There are usually field hospitals in Mina and Arafat, and basic medical units and outpatient clinics in other strategic places. The National Guard has 900 hospital beds, 1,019 physicians and 1,721 nurses. In 1996, there were 34,841 admissions, 951,024 outpatient visits, and 14,030 surgical operations.3 11

Medical Services Department of the Ministry of Defense and Aviation The Medical Services of the Armed Forces, MODA, is a major player in the delivery of health services in the Kingdom in terms of resources and services provided. It is the second largest government health sector agency after the MOH with 4,189 of the 8,794 hospital beds in other government sectors, 2,400 physicians and 5,961 nurses in 1996. There were 520,649 visits, 138,666 admissions and 45,738 surgical operations in the same year. The mission of the General Department of the AFMS is the provision of remedial and preventive medical services of the highest possible standard to its personnel and their families in times of war and peace. Activities of the medical services are spread kingdom-wide: at military towns, camps, air and marine bases. In emergency cases, and in cases of disease requiring specialized care not available in other government hospitals, civilians are cared for in MODA facilities. Sponsored, foreign nationals are frequently given medical care in the highly specialized Armed Forces Hospital in Riyadh. Air medical evacuation, or flying hospitals, is a unique service of the AFMS. This project involves a fleet of planes of various types equipped to carry patients and injured people from anywhere in the Kingdom to ground hospitals. Some of the aircraft are virtually hospitals in themselves and are equipped to treat patients while airborne. The project is highly useful in a country as big as Saudi Arabia where access to very remote areas might otherwise render emergency victims helpless. The General Department of the AFMS established a field hospital that includes the necessary clinics, as well as a number of branch dispensaries distributed throughout the holy places (providing service of some sort to pilgrims at the Holy Mosque during Hajj). Helicopters of the air medical evacuation fleet are an essential component of the emergency medical services, by transporting injured persons, while surgery has been performed in-flight in other aircraft.

Medical Services Department of the Ministry ofInterior The Security Forces Hospital, established by the General Directorate of Public Security in 1973, is a tertiary care, highly specialized, referral facility providing the optimum in quality health services - both inpatient and outpatient - to the MOI personnel and their families. The Security Forces Hospital operates an internationally accredited bed service program with a total capacity of 508 beds and an average occupancy rate of 73.4 percent. The Hospital is equipped with modern biomedical equipment and state-of-the art apparatus necessary for carrying out the most advanced medical investigations. In addition, the facility maintains well equipped physiotherapy services for inpatient/outpatient care, and has a well organized ambulatory care/emergency room system, providing emergency helicopter service from its rooftop heliport which is directly connected to the emergency room. In 1997, the Security Forces Hospital had 26,854 admissions and performed a total of 9,881surgical operations. 12

As the only hospital for the MOI, Security Forces Hospital is also a referral center for other Medical Services Division (MSD) satellite clinics and works with other health care institutions and agencies to share its wide range of comprehensive health care services. The MSD has 73 primary health care centers throughout the Kingdom. The hospital participates in the provision of health care services required by pilgrims during the Hajj season through the operation of the Makkah Mobile Hospital in Makkah. By adopting the principle of primary health care services, Security Forces Hospital takes a strong stand in promoting health education and preventive medicine and places great importance on its role in educating patients on disease and preventive measures. Security Forces Hospital is an acknowledged and accredited health care facility readily engaged in medical education, seminars and scientific research, in addition to being recognized and accredited for the training of residents for Saudi Board and Arab Board certification in most medical specialties.

King Faisal Specialist Hospital and Research Center King Faisal Specialist Hospital & Research Center (KFSHRC) is the most highly specialized of all the hospitals in the Kingdom. The two main objectives of the 500-bed facility are the provision of advanced tertiary medical care, for which Saudis have gone abroad in the past, and research on different diseases, particularly in relation to the environmental and climatic conditions of the Kingdom. Services provided in KFSHRC are of a highly specialized nature, and patients are treated on referral only. The KFSHRC has all the latest medical, diagnostic and therapeutic equipment, and provides advanced medical services, such as open-heart surgery, kidney transplants, bone marrow transplants, etc. It is the main referral facility for cancer treatment in the Kingdom. Non-Saudi patients from the region and beyond are also frequently (under royal order or other acceptable sponsoring) treated in the hospital. Because of the quality and the highly specialized level of treatment provided, there are usually numerous requests from abroad for treatment in the facility.

King Khalid Eye Specialist Hospital King Khalid Eye Specialist Hospital (KKESH) functions as a referral facility and a research center for ophthalmic diseases that studies cases of and factors related to the incidence of ophthalmic diseases in the Kingdom. It remains one of the fundamental pillars of the Kingdom’s medical infrastructure assuring Saudi citizens the highest standard of ophthalmic care with state-of-the-art equipment and renowned professionals. As a highly specialized, referral facility, the hospital provides tertiary-level services for patients who must be referred by general medical committees, hospitals, health centers, eye clinics and local ophthalmologists, on the grounds that the required service cannot be provided in a less specialized facility. Patients treated are discharged for continued nontertiary care services by the patient referral source. With KKESH on a par, in terms of resources and standard of service, with the best ophthalmic facilities in the industrialized western countries, Saudis no longer need to go abroad for ophthalmic care. A regular 13

stream of sponsored, non-Saudi residents are cared for in KKESH. There were over 9,500 admissions to KKESH in 1996, and approximately 95 percent of these inpatients were treated surgically. In addition to its treatment and research for ophthalmic diseases, the hospital plays a vital role in education. In cooperation with King Saud University in Riyadh, the hospital runs a medical diploma program which prepares students for ophthalmic surgery.

UniversityHospitals The Kingdom counts six medical schools four of which have their own university hospital or academic medical center. The two most recent medical schools in Medina and Makkah have only started teaching the pre-clinical years and do not have a hospital affiliation yet. The four established university hospitals are: •

The King Abdulaziz University Hospital in Riyadh which is the oldest of the four university hospitals with 104 beds specialized in ophthalmology and Ear, Nose and Throat (ENT). The first King Saud University class of Saudi physicians - of which the author was a member - graduated in 1976 and trained at the King Abdulaziz University Hospital;

•

The King Khaled University Hospital in Riyadh which has been operating since 1982. It has 624 beds with training programs in all medical specialties;

•

The King Abdulaziz University Hospital in Jeddah has a bed capacity of 291 beds and covers all medical specialties;

•

The King Fahd University Hospital in Al-Khobar has 420 beds and also trains physicians in all medical specialties.

The General Organization for Social Insurance The General Organization for Social Insurance (GOSI), a quasi-government organization, operates a social insurance program with two branches: Occupational Hazard and Annuity Compensation.8 Subscription to the Occupational Hazard branch is required of all private companies, and financing is through payroll. GOSI operates on the principle, which is clearly stated in its regulations, that workmen and laborers should be protected from occupational hazards and should be provided with safety equipment against such hazards and resultant diseases. Employees who violate safety instructions of the Ministry of Labor and Social Services (MOLSS) are subject to increases in contributions, anywhere from 2-4 percent. GOSI is both provider and purchaser of health services to the subscriber. It provides services through its own hospitals and clinics and purchases services from private providers, particularly in areas where it has no facility. Its role in health care delivery in the Kingdom is highly significant in light of the increasing number of subscribers, as the number of industries increase, and the incentive for industries to comply with the 14

MOLSS’s Safety Standards in order to avoid financial penalty in the form of increased contribution rates. GOSI’s experience with the Occupational Hazard branch is also very useful, as the Kingdom plans a nationwide compulsory health insurance program. Benefits to subscribers of GOSI’s Occupational Hazard branch include: •

total cost of medical services, in the event of occupation-related injuries for services received in private medical facilities (no payment is necessary for treatment in a government health facility); • 50 percent of income, in cases where the subscriber was hospitalized; • if hospitalized in a government hospital, 75 percent of income for each day spent in the hospital; funeral expenses, in the event of the subscriber’s death; and • marriage grant(s).

Saudi Red Crescent Society The Saudi Red Crescent Society became the 91st member of the international Red Crescent and Red Cross Societies League. The League is a non-political, neutral entity that aims to serve humanity anywhere in the world. Tasks and responsibilities include all the activities of league members throughout the world and those related uniquely to Saudi Arabia, as a host country of the largest annual gathering during Hajj, and the resourcefulness and generosity of the Kingdom. In addition to known activities of the league, its mission includes readiness to work in wars and disasters, ambulance service, preventing epidemics, providing first-aid at sites of accidents, etc. The Saudi Red Crescent Society’s services reach a climax during the pilgrimage season. The Society establishes more than 300 first-aid centers and units in Makkah, Madinah, and on the roads used by overland pilgrims. Services and resources are also extended to victims outside the country by the Society, especially the distribution of material and foodstuffs donated by Saudi citizens to victims of war or natural disasters.

Other GovernmentHealth Providers There are other important public (government) provider agencies operating autonomous health service programs for their target populations. Some of these agencies, particularly the most resourceful ones, have highly specialized facilities and almost operate a system within a system. As could be expected, the issue of coordination and duplication of resources (discussed in more detail in Chapter IV) poses a serious challenge. Table 2 compares the number of hospital beds, hospital admissions, bed turn-over and outpatient visits corresponding to non-MOH, governmental health service providers.

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Table 2. Non-MOH Governmental Health Services Providers, KSA, 1996

Sources: Ministry ofHealth -AnnualHealth Report 1996; Ministry of Finance and Economy; and interviews

* School Health Units at General Presidency for Girls Education, Youth Welfare Hospital, Saline Water Conversion Corporation Medical Units, Imam Muhammad Ibn Saud Islamic University Medical Units, King FahadUniversity Petroleum and Minerals Medical Unit, Institute of Public Administration Medical Clinic, Medinah Islamic University Medical Clinic, Saudi Red Crescent Society.

Private Sector Complementing the services provided by the MOH and other public providers is the private sector, which has been growing rapidly over the past several years. The government policy of encouraging private sector participation in all aspects of the economy has led to growth in commerce, industry and health. In addition to support for setting up health facilities, in the form of interest-free loans - up to half the value of facilities to qualifying individuals and organizations, the government purchases services from the private sector. Some private facilities have beds set aside for government patients. All levels (primary, secondary, tertiary) of services are provided by the private sector. Some of the large private hospitals have all the latest in medical diagnostic equipment and are in direct competition with the public specialist hospitals for provision of highly specialized procedures. In 1995, the private sector accounted for approximately 16 percent of total inpatient services; 13 percent of ambulatory visits; 15.8 percent of hospital beds and 27 percent of physicians in the Kingdom.3 16

The private sector is very important in its role as the main source of health services for private sector expatriates. Except in case of emergency, private sector expatriates are not eligible for health services provided in public health facilities. Since public sector health providers do not offer their services for sale, private employers purchase medical services for their employees solely from private sector providers. Some companies contract with private hospitals for comprehensive coverage of their employees for a prospectively agreed price, while others buy services on a fee-for-service basis. Contrary to the expectations that most services of the private health sector will be for private expatriates who have no access to public facilities, an overwhelming proportion of services is provided to Saudi citizens. In 1995, the proportion of private sector inpatient and outpatient services provided to Saudis was 78 and 76 percent, respectively.3 Since Saudis have access to free, public sector services, the growing use of private sector services, where payment is required, may signal unavailability or dissatisfaction with the public services. This is also a good indication that Saudis are willing to pay for health services, if there is a perceived increase in quality and/or convenience. Private facilities are usually open off-duty hours (evenings), and because there are relatively fewer cases, they provide services promptly to patients. On the other hand, unless they have access to the highly specialized, public facilities, affluent Saudis who especially value their time sometimes lack the patience it takes to wait for care in the [free] public sector. The proportion of total services provided by private sector health providers is currently about 14 percent. Given the government policy of encouraging private sector participation and the fact that much of the growth in the Saudi economy is occurring in this sector, this proportion is expected to increase dramatically in the near future. It is generally assumed that private providers are more efficient in the production of health services than public providers. If that proves to be true, the Saudi health system can expect greater efficiency with the increase in the private sector. There are no data to verify this assumption, as yet. The issue of cost-containment and overall economic efficiency in the Saudi Health System is addressed in detail in Chapter VI. Suffice it to say that there are no mechanisms readily apparent in the private sector which generate adequate incentives for efficiency. Services are mostly paid for on fee-for-service basis, and this payment method has the most negative effect on cost-containment. In theory, the MOH regulates and controls all aspects of private sector services, to the point even of determining prices for medications. and services. Unless the appropriateness of services can be verified, setting prices has absolutely no effect on the conduct of private providers. In short, the MOH's aim in regulating the private sector is to guarantee high quality service, with no regard to incentives for efficiency. Given that the private sector will continue to grow, the current regulation and control mechanisms must include measures that will generate adequate incentives for efficiency.

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Contract Management of Public Hospitals Hospital management companies play a pivotal role in the operation of public sector hospitals in the Kingdom. The estimation that private health providers account for 14 percent of services excludes the services of hospital management companies, and therefore is underestimated. Health planners in public health agencies realized long ago that it was not easy to construct and commission hospitals because managers with the requisite skills and training were lacking. Yet it was clear that the emerging Saudi health system favored hospital-based, curative health service patterns. With increased wealth, the goal initially centered around developing health facilities that could quickly demonstrate their value as a vehicle for medical and social progress. High technology hospitals were preferred and proliferated the public health agencies that lacked the manpower to manage such facilities. To close the gaps in manpower and skills necessary to run these hospitals, government agencies provided health care contracts with management companies to either fully or partially manage their hospitals. The full or turnkey management contracts are those contracts which engage the company for the total operation and maintenance of a hospital, while partial management contracts cover specified areas or services within the hospital. Almost all major public sector hospitals were either fully or partially managed by a private company. The popular perception that contract-managed hospitals are more efficiently managed than hospitals managed directly by the government has, so far, not had any empirical backing. On the contrary, certain aspects of the contract and the performance of some companies are calling into question the assumption of greater efficiency.

Evolution of Hospital Management The management of hospitals in the Kingdom has evolved through four stages: • • • •

Complete in-house management of all hospitals - mostly MOH; Partial management of hospital operations while contracting out services; Full management by private management companies; and Direct management by programs.

Stage One: During the early developmental stages of the Saudi health system, MOH was responsible for all aspects of hospital operations. Maintenance, housekeeping, catering and medical operations were performed by MOH employees. This first stage corresponds with the period when health facilities were relatively small, and only the simplest most basic procedures were performed. Proliferation of high technology hospitals and acquisition of medical equipment which characterized subsequent stages had not yet begun. Given the relatively modest facilities and services, in-house management of hospitals was no problem for the MOH. Stage Two: As the number of hospitals and beds increased at almost an alarming pace, MOH manpower was stretched, almost to a breaking point. At the same time, the population was becoming more aware of the medical services that were available and began demanding more specialized care. MOH’s own employees could no longer manage 18

all aspects of the many hospitals that were being built. It then became necessary to contract with private health management companies to provide some of the services. Housekeeping was the first to be contracted out, then general maintenance, then catering, and later medical operations. During this stage, MOH still provided some of the services directly, while contracting with other companies - sometimes four or more at a time. Dealing with many companies in the management of one hospital became extremely cumbersome for the MOH. Considerable time and resources were devoted just to coordinate the activities of the management companies. It was not uncommon to encounter situations where responsibilities for provision of certain services were contested by the companies and MOH. At the operational level, demarcations between the responsibilities of the contractors, eg., housekeeping and maintenance, and the MOH, are sometimes unclear. Another problem with partial management contracts is that the differential salary levels between MOH and contractor’s staff sometimes engender resentment. Dealing with all the management companies caused numerous distractions, and the number of supervisory posts within hospitals became excessive. This was not conducive to the provision of high quality, cost-effective hospital care. Stage Three: The systems under which the MOH operate in contracting and budgeting make dealing with the myriad of companies particularly difficult. Having to obtain clearance from the Ministry of Finance (MOF) and Civil Service Bureau (CSB), both of which have lengthy procedures, delays the execution of contracts. In some cases, the situations existing at the beginning of the contracting process change significantly before the contracting is concluded, to require a major change or total abandonment. It is in response to these difficulties that the MOH has favored contracting with one company, whenever possible, to provide the full range of services. The total operations, or turnkey contracts, require fewer MOH staff, and instead of many lengthy procedures in MOF and CSB, only one such procedure is necessary for a hospital. The MOH still manages - fully or partially - some of its hospitals. The trend was to contract the full range of services (housekeeping, maintenance, catering, medical operations) to a single company. Other government health providers, particularly the Armed Forces, National Guard, Security Forces and the specialist hospitals (KFSHRC and KKESH), have highly specialized hospitals which require an experienced management team to operate. These agencies have little experience in management of the type of hospitals they now have, and therefore rely on hospital management companies for full or partial management of hospitals. In the past, these were foreign management companies, e.g., National Medical Enterprise (NME), American Medical International (AMI), Hospital Corporation of Arabia (HCA) and Whitaker, and the contracts were mostly turnkey/full operations. Local companies e.g., General Arabian Medical and Allied Services, Ltd. (GAMA), Arabian Medical International (AMI) and A1 Saif Group, have since moved in to overturn the predominance of foreign companies in hospital management, either by going into partnership with foreign companies or standing alone. In contrast with the MOH, the National Guard, Armed Forces and Security Forces health agencies started with turnkey or full operational management of the highly specialized and 19

large hospitals. A reversal of this trend is in evidence as hospitals of these agencies seek to reduce the range of services provided by private companies. Given the government policy of encouraging private sector participation, hospital management role in health service delivery in the Kingdom is however expected to continue. The issue, which is explored further in Chapter VI, is whether contract management of public hospitals is a bane or blessing. Stage Four: The increase of expenditure and poor performance of some of the management companies, convinced the government to return to direct operation in a program format. The Ministry of Finance allocated the same budget to the hospital after deducting the profit of the management company, which gives some flexibility for purchasing and recruitment procedures. There is a trend to giving autonomy to hospitals to generate revenue and expand upon their services.

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CHAPTER THREE

Achievements over the Last Twenty Years The Kingdom has witnessed an unprecedented level of achievements in a short period of time. The system of free health care, backed by abundance of health facilities and manpower, and the general improvement in economy has produced very high levels of health as noted by standard socioeconomic measures of health status. With almost all health status indicators similar to those of the more developed, Organization for Economic Cooperation and Development (OECD) member countries, the Kingdom no longer fits into the health profile of a developing country. A visiting WHO consultant once noted that in most health indicators, the Saudi health system is actually ahead of targets set in WHO’s goal of Healthfor All by the Year 2000.

Health Status of Saudi Population Maternal and child health programs receive special attention in all health sectors in the Kingdom. Programs for pregnant women stress prenatal care with home visits for those who fail to attend the clinic. In the mid-1980’s, 78 percent of deliveries were by trained personnel. Today, about 90 percent of pregnant women are being attended and delivered by trained personnel. Saudis who are disabled or have a physical handicap are adequately cared for in several of the rehabilitation centers operated by the MOLSS. The rehabilitation centers provide occupational therapy and other services to enable inmates to function to the limits of their abilities. This also eliminates street begging by the disabled or handicapped, a common sight in most developing countries. The level of immunization in the Kingdom is a commendable achievement. In 1964, immunization services began with a program against tuberculosis. By 1979, poliomyelitis, diphtheria, pertussis, tetanus and measles were added to complete the basic needs for the WHO Expanded Program on Immunization (EPI). By 1989, vaccination coverage was 97.5 percent for Calmette-Gukrin bacillus (BCG), 94.3 percent for Diptheria (DPT) and Oral Polio Vaccine (OPV), and 86 percent for measles. By the first birthday, 84.6 percent of the population was covered with a range of 83.0 to 86.2 percent, and by the second birthday, 91.9 percent was covered with a range of 90.7 to 93.1 percent. By 1996, the Kingdom had almost an unbeatable record on the immunization (Figure 3) with the number of coverage exceeding 94 percent for most diseases. A review of morbidity patterns in the Kingdom attests to the benefits accruing from the high immunization coverage and increased health awareness, due to health education and other economic and environmental improvements. According to a report by WHO, in 1992 there were 46 reported cases of AIDS in the nation, which increased to 50 cases by 1993. In a world that seems to have been cursed with the epidemic of this deadly virus, it is highly commendable that measures are in place to keep the incidence of AIDS to a minimum. The rate of decrease in all immunizable diseases dropped to such a low level 21

that it no longer made sense to use the traditional measure of incidence per100,000 population. Per million population, the incidence rate was 0.5 for diphtheria, 2.7 for whopping cough, 3.0 for tetanus, 0.1 for poliomyelitis, 190 for measles and 150 for tuberculosis (Figure 4). These are very negligible figures, representing impressive achievements by the health authorities. If the cost of health services in the Kingdom is a function of growing pressures of health expenditures on the government budget, the benefit is the remarkable improvement in health status indicators (Table 3). It is rare to find a country with the same degree of improvement in the health status of the population within such a short period of time as the Kingdom. Most of the indicators compare favorably with the more developed countries that have developed health systems over a hundred years or more. Life expectancy at birth in the Kingdom is now 70 years, compared to 57 years in 1973. Infant mortality rate decreased from 57 per 1,000 live births in 1982 to 26 in 1996. The rate of death among children aged 1-5 years decreased from 71 in 1982 to 34 in 1996, while the rate of maternal mortality rate per 100,000 births fell from 32 in 1982 to 18 in 1994. In summary, the Kingdom has achieved remarkable progress in providing health services to a population growing at the average rate of 3.6 percent per year. Communicable diseases have been brought under control, and immunization coverage for all vaccine preventable diseases is very high (Figure 3). The antenatal coverage is good, and only six percent of babies are born with low birth weights under 2,500 grams. Hygiene of the environment has improved, contributing significantly to the favorable health conditions. Seventy-eight percent of the population dispose of excreta adequately, and 95 percent have access to safe drinking water.

Table 3. Health Status Indicators for Saudi Arabia (most recent years)

Sources: ‘Ihe World Bank: World Development Indicators 1998; WHO: Demographic and Health Indicators for Countries ofEastern Mediterranean, 1996; KSA Ministry ofHealth, Annual Health Report 1996.

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Human Resources An overwhelming proportion of health care professionals in the Kingdom may be nonSaudis; nevertheless, they are here to ensure that Saudi residents get the best quality health service. What is highly commendable is that the number of physicians and other professionals available to practice medicine in the Kingdom, in spite of the huge costs involved, has gone up from a mere 11 1 in 1949 to 1,316 in 1971, and 30,544 in 1996. The physician-to-population ratio of 1 /600 compares favorably with the more developed industrialized societies. The number of nurses and other professionals has risen as much or even more. The nurse-to-population ratio in the Kingdom now stands at 1/300, up from 1/2,750 in 1971, and increased from 3,355 in 1971 to 61,214 in 1996. The number of technicians has also jumped by as much as 1,626 percent from 1982 in 1971 to 34,277 in 1996 (Table A5). What is more important in the provision of medical care is the availability of highly qualified and experienced professionals. The nationality of health professionals, which has been a serious preoccupation of the Saudi health system, and rightly so for other reasons, is a secondary matter. After all, when patients need care, competency is more significant than the nationality of professionals. When Saudis went abroad in large numbers for medical care, the nationality of professionals was not an issue. This being stated, there is no denial that reliance on foreigners poses both financial and cultural problems, and, therefore, having more Saudis is highly desirable. Much of the argument, however, has more to do with costs, as there are no serious negative impacts on the quality of care provided because services are provided by non-Saudis. The impressive progress made in increasing the number of Saudi health professionals is often not recognized because of the continued dependence on foreign manpower. In less than 20 years (1979-96), the number of Saudi physicians has increased by 1,055 percent from 460 to 5,3 15. This increase far exceeds all the projections a decade or more ago. For example, in 1985 Dr. Z. Sebai projected that, by 1995, the four medical schools in the country and medical schools abroad would, in combination, produce 4,450 Saudi physicians.9 The figure of 4,940 Saudi physicians in 1995 is 11 percent higher than Dr. Sebai’s projection, which, at the time, was considered ambitious. In only seven years from 1989 to 1996, the number of Saudi physicians more than doubled from 2,627 to 5,315 physicians, raising the proportion of Saudis from 12.8 percent of total to 17.4 percent of total. There were about 10,100 Saudi nurses in 1996, up from 4,584 only seven years earlier. This represents a 120 percent increase and raised the proportion of Saudi nurses from 10 percent to 16.5 percent. The tremendous increase in the number of health institutions, health colleges and similar training facilities provided by the university hospitals, has enabled the health field to maintain a relatively higher proportion of Saudi allied health personnel; 12,271 Saudi allied health personnel in 1996 accounted for 35.8 percent of the total. These are highly commendable achievements, difficult for most countries to match. Even more remarkable is the relatively short period of time it has taken the Kingdom to produce 23

such numbers of health professionals. The health system should be proud of its performance in manpower development. The seeming lack of progress towards Saudization may be a result of the ambitious goals and objectives the Kingdom sets for itself. Most countries with a population size of Saudi Arabia do not require 6 1,2 14 nurses, thereby making the total of 12,271 indigenous nurses account for only 16.5 percent of the total number of nurses. It is highly debatable whether a country with similar demographic characteristic disease patterns and a population the size of Saudi Arabia really needs 30,544 physicians. Of course, more is always regarded as better. In a country like Saudi Arabia, where there has always been preoccupation with the dependence on foreign manpower, questions must be asked about the actual manpower needs. Could the system perform just as well with lower trained (auxiliary personnel) professionals, in many instances where highly specialized and expensive professionals are currently used? If auxiliary health professionals, e.g., physician assistants, nurse practitioners, nurse aids, are widely used in the Kingdom, how would that reduce reliance on foreign manpower?

Physical Infrastructure The Kingdom’s health system has been transformed from a poorly developed and resource-starved system to the most advanced in the region. The sheer explosion in the number of hospitals and other health facilities, within a short period of time, is highly impressive. The acute care bed-to-population ratio of 2.5/1,000 is comparable to corresponding ratios in more developed countries. There were 42,625 hospital beds (290 hospitals) in 1996, up 333 percent from 9,837 hospital beds (75 hospitals) in 1971. The growth of primary health centers, dispensaries and clinics, from a low of 599 in 1971 to 2,700 in 1996, have raised the population coverage to more than 98 percent.3 Health centers are adequately equipped and staffed, and in some cases, it takes as little as ten minutes to consult with a physician and get the required medication. This is even more remarkable because services provided in MOH primary health centers and polyclinics of other government health sectors are completely free. Because of the large number of health centers (available in every neighborhood), travel costs are minimal or nil. Easy access to primary health centers enables residents of the Kingdom to seek medical care as soon as the need arises. Physician visits per person per year in the Kingdom was 5.4 in 1995. The Kingdom does not boast just increases in numbers. Some of its highly specialized facilities are world renowned for the level and quality of services they provide. In addition to reducing the need for Saudis to go abroad for treatment, certain specialist hospitals serve as referral centers for some neighboring and friendly countries. These facilities, such as the KFSHRC, KKESH, the military hospitals, the university hospitals, and some MOH hospitals, have the latest diagnostic and therapeutic equipment, world-renowned professionals, and provide highly specialized services. KFSHRC is the top center in the region for treatment and research of cancer, among other services, while it may be claimed that KKESH is the best center in the region for the treatment of eye disease. In addition, organ transplant operations are performed in numerous hospitals in the Kingdom. 24

Health providers in the Kingdom can boast of providing services of the highest standards. Laboratory services are of very high standards, as equipment is continuously updated and new equipment is made available to medical laboratories as soon as its reliability and accuracy is documented. Medical laboratories in the Kingdom strive to improve and maintain quality, with many of them subscribing to quality control programs like the Saudi Arabian National External Quality Assurance Scheme (SANEQAS) and the College of American Pathologist (CAP) Quality Control Program and surveys. Many more laboratories are inspected and approved by foreign organizations such as the Royal College of Pathologists of the United Kingdom and the American Association of Blood Banks (AABB). All hospitals accredited by the American Joint Commission on Accreditation of Health Care Organizations (JCAHO) strive to maintain the high standard care required for accreditation. Saudis are therefore able to enjoy here in the Kingdom, the same high standard of care provided in American hospitals because of subscription to such foreign organizations. Most laboratory tests are performed within Saudi Arabia. However, certain rare requests are still referred to highly specialized laboratories abroad, predominantly labs in major universities and hospitals in the United States and Europe. Recently, practitioners in the Kingdom have been afforded the opportunity to experience close, more continuous interaction with highly specialized facilities and professionals via tele-medicine and telepathology. The number of Saudi patients who had to be sent abroad for treatment has fallen dramatically in recent years, as the services for which they were sent abroad have become widely available in many of the Kingdom’s hospitals (public and private). The huge costs involved in sending patients abroad for treatment has constituted only one aspect of the problem for both patients and the government. The psychological trauma of being sent abroad (where there are no family members) for treatment used to be overwhelming. For Saudis, who traditionally have close family ties and seek to maintain those relationships under any circumstance, being sent abroad is like the first stage of the eventual death of the family member. It will be interesting to find out how patients undergoing similar treatment within the Kingdom compare to those who were sent abroad, in terms of certain outcome measures, e.g., quality of recovery, length of time, general frame of mind and mood of patients and their relatives. Few Saudis still need to be sent abroad for some extremely rare disease situations, but this number is becoming negligible. Many Saudis who still travel abroad for treatment, however, do so as a matter of affluence and prestige, rather than need. Some even go to countries and facilities which cannot boast of the level of resources available here, in terms of highly specialized professionals, facilities and equipment. With many hospitals in the Kingdom, performing such services as open-heart surgery, kidney transplant, bone marrow transplant for treatment of primary illness, including non-tissual anemia, acute leukemia and accouchement problems, infecundity (sterility) and in-vitro fertilization, blood transfusion for self immunity, and specialized services, most all services requiring trips abroad are covered. Figure 5 shows the decline in the number of cases transferred abroad for treatment from 1982 to 1992.

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The health system has matured considerably, and efficient practices are gaining strength. Most hospitals have quality assurance programs to monitor the standard of services provided and increasingly recognize the need for utilization management. The average length of stay (ALOS) for MOH hospitals is a short 3.7 days and an acceptable 6.3 days for MODA facilities. Ambulatory care visits in the Kingdom average 5.4 per person per year, a very satisfactory figure by international standards. Bed turn-over rates and the number of times a hospital bed is used in one year show satisfactory utilization of hospitals in the Kingdom, as on the average, a hospital bed is occupied 47 times. Finally, the level of awareness of health issues and good health habits has risen considerably in the last several years. The primary health care approach, which the Kingdom adopted in the mid-1980’s’ emphasizes health education. A great deal of effort is devoted to educating the population regarding the need for immunization, nutrition, the dangers of smoking and the correlation between speeding and car accidents. There is usually an on-going campaign to increase the awareness of the dangers of drugs and unsafe sex practices. Health education is provided to citizens at primary health centers in hospitals, through the media, in schools, in a series of seminars and workshops and by field health supervisors/inspectors who make home visits. In conclusion, there are some impressive levels of achievement in all aspects of the Saudi health system to justify the huge expenditures on health in the last several years. No doubt there is still a great need for improvement (no system is perfect), particularly in the area of efficient use of resources. However, the overwhelming number of health facilities and health professionals which enable easy access to high quality care for Saudi residents, the increase in the number of Saudi health professionals, the drop in immunizable diseases and general improvement in health status indicators are some of the achievements that need to be highlighted.

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CHAPTER FOUR

Resources Facilities Growth in Hospitals and Hospital Beds by Sector Within a short period of time, hospitals and other health facilities in the Kingdom have witnessed a rate of growth unprecedented in any health system. The Kingdom enjoyed a sudden increase in wealth due to increase in oil revenue, and wisely chose to devote the revenue to rapid development of the country. Hospitals in the Kingdom increased from 75 in 1971 to 290 in 1996, while hospital beds grew 333 percent; from 9,837 to 42,625 in the same period. The number of MOH primary health centers and clinics increased from 599 to 2,451. The number of acute care hospital beds per 1,000/population now stands at 2.3, up from 1.6 in 1971 (Table A1). Health facilities are distributed among the provider agencies, with the MOH (the main agency) having a larger proportion of the facilities. The MOH has 61 percent of the hospitals and 63 percent of the beds; other government sectors have 13 percent of hospitals and 21 percent of beds; and the private sector has 26 percent of hospitals and 16 percent of beds (Table 6 and Table A1). The distribution of beds indicates that the other government sectors have larger hospitals, while hospitals of the private sector are smaller. The MOH, in 1996, had 1,731 primary health centers, from 521 in 197 1 , indicating the Kingdom’s emphasis on primary health care. There are 768 private clinics and 598 dispensaries. These are considerably smaller than the primary health centers of the MOH. The Armed Forces health programs also operate polyclinics for their employees. The capital construction program accounted for the largest proportion of increase in health expenditures during the first three development plan periods and started to decline thereafter. The MOH expended significant sums for construction, expansion and renovation of varying scope and complexity. Expenditures on projects grew from a modest SR 10.9 million a year in 1970 (first year of First Development Plan) to a peak SR 4,183 in 1984-85 (the fifth year of the Third Development Plan). Table A2 shows that MOH expenditures on projects were higher during in the Third Development Plan than the two previous plans. However, as a percentage of annual expenditures, it was lower than the Second Development Plan, which has average project expenditures of 53.9 percent. The main feature of the Second Development Plan was the construction of five MOH hospitals in Jeddah, Medina, Gizan, Hofuf and Khobar. This project added 2,275 hospital beds to those already existing and cost SR 3,084,500.000, accounting for 33 percent of total project expenditures during the development plan. Project expenditures slowed down after the Third Development Plan period. This reflected the fact that much had been accomplished in terms of facilities (hospitals, 27

medical centers, rehabilitation centers, etc.) and the prevailing economic situation. The price of oil, which rose to a high of $34 per barrel in the early eighties (1981-82), started declining.4 Further, oil production was significantly reduced by 1986 to below five million barrels a day, from more than 10 million barrels a day in 1981-82. The era of rapid expansion (1970-85) when hospital beds in the Kingdom grew at an average annual rate of 8.5 percent, increasing from 9,039 to almost 31,000, appeared to end with the Third Development Plan. Primary health centers increased from 691 to 1,821 during the same period. Hospitals and other health facilities of the MOH continued to increase, even up to the present day. However, after the rush to the development phase, when many of the facilities are in place, emphasis shifted from monumental projects of very large hospitals to building clinics throughout the Kingdom to be used as units for primary health care. The acting Minister of Health at the time, Dr. Ghazi Al-Gosaibi, stressed this policy change in the words, “no more white elephants,” referring to the change in favor of smaller hospitals. 10For example, during the Fourth Development Plan, approximately 100 30-bed hospitals were built in rural areas - a far cry from the 300-500 bed hospitals common during preceding development plans. Table A3 shows the hospital beds in other government sectors. Hospitals in this sector are mostly large and highly specialized. The two specialist hospitals (KFSHRC and KKESH) are highly specialized, internationally renowned for excellence, and are mainly referral centers. Patients are brought from abroad to be treated in these hospitals. Armed Forces hospitals account for almost 50 percent of hospital beds in other government sectors. The main hospital, Riyadh Kharj Hospital (RKH) located in Riyadh, is a highly specialized hospital providing services such as organ transplants, cancer treatment, etc. The Flying Hospital Program, which caters mainly to remote locations and accidents, is a facility of the Ministry of Defense and Aviation. The two teaching hospitals of King Saud University College of Medicine, King Khalid University Hospital and King Abdulaziz University Hospital, both in Riyadh, have 624 beds and 104 beds, respectively. The other teaching hospitals, King Fahd University Teaching Hospital in Al-Khobar and King Abdulaziz University Hospital in Jeddah, have 420 beds and 291 beds, respectively. Other major providers in the other government sectors include the National Guard with a total of 900 hospital beds. The main health facility of the National Guard is King Fahad National Guard in Riyadh. Security Forces Hospital, a 508-bed hospital located in Riyadh, caters to the Security Forces staff and their families. There are also numerous polyclinics which provide (at times) primary level care and referral to hospitals, if indicated. ARAMCO Health Services is also a significant provider with 584 hospital beds. The Royal Commission Hospitals have 339 hospital beds. All these hospitals are highly specialized and mainly serve the health needs of their staff and families, and sometimes sponsored patients. Private sector hospitals have grown from only 18 in 1971 to 75 in 1996.3 Growth is attributable to the government policy of encouraging private sector participation in aspects of the economy, and some powerful economic incentives offered to private hospitals, clinics, dispensaries and other health facilities. These include, among other things, generous loans of up to 50 percent of the cost of construction of health facilities, 28

and reserving 15 percent of beds for use by government paid patients. The latter, in other words, guarantees 15 percent occupancy from the start. Most private hospitals are primarily owned by single individuals, usually physicians in private practice. The limited capacity of single individuals to raise the huge sum of money required by the capitalintensive hospital business may account for the fact that private hospitals tend to be a lot smaller than government hospitals. However, with the involvement of larger business in hospital operations management, medical insurance and other aspects of health care in the Kingdom, the trend is expected to change in the near future. GOSI, for example, already owns and operates fairly large hospitals. In the long run, group-owned hospitals and hospitals owned by health corporations will replace the current, single individual-owned hospitals. Experience in the Kingdom shows that once one such hospital is established, and businesses realize that there is money to be made, it will multiply in a relatively short period of time. Or, given the changing business atmosphere in the Kingdom, bonds and stocks could be issued to raise the needed capital so that private hospitals can achieve the size and stature needed.

Major Diagnostic Equipment by Sector Hospitals and other health facilities in the Kingdom are equipped with the latest medical diagnostic and therapeutic equipment. The more highly specialized hospitals, particularly the specialist hospitals, all have state-of-the-art medical equipment. The same is also true for some of the MOH hospitals and the more prominent private sector hospitals. The specialist and Armed Forces hospitals generally have a higher number of more expensive equipment/beds than the MOH and private sector hospitals. Government policy of providing the highest quality care and the readiness to provide funds, enable all hospitals to have their own equipment rather than depend on other facilities. For this reason, such highly expensive diagnostic equipment as Magnetic Resonance Imaging (MRI), Computed Tomography (CT) Scan and other equipment, are available in most hospitals. The type of equipment available in the hospitals reflect the original contract manager preference. Most of the hospitals in the Kingdom were built by foreign contractors who also provided both medical professionals and the equipment under the turnkey contracts prevalent in the past. Most of the equipment is either American or European in origin. A change of contractor sometimes meant the procurement of new equipment to suit incoming professionals, and sometimes mean the obsolescence of some equipment. Lack of coordination among health sector agencies is responsible for unnecessary preponderance of expensive medical equipment, a very important factor in the escalation of medical expenditures in the Kingdom.11 As discussed further in the section on reasons for cost increases, duplication of resources, particularly expensive medical equipment, occurs because of competition among health sectors. Availability of expensive medical equipment is seen as a status symbol. There is therefore no incentive to explore the possibility of making use of such equipment in another facility, since that does not enhance prestige. Even within the same agency, joint use of equipment is never practiced 29

for the same reason. The result is that some very expensive equipment is either underutilized or not used at all in some hospitals. Because of the recent budgetary constraints, some hospitals in the Kingdom are now requiring elaborate justification for procurement of equipment exceeding a specified amount by the requesting department. This is a good step, but does not go far enough to curb the duplication of equipment in the system. Unless justification of need includes non-availability of such equipment in other facilities as discussed later, duplication will continue. The first step is therefore establishing a coordination framework among health sector agencies which will permit the shared joint-use of resources.

Health Centers and Polyclinics The Kingdom fully embraced the WHO primary health care approach as the most efficient and equitable method for achieving the goal of Health for All by the year 2000. By 1990 (final year of the Fourth Five-year Plan), there were already 1,668 primary health centers, forming a network closely linked to hospitals of the secondary and tertiary level by a referral and feedback system. The health centers have effectively implemented the components of primary care and satisfactorily carried out population and family census within their catchment areas, opened medical files, surveyed schools in their areas and conducted routine home visiting. A study showed that the effect of these primary health activities, and especially the efficient referral system, resulted in a reduction of the overall cost of patient visits to hospitals and health centers. The MOH currently has 1,731 (Table A4) health centers of which 60 percent are equipped with laboratories, 23 percent with x-ray equipment, and 42 percent have dental clinics. Some other government health sectors, particularly the Armed Forces, have polyclinics that cater to staff and their families. Except in cases of emergency, polyclinics serve as the first point of contact with health professionals and provide a variety of primary care services. Some hospitals in this sector require referral from polyclinics before patients are accepted. This is to ensure that cases which could be handled at the polyclinic level do not end up in the hospitals. Complementing the public sector health centers and polyclinics are the private sector clinics and dispensaries. Most of the private sector clinics and dispensaries are located in Riyadh and Jeddah. These two cities account for 71 percent of clinics and 50 percent of dispensaries. One explanation is that Jeddah and Riyadh have large numbers of foreign, non-government sector expatriates who need private sector health services. Emergency services in the main hospitals in the Kingdom are well developed and ensure that no life is needlessly lost because of accidents and health situations requiring urgent medical attention. Central city hospitals have emergency services with limited services available to residents outside the city. The Saudi Red Crescent Society is the major governmental agency charged with emergency services. It has 12 centers and 152 branches, and provides ambulance and emergency transport services. It has special responsibilities during Hajj. The air medical evacuation services provide the flying hospitals of the Ministry of Defense and Aviation, and are a vital source of emergency 30

services in the Kingdom. The fleet is on 24-hour-a-day readiness to respond to emergency calls, by transporting teams to sites when the patient(s) cannot be moved or transporting patients to sites where proper medical care can be provided. In addition, the aircraft is equipped to provide services, as needed, to stabilize patients. This is an innovative and important service that contributes in no small measure to the high quality of medical care Saudis can expect to receive, if the need arises.

Health Information System: Current Situation A Health Information System (HIS), valuable to decision makers is required, if planning is to be based upon the needs of a population and integrated at each level with social and cultural values and priorities. And, in order to clarify the links among health status, health activities (service delivery) and health resources, including personnel, effective methods must be developed to collect, process and analyze relevant information. The task of the Saudi health system has grown enormously in complexity over the past several years. The increase in resources in all sectors which encompass both health facilities and number of personnel, the highly specialized services provided and the rising expectations of the Saudi population, demand an equally developed health information system. In the MOH for example, activities have been decentralized into national, regional and local levels, necessitating detailed health information for efficient operation of any one level and coordination with other levels. Each health sector tries to deal with this great need for information according to its resources and strategic plans, and is in varying levels of HIS development. The strategy for a national health information network, encompassing all health sectors, was proposed on the 15 Jumada II 1417 (October 27, 1996).12 The mission is to build a kingdom-wide, integrated National Health Information Network (NHIN) enabling the government and private health care organizations to communicate with each other using a standardized network infrastructure to improve the quality of care and maximize resource utilization. The primary goal is to establish an effective communication infrastructure that will be capable of supporting the health care communication requirements: provide a high-speed, large band-wide, reliable backbone and support global communication and connectivity; support tele-medicine among health providers; support connectivity and communication for remote and mobile health care units; and improve the quality of care and reduce operation costs. The Health Information System (HIS) in Saudi Arabia is not necessarily computer driven. The first priority for the various sectors was to improve the quality of health data/information and ensure that producers get what users want. Having achieved this, it became necessary to explore ways of accessing the needed information more quickly and improving quality -- this is where the computer comes in. Computer technology has revolutionized information processing and led to considerable reduction in costs of storing and retrieving large amounts of data. For all its merits, information in a manual system requires human effort to retrieve and collate, and may inhibit attempts at cross referencing. In comparison, the ability to sort, analyze, compile, report and integrate large 31

amounts of data makes computers an interesting and imperative technology for health service planners and providers. Given the large volume of health data and the importance of storing and retrieving in a timely fashion to aid decision makers, that the Fifth Fiveyear Plan identified the development of HIS as a long-term plan objective. In the 1980’s, few specialized hospitals and private clinics utilized conventional miniand mainframe computers coupled with dumb terminals. Some used software developed in-house, while others used a standard package. Most hospitals in Saudi Arabia have been in a state of transition from one of the older systems to the latest technology in medical information. A brief discussion follows on the current situation of health information systems in MOH, the status of medical informatics in Security Forces Hospital (Riyadh), and health information systems computer technology in some tertiary care hospitals in Riyadh. The MOH adopted a Health Information System model that is dependent on a wellorganized, feedback mechanism. The Health Information Center of the MOH is a directorate consisting of two departments: the Statistics and Computer Departments. Its main function is to collect, process, analyze and make available all information needed to assist in health planning and decision making. As such, it coordinates the activities of the entire health information system from the local, regional and central levels. In cooperation with the regional and local authorities, it establishes the information needs of each level and constantly reviews them. There are more than 250 terminals connected to the main computers in the ministry from the central, as well as regional levels, with more than 15 applications currently available. The department is undertaking a large computer and information system project. When completed, the HIS will connect all health facilities of the MOH in an integrated information network that will simplify and speed the flow of information to all levels. This information technology plan document was adopted after the analysis of the present status of information systems at different levels of the MOH and the resource requirements. The plan was to be implemented over a period of ten years, with the objective of automating administrative and medical procedures at various levels, consolidating and providing information about health care and establishing a means for faster information exchange among health facilities. The strategy aims at implementing information systems in a structured and integrated database environment for MOH, regional health directorates, primary health care centers (PHCC) and hospitals and establishing a health net for networking them. The HIS was introduced in 1984, while network and extension of computer resources were initiated in 1988. The systems were mainly administrative and medical care systems, and over fifteen are operational at the MOH, meeting approximately 60 percent of information requirements of the various departments at the MOH. Pilot projects for the computerization of MOH hospitals and primary health centers have been completed. Figure 2 shows the basic structure of the MOH information system. It is evident from the figure that, as data flows up from the community (hospitals, PHCCs) to the regional level, the necessary details diminish. At the point of central database, only extracted or summarized information may be necessary, because the bulk of data is generated and used in the PHCC and hospitals.13 32

Security Forces Hospital The Security Forces Hospital has one of the most highly automated health information systems in the Kingdom. Automation of patient records started in 1983 with the installation of the Local Area Network (LAN) and some other hardware and software. In 1993, the hospital decided to improve the existing medical informatics system and to incorporate the latest information technology on health care systems. To cope with the greater amount of data storage and processing requirements, larger and more sophisticated hardware is required. Some of the installed hardware includes: • •

Two Hewlett-Packard HP9000 series 800 H70s with 192 megabyte (MB) main memory, 43.2 gigabyte (GB) disk storage, 220 workstations (486) plus existing peripherals; and Four NetWare servers (Pentium-based) running on Novell Operating System (OS).

Software includes: • • • • •

Patient Processing and Master Patient Index (MPI) (upgrade); Physicians Access (new); Order Management (upgrade); Chart Management: Patient Scheduling; and Department Profiling; Nurse Management and Nurse Scheduling.

The hospital has communication links and connections with AT&T Systems, Professional Drug System (PDS) and Synoptics for communication electronics. 14 The following benefits are attributable to the new medical informatics system at Security Forces Hospital: improved hospital operations through computerization in areas that currently are not automated; better reporting tools, such as Structured Query Language (SQL); a significant expansion of the functionality of the database for better access to management information; departmental profiling for therapy and diagnostic departments; nurse acuity staffing; risk management; quality assurance and physician credentials database. Other highly specialized hospitals, particularly those of the Armed Forces and other government sectors, have also developed highly automated HIS systems, with state-ofthe-art hardware and software applications. KFSHRC has an IBM ES 9121-311 processor, SEC 300 model and 600 Alpha. All applications (patient care and financial system) are developed in-house using Customer Information Control System (CICS) and Common Business Oriented Language (COBAL) among others. There are about 2000 workstations, terminals and stand-alone PCs.

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The main hardware of RKH include 2x HP3000 model 68, HP3000 model 70, HP3000 model 990, HP3000 model 932 and 2 x VAX 6410 with dual processor. The applications, including patient care systems, laboratory systems, (Micro Computer Business Accounting System (MCBA) accounting package and the administrative support application, are developed in-house and hosted on the above hardware. King Fahad Hospital in Riyadh has 2 VAX 8530, VAX 6410 and two VAX 7610. All applications (patient care and financial system) are developed in-house, except the laboratory information system, which is from Cerver Pathnet. The 900 workstations consist of both PCs and terminals. Finally, KKESH has HP3000 model 52, HP3000 model 925 and IBM RS6000 model 550 (UNIX). Patient care is developed in-house and hosted on the HP3000-925, while the pharmacy application is from Cerver Company and hosted on RS6000. There are 201 workstations consisting of PCs and terminals. In conclusion, HIS in the Kingdom has progressed to advanced stages in individual sectors, as evidenced by the high level of automation. Medical informatics is moving more toward full standard packages with full integration, such as SMS, HBO & Company, Cerner Corporation and MEDITEC. As in other aspects of the health system, lack of inter-sectoral coordination is a problem, with each sector and facility tending to go its own way. Hopefully, when the proposed NHIN is fully implemented, inter-sectoral communication will be greatly enhanced.

Manpower Growth in Manpower by Nationality As in the case with other health sector resources, the Saudi health manpower has seen an unprecedented level of growth in the last twenty years. The health care industry is labor intensive, so the many new facilities and services, particularly those employing high technology, require large manpower input. The number of physicians, including dentists, practicing in Saudi Arabia rose from 1,316 in 1971 to 30,544 in 1996; nurses from 3,355 to 6 1,2 14, and allied health personnel from 1982 to 34,205. The increase raised the health professionals to a population ratio in the Kingdom from 1/5,900 and 1/2,750 in 1971 to 1/600 and 1/300 in 1996 for physicians and nurses, respectively. These ratios are comparable to those in more developed countries and reveal the progress made in the Kingdom. Not quite reflecting the proportion of services provided by individual health sector agencies, most health personnel work in the MOH: 50, 57 and 59 percent of physicians, nurses and allied health personnel, respectively, worked in the MOH in 1996, while other government health sectors employed 22, 26 and 29 percent of physicians, nurses, and allied health personnel in the same year.3 The private sector employed 28, 17 and12 percent of physicians, nurses and allied health personnel. The MOH is estimated to provide about 70 percent of services and yet employs only 50 percent of physicians. On the other hand, the other government health sectors, estimated to provide about 18 percent of services, employ an average of 26 percent of the main three categories of 34

health manpower. Also, given that most hospitals in the other government health sector agencies are highly specialized and better funded, health professionals in these agencies are expected to be more highly specialized and therefore more expensive than those of the MOH and private sectors. Table 4 below provides additional information on the number and proportion of physicians, nurses and allied health professionals employed by the MOH, other government agencies and the private sector. Table 4. Physicians, Nurses and Allied Health Staff in KSA, 1996

Source: Ministry ofHealth, Annual Health Report 1996.

(1) Includes Dentists (2) Includes Pharmacists The “United Nation of Health Professionals” is a term sometimes used to describe the health manpower situation in the Kingdom, in which a large number of countries are represented. In any society, the results of manpower development efforts take longer to achieve than in other development areas. Construction of health facilities and purchase of required equipment/supplies can be completed more quickly than formal education and training for health manpower professions. Thus, the aspiration for rapid development of the Saudi health system, with some very highly specialized infrastructures, could not be met by the Saudi labor force alone, which is limited in size and skills. As a result, a large number of non-Saudi health professionals are needed to run the numerous, highly specialized facilities and programs. It has been, and continues to be, the government policy in the Saudization process to replace, to the maximum extent possible, non-Saudis with nationals. The policies and measures adopted to achieve this are reaping some success. However, a total or even near total replacement by Saudis, particularly in the highly specialized medical professionals, is unlikely in the very near future.

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As shown in Table A5, an overwhelming proportion of physicians are non-Saudis. A breakdown of MOH physicians into individual specialties in 1996 reveal that of the 23 specialties, only in six does the proportion of Saudis exceed 20 percent, including dentistry (23-24%), ophthalmology (25%), OB/GYN (20.7%), dermatology/venereology (32%), public health and tropical medicine (28.9%) and pediatrics (3 1.5%). On the other hand, only 4.7 percent, 8.1 percent and 8.3 percent of anesthesiologists, pulmonologists and neurosurgeons, respectively, are Saudis. The situation in the private sector is even more dismal, with Saudis accounting for only 3 percent of the 7,302 physicians practicing in 1996. Saudi physicians prefer to work in other government health sector agencies and are better represented in this sector than the MOH or private sectors. About 37 percent of physicians practicing in other government sectors are Saudis. In surgery, ophthalmology, dermatology/venereology, public health and tropical medicine and pediatrics, the majority are actually Saudis. Some of the non-Saudis are from the West, mainly from the United Kingdom, United States and Canada. Most of these are in other government health sector agencies, particularly in the KFSHRC, the Armed Forces facilities and the highly specialized facilities, such as KKESH. Other nationals include those from Egypt, Sudan, Syria, Jordan, Philippines, India, Pakistan, Tunisia, Australia, Nigeria, Ghana, Uganda, Kenya, Palestine, etc. Most facilities require western training for those from developing countries. The majority of the more specialized hospitals do not employ non-Westerners who do not have western qualification, unless they are Saudis. The pressure of budgetary constraints has compelled some of the facilities to employ western-trained, non-western nationals. In the past (late 1970's through the mid-1980's), non-Westerners were not considered for employment in these facilities.

Future Supply and Demand Estimates vary as to present and future health manpower requirements and depend on the specific ratio of health professionals to population/facility that is applied. For example, a larger number of physicians will be required, if the objective is 1/600 rather than 1/1200. Manpower development policies outlined in the Sixth Plan period aim to address the qualitative development of Saudi manpower through the acquisition of skills and qualifications commensurate with the need of the national economy through: • • • •

General and higher education; Scientific specialization - to achieve greater consistency between the needs of the labor market and the education profile of new labor market entrants; Technical education and vocational training; and Pre-service and in-service training.

The four medical schools and colleges of dentistry produce an average of 400 graduates annually, while the health colleges and institutes train approximately 5,000 students in a wide range of health care professions, including nursing, laboratory technology, radiography and medical records.

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SaudizationofManpower The proportion of Saudis in the total health manpower has been a source of serious concern for authorities for some time now. Successive Five-Year Development Plans have made Saudization manpower a top priority. The Sixth Development Plan identified health sectors in particular as one area where the rates of Saudization should be highest, especially with respect to general practitioners and assistant technicians. 15 The imbalance in the program and intersectoral distribution of Saudi health is also seen as a problem that must be addressed. The huge expansion in health facilities and services by MOH and other government and private sectors puts great pressure on health planners to deal with the acute shortage of a wide range of health manpower. To meet the shortage, each of the health sector agencies has its own department for recruiting foreign manpower in different parts of the world, including the United States, Canada, United Kingdom, Philippines and India. The recruiting agencies are said to frequently compete with one another. It is also claimed that private sector employers have not cut back on recruitment of foreign manpower to reflect the slow down in economic and other activities. The authorities recognized earlier on that a nation dependent on other nationals for such a vital activity as health care, is highly vulnerable to outside influence. Many of the nonSaudi health professions come with different cultural values, and, hence are not as effective as nationals would be in implementing and promoting preventive and curative aspects of primary health care in the community. In addition, most of the activities in health centers involve community participation and therefore require sensitivity to the unique customs and habits of the population. Given the emphasis on primary health care and the customs and habits specific to Saudi society, there is a need for individuals who understand both the language and the culture. In short, the implications of having mostly non-Saudi physicians at the first level of contact with the community cannot be underestimated. Yet, only 345 (8%) of the 4,172 MOH health center physicians are Saudi.3 The proportion of Saudi physicians in the private sector clinics is estimated at less than one percent. Since expatriate medical professionals tend to stay for a short period of time, continuity poses a problem. The average tenure among non-Saudi physicians and nurses, according to a study by the KFSHRC is 2.3 years.16This is hardly sufficient for most programs to attain any level of maturity. Numerous, expensive pieces of equipment are also made obsolete when expatriate professionals, who request their procurement, leave and are replaced by others with a different background. There is also no doubt, professional ethics apart, that Saudi nationals would be committed to the affairs of health care delivery in the Kingdom more than expatriates. Expatriates are mostly in the Kingdom to make money, without much particular vested interest. On the other hand, Saudi nationals should take greater interest in the general improvement of the population's health status and should work toward this goal. And hopefully, because they have no where else to go, Saudi's should have more interest in ensuring that 37

resources are used efficiently to avoid waste. The qualifier, hopefully, is employed because this is not always the case. In fact, there are no studies either to support or reject any claims that Saudi medical professionals are better at cost-containment than their expatriate counterpart. Various efforts have been sustained toward Saudization of health manpower. However, the health sector continues to rely strongly on foreign labor because the expansion of the hospital sector, in particular, means that demand far outstrips the supply of Saudi health workers, notably in the more technical and supportive positions. Considerable progress is being made, but the proportion of MOH physicians - up from 11 .0 percent in 1992 to 17.1 percent in 1996 - still falls far short of the 50 percent projected a decade ago. Also, only 22.1 percent of MOH nurses are Saudis. This pattern holds, true in other sectors (other government and private), leaving the proportion of Saudis in the total national health manpower in 1996 at 17.4 percent, 16.5 percent and 35.8 percent for physicians, nurses and allied health personnel, respectively. As Table A5 shows Saudi physicians appear to have a preference to work in other government agencies, and least so for the private sector. This is probably because other government health agencies offer more attractive working conditions; higher salaries and more desirable benefit packages than the MOH. Compared to the MOH, the private sector has more specialized facilities and equipment, and more highly-qualified, foreign, medical professionals, thus providing a better setting for further training and specialization. It remains to be seen whether this preference for work in the higher paying, other government health sectors is consistent with the need to develop a Saudi work force, whose education and skill profile, remuneration expectations and attitudes toward work are compatible with the realities of the situation. The fact that a very insignificant proportion (less than 8%) of Saudi physicians work in primary health care, which is strongly emphasized and for which nationals are definitely best suited, is another reason why a coordinated policy with regard to training and practice of Saudi physicians is urgently needed. The objectives of the Sixth Development Plan (1 995-2000) are to: • • • •

Replace non-Saudis by appropriately qualified Saudis in a gradual progressive manner in all occupations and economic sectors; Rationalize the growth of the non-Saudi labor force in all occupations; Provide job opportunities for all Saudi new entrants to the labor market, mainly in the private sector; and Increase job opportunities for women (in conformity with Islamic Sharia).

These and other objectives aim to increase the proportion of the Saudi work force in health and other sectors. Because the authorities believe that the success of the Saudization process cannot be left to market forces alone, either in the public or private sectors, a two-fold policy approach was adopted to replace non-Saudis with Saudis. The policy involves combining incentives and mandatory measures as follows:

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•

•

•

•

Financial and other support measures provided by the government to private sector establishments will be linked to commitments for training of Saudis and achievement of the Saudization target. Hospital management companies operating government hospitals sign agreements to provide training for Saudis and to ensure that Saudis receive first consideration when filling any positions. Failure to comply with this provision could result in sanctions in the form of financial penalties or even loss of contracts; Concerned government agencies are required to implement the decisions of the manpower council regarding the size of the non-Saudi labor force and the positions which should be restricted to Saudi citizens. In addition, annual minimum targets are being set for private firms to employ Saudis and place ceilings on the number of nonSaudis permitted; Recruitment of foreign labor is being restricted to skilled and semi-skilled workers, thus reducing the demand for non-productive workers in community and personnel services. Unskilled workers are no longer issued visas to work in the Kingdom, and the resident permits (Iqama) of such workers may not be renewed when they expire; and The CSB is continuing to implement decisions and policies concerning Saudization in the government sectors and following-up on Saudization plans that will be implemented annually by each government ministry and agency. Particular emphasis is placed on vital government utilities, increasing job opportunities for women and finding appropriate solutions to the problems of employment and Saudization outside cities.

The health sector is not highly affected by restrictions regarding employment of foreign, unskilled workers. Although some private health sector facilities do prefer recruitment of non-Saudi health professionals, for economic and other reasons, the problem is generally the lack of Saudi professionals, rather than the inability to employ. In pursuing the objectives of Saudization of health manpower, an intersectoral committee was established by resolution of the Minister of Health in June 1996 to make recommendations on increasing the share of Saudis in the Kingdom's health workforce. The committee's task is to analyze the supply and requirements for doctors and other professionals, in order to make practical and sound recommendations for health manpower. Five categories of health workers were examined: physicians, dentists, pharmacists, nurses, and health specialists and technicians. Assumptions underlying the projections for all five categories included a declining population growth rate dropping to 2.5% per year by 2015 and remaining stable at that level, and an annual attrition rate among the health workforce of 3% (Tables A10-A14). Physicians. The Saudization target to be achieved by the year 2025 would be 40% based on a physician/population ratio of 600 persons per physician. Achieving this target would require increasing the annual number of medical school graduates from the current 400 to 1,560 by establishing seven new schools of medicine or branches of the existing five schools. Projections also took into account Saudis studying medicine abroad and qualified non-Saudis being granted the Saudi nationality.

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Dentists. The Saudization target rate for dentists by the year 2025 is 71% based on a ratio of one dentist per 5,000 inhabitants. An increase in the number of graduates to 250 per year would be attained by increasing the capacity of the existing two colleges of dentistry and the establishment of a new college at King Faisal University. Pharmacists. In the year 2025 52% of the pharmacists would be Saudis maintaining the current ratio of one pharmacist per 2,100 persons. This target would require increasing the number of graduates of the only college of pharmacy from 165 to 200 per year as well as establishing two new colleges of pharmacy. Nurses. The nurse/population ratio would be maintained at one nurse per 300 inhabitants and 25% of the nursing staff would be assistant nurses. Increasing enrollment in existing schools of nursing aiming at an annual output of 3,858 nurses would achieve the Saudization target of 50% in 2025. Health Specialists and Technicians. This category includes several professions (laboratory, radiology, pharmacy, dietary, anesthesia, etc) and two levels of education, i. e., , at the level of technician and at the higher level of health specialist. The Saudization target for 2025 is 90% which could be achieved by enrolling more Saudi students in the existing colleges and by encouraging the private sector to participate in training this category of the health workforce. The Committee correctly underlined the need for a proper geographic distribution of the Saudi health workforce suggesting incentives in the form of housing for staff in rural areas, and opening branches of colleges in remote areas where scholarship support would be provided to attract students. The Committee also posited the need for adequate additional financial allocations to increase the capacity of existing schools and to establish new schools, and for providing incentives to attract students such as a guarantee of employment upon graduation and a career ladder based on professional qualifications. The Committee blamed the limited intake of students by the medical schools, and the relatively low number of graduates (averaging 400 annually) for the low proportion of Saudi doctors. It concluded that, at the current rate of medical graduates per year, the Kingdom's goal of attaining at least 60 percent Saudization of doctors by the year 2025 cannot be achieved, and total Saudization will be impossible in the foreseeable future Measures suggested to accelerate Saudization of doctors and other categories of health professionals include: •

Expanding the capacity and number of medical colleges. The committee recommended the establishment of five more branches of medical colleges, similar to the situation with King Saud University in Abha. This is deemed a more practical and financially feasible option than building entirely new medical schools, particularly in the short and medium term, given the prevailing budgetary constraints;

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• • • •

Increasing the number of students admitted into the existing medical colleges by 2050 percent by expansion and increase in support facilities; Sending about 50 high school graduates each year to study abroad until institutions in the Kingdom have significantly increased intake; Encouraging the private sector to establish colleges of medicine, allied health sciences and nursing schools; and Reviewing the curriculum and admission policies of the health colleges and institutes to ensure that undue restrictions to entry are not imposed.

Progress in Health Manpower Development The continued reliance on foreign health manpower sometimes masks the commendable progress achieved in the development of Saudi health professionals. For example, in just 11 years, from 1985 to 1996, the number of Saudi physicians increased by more than 250 percent, from 1,488 (1 0.8% of total) to 5,3 15 (1 7.4% of total). Saudis currently account for 35.8 percent of allied health personnel, and the proportion of nurses has jumped more than 6 percent in five years; from 10.1 percent in 1992 to 16.5 percent in 1996. In many developing countries the size of Saudi Arabia, one would find 5,3 15 physicians qualified to cope with health services. But Saudi Arabia, with its multiple specialized facilities and services, is not a typical developing country. The ratio of one physician to 600 population, as cited earlier, is comparable to ratios in member countries of the OECD, and contributes to the need for a higher number of physicians and therefore to a low proportion of Saudi physicians. A lower physician-to-population ratio would require a lower number of overall physicians, and greatly increase the proportion of Saudis to total. The intersectoral committee mentioned in the previous section based its projections on a physician-to-population ratio of 1 /600. Similarly projections for dentists, pharmacists and nurses were based on current ratios. Changing the ratios affects the Saudization results. The results of lowering the ratios in manpower can be observed in Table 5 below, where the first ratio is the current one and the next one or two ratios are the result of increasing the population served by one professional.

Table 5. Saudization Percentages, 2000-2025

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Closing the Resource Gap Much progress is being made towards health manpower development in the Kingdom as described in the preceding section. However, the proportion of Saudis in the health manpower overall is very low and may remain so in the foreseeable future. The problem arising from the presence of health professionals with varying traditions, cultures, practices, models of professionalism, training and skill mix has been emphasized. Yet, there appear to be no alternatives, as demand for professionals far outstrips the local supply. In view of the high costs of foreign manpower and the economic constraints the Kingdom now faces, there is no time like the present to critically review the Kingdom’s manpower requirements. This will not be easy, particularly since there is no coordination among the health sector agencies on the issue of health manpower. The two main questions that need to be answered are: 1. Does the system really need that many physicians, and, therefore, so many non-Saudi physicians? 2. Could the use of physician assistants and other auxiliary health personnel be explored to expedite Saudization of manpower? The issue of adequacy in the number of physicians practicing is highly debatable. There seems, however, to be a general belief that the physician-to- population ratio of 1/600 is high. What is also known is that the physician-to-hospital bed ratio is quite high in the specialist hospitals. This can probably be justified on the grounds of high tech facilities in hospitals of these sectors - even though over-capacity and idleness are known to exist. If there is an excess supply of physicians in the Kingdom, then, in addition to the high cost of recruitment, the cost of arising from the phenomenon known as “a built bed is a filled bed”, is also unnecessarily borne by the Kingdom. A physician-to-population ratio of 1/1,000 is by no means low and should be seriously considered as a way of reducing the requirement and dependence on foreign physicians and other professionals.

Physician Assistants and Other Auxiliary Professionals It takes considerably less time to train physician assistants than physicians. It takes between three and four years to train high school graduates as physician assistants. The use of physician assistants in primary health centers is one alternative to replace nonSaudis in this crucial, first-level contact where Saudis are highly desired. Even in the United States with an advanced health care system, physician assistants practice medicine under the supervision of licensed physicians. If approved, education and training programs could be provided in health colleges. In addition, the use of other auxiliary health professionals should also explored in circumstances where there would be no breach of quality. Over ten years ago, Professor Zuhair Sebai suggested accepting suitable selected university graduates to study medicine for three or four years, as a possible way to cover the difference between the supply of indigenous physicians and the demand.18 This idea merits critical review, in light of the gloomy forecast for the significant replacement of expatriates by nationals.

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Saudi Council for Health Specialties The Saudi Council for Health Specialties was established by Royal Decree in 1993 in response to the ever growing need for various specialists, the difficulties and high cost of recruiting and screening specialist trained abroad, and the realization that some of the highly specialized medical facilities in the Kingdom could serve as grounds for training programs in health specialties. The Council is supervised by a Board of Trustees, headed by His Excellency, the Minister of Health, and includes 14 members representing the various health sectors. The main objectives of the Council are to: • • • • • • • • • •

Design, accredit and supervise training programs in medical and health specialties; Assess and accredit centers participating in training; Evaluate trainees, set examinations and issue specialty certificates; Design, conduct and supervise continuous educational programs for health professionals, e.g., symposia, conferences, workshops, seminars, periodicals; Coordinate and liaise with similar organizations abroad; Accredit specialty certificates issued by similar organizations abroad; Develop guidelines and standards of practice for health care professionals; Study and approve projects of health societies; Actively participate in the study and design of plans for development of health care manpower; and Participate in planning, developing and conducting research projects in areas related to health care.

The Council carries out these functions through medical specialty boards made up of committees. There are currently six specialty boards and several committees supervising over 90 specialty training programs in 28 hospitals throughout the Kingdom. In addition to significant savings in cost and time to train abroad, the Council is committed to providing good training programs that will have a significant impact on the standard of health care delivery throughout the Kingdom. The Council is in a better position to evaluate certificates from abroad than any single institution or agency. Finally, the progress in establishing specialty training sites means that more Saudi nationals have a chance to acquire medical specialty training. Some that might have been unable to pursue such training abroad for various reasons, especially females, are awarded the opportunities within. The increased number of Saudis gaining specialty training, because of their availability within the Kingdom, implies progress towards Saudization.

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CHAPTER FIVE

Expenditures and Financing Trends in Healthcare Expenditures Health care expenditures in the Kingdom have increased rapidly from the early 1970’s and are estimated at 8 percent of the GDP in 1997. Health expenditures of the MOH (the main agency charged with the provision of health services in the Kingdom, estimated to provide 65 percent of total services) rose, in current terms, from just SR177 million in 1970 to a peak SR10,743 million in 1985, and the 1996 budget was SR7,364.8 million. MOH expenditures, as a proportion of the national budget, continued to increase from 2.78 percent in 1970 to 6 percent in 1992 (an average of 5.3 percent per year).3Reflecting the labor-intensive nature of the health sector, salaries and allowances account for over 52 percent of MOH expenditures (Table A6). This proportion is expected to be substantially higher in the other government health agencies and the specialist facilities, with primarily secondary and tertiary level facilities. On the other hand, capital projects, which accounted for as much as 64.5 percent of MOH expenditures in 1975 (the rush to development phase of the Development Plan), were just over 3 percent in 1996. The extent of government commitment to health care in the Kingdom is evidenced in the funding allocations to health facility projects during the rush to the development phase, which also coincided with the oil boom period. Budget allocation to the MOH, simply for the period 1975 to 1985, was a whopping SR 65,425 billion. Project expenditures in other government agencies were equal to or higher than the MOH. Expenditures on operations and maintenance have not changed dramatically but are beginning to rise, reflecting the need to replace or maintain facilities and equipment more regularly as they age. In 1996, MOH spent 44 percent of total expenditures on operations and maintenance. What the massive expenditure on health has produced is unprecedented growth in the number of health facilities and other health resources within a short period of time. The number of MOH hospitals, hospital beds and health centers rose from 75 and 9,837, and 599, respectively, in 1971 to 290 hospitals, 42,626 hospital beds, and 2,451 health centers in 1996. Even though the Kingdom is heavily reliant on foreign manpower, achievement in this area is also very impressive. The number of physicians, nurses and technicians increased from 1,316 physicians, 3,355 nurses, and 1,982 technicians in 1971 to 30,544 physicians, 6 1,2 14 nurses, and 34,277 technicians, respectively, in 1996 (Table A5). At 8 percent of GDP, health expenditures definitely absorb quite a large share of the nation’s wealth. The results, in terms of improved health, suggest a satisfactory execution of key health programs, and given the number of facilities at all levels, good population coverage or good access to basic care. Even though the proportion of the government budget allocated to the MOH has increased from 2.3 percent in 1980 to 5.1 percent currently, the actual per capita cash 44

allowances which that increase represents fell by 44 percent, from SR 1079 in 1984 to about SR 604 in 1993. Government revenue and GDP per capita have been declining because of the drop in the price of oil, the main source of government revenue. By any standard, health expenditures in Saudi Arabia are high. At 8 percent of GDP, health expenditures in the Kingdom, in relative terms, already exceed or come close to corresponding expenditures in most OECD countries with much older populations, and its expenditures substantially exceed the average health care expenditure of 5.2 percent for the Middle East and North Africa region (MENA). The question then becomes, Is the Kingdom getting adequate value from its investment in health, or is increasing expenditures a result of inefficiency in the system? How, for example, does cost of producing health services in the Kingdom compare with other countries?

Why the Rising Expenditures? Expenditures on health care, as a proportion of GDP, have been increasing in almost every developed and most developing countries. This raises concerns as to whether the bulk of expenditures is publicly financed by general revenue - as in the Gulf States, by Social Insurance programs, as in most Western European countries, or mainly privately financed, as in the USA, Netherlands and Switzerland. The burden of increasing expenditures on health care is even more disturbing because of evidence that there is no significant association between the level of spending on health services and improvement in health indicators, e.g., mortality among infants and children under-five years and life expectancy at birth. Some of the underlying factors for the rising expenditures on health care are common to all countries; such increases are, to some extent, inevitable. There are also other factors, peculiar to the Saudi health system, which have contributed immensely to rising expenditures on health. These factors include: .

Rapidly growing population and demographic changes: the Saudi population has been increasing at a rate of 3.6 percent annually, and currently stands at over 18 million. Substantial resources are required to satisfy the growing demand for health care. Government’s policy of free health care and huge investments in health resources and other social development policies have led to a remarkable improvement in the health and social status of the population. Because of improved treatment of diseases and prevention innovations, mortality among those aged 65+ years has been declining in countries able to avail themselves of these innovations. Life expectancy at birth in Saudi Arabia is currently 70 years, up almost 60 percent from 44 years in 1960 (Table A7). The number of elderly people is also growing with the population. It is estimated that about 3.5 percent of the population of 18,300,000 is over 65. Various studies on the problem of patients with lengthy stays in acute care hospitals found that the elderly were more than proportionately represented. As the number of Saudis surviving into the oldest of the old (85+ years) category increases, we can expect more pressure on 45

acute care hospitals. In a study on the problem of patients with long stays in acute facilities (seven hospitals in Riyadh), it was found that the those aged 65 years and older (3.3 percent of the population) occupied 22 percent of the beds.19 Acute care facilities are the most expensive and account for the largest proportion of costs. •

Related to the growing population is the growing awareness of the availability of high technology medical facilities and procedures. Rising expectations and demands for highly specialized procedures contribute to rising expenditures on health. It is not uncommon to see citizens protest vehemently the decision of a medical professional regarding the appropriate level of care. The more expensive, highly specialized alternative, at times inappropriate, is always preferred. Advances in medical technology have transformed health service activities into a very sophisticated and expensive business. Saudi health facilities have all the latest in medical diagnostic and therapeutic equipment. Proliferation of such expensive equipment throughout the different agencies in the Kingdom contributed immensely to the growth of expenditures on health. The availability of these sophisticated facilities and equipment means that Saudis no longer need to go abroad, except in the rarest of cases. On the other hand, the economic saying that “a built bed is a filled bed”20is also very much in evidence. The mere availability of this equipment and these procedures necessitates their use in numerous situations.

•

The system of free medical care in all public health facilities (which account for over 85 percent of all facilities) is one of the most important factors affecting rising expenditures on health care in the Kingdom. With the exception of token (nominal) charges levied in a few public, tertiary hospitals, all levels of care are provided free to Saudis and public sector expatriate employees, together with their dependents. There are virtually no economic constraints - on either consumer or provider of services and this may have led to loss of perspective regarding health care delivery. Consumers and providers do not seem to realize that equipment and services must be paid for one way or the other. Because of this loss of perspective, some services, which cannot be justified on the basis of need or outcome and contribute little to patient care, are widely provided. Patients’ tendency to opt for a more specialized procedure than necessary is a direct result of the free-care policy. The same is also true for the problem of long-stay patients and patients who sometimes refuse/protest discharge from hospitals. If patients bore the costs of a hospital stay, they would consider the wisdom of paying up to $800 per day for patients requiring only skilled nursing or custodial care. Lack of cost-consciousness and economic incentives on the part of physicians has led to unnecessary use of high-tech diagnostic and therapeutic procedures, with no consideration for costs in relation to benefits.

•

The method of reimbursement for the private health services provider has also contributed to the escalating costs of medical care. Health services in the private sector are mostly paid for on a fee-for-service basis. This mode of payment generates the incentive to provide more services and pays little attention to preventive

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•

services.21 As mentioned earlier, it is no consolation that MOH sets or regulates prices in the private sector. The crucial factor is the appropriateness of services, which is not verified.

•

Reliance on foreign health manpower has been inevitable given the relatively few Saudi medical professionals, on one hand, and the proliferation of highly specialized medical facilities in all sectors, on the other hand. Some of these foreign professionals, particularly those in the specialist and military hospitals, have international recognition in their field(s) and are paid high salaries. In addition to the huge salaries some of these attract, other benefits, such as paid multiple visits for these professionals and their families, cost of children’s education - either in or out of the Kingdom - and total annual holiday entitlements of up to 60 days, make these professionals very expensive. These extra benefits would not be necessary for Saudi employees. Other costs attributable to reliance on foreign manpower include: recruitment, employee turn-over, costs of obsolete equipment and down time of equipment, as a result of the departure of an employee and cancelled/unfinished projects.

•

The changing disease pattern in the Kingdom contributes to increasing costs of health care and is expected to be very important in the future. Immunization coverage is over 90 percent, and other measures have led to a tremendous reduction in the incidence of communicable and infectious diseases common in developing countries. These are being replaced by the more expensive diseases of the industrialized countries. Chronic diseases, such as diabetes, cardiovascular disease, cancer and stroke, are on the increase in the Kingdom and are significantly more expensive to treat than communicable and infectious diseases. Motor vehicle accidents, which have become something of a bane to the system, are another lifestyle problem contributing immensely to the increasing expenditures on health in the Kingdom.

•

Geographical distribution of the population is another factor in the rising expenditures on health care. A majority of the population live in the urban areas. The small remaining proportion is scattered throughout the vast landscape of the Kingdom, in communities of sometimes less than two hundred inhabitants. The remoteness of some of the settlements presents a serious financial challenge to a government determined to provide citizens with adequate health care. Some of the communities are too small to have a free-standing health facility. However, because the nearest health facility may be tens or even hundreds of kilometers away, these communities are provided with facilities of their own. Reaching such remote settlements is one of its important functions of the Armed Forces air evacuation facility (flying hospitals).

•

Duplication of health resources and services by different health provider agencies is at, or near the top of the list of factors responsible for cost escalations in the Kingdom. There is no coordination between the other health providers (other government and private sector) and the MOH. On the contrary, government agencies compete for highly specialized facilities, medical professionals and equipment. While

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there is usually high patient pressure on the MOH hospitals, there is excess capacity in the hospitals run by other government sectors. Data on cost of services in various sectors are not available for performance evaluation. However, it is generally believed that the proportion of government outlays for health care going to other government agencies, particularly the Armed Forces Medical Services, is very high in relation to the volume of services they provide. The wasteful practice of attracting medical professionals from other sectors contributes, in large part, to the ever-increasing cost of medical manpower. The attractiveness of these facilities to physicians is evidenced by the number of Saudi physicians working in this sector compared to the MOH or private sector. •

Contracting the management of hospitals to private management companies is another source of escalating costs. Government agencies providing health services use contract services to fill gaps in manpower and skills. Companies are generally selected on the basis of lowest bid. However, the low bids could still be considerably higher, if such hospitals were directly managed by the MOH or other agencies’ staff. Selection of inexperienced, low-bid companies often costs the agency more in the form of tasks unperformed or performed poorly. The terms of contracts generate no incentives to contain costs. Once agreement is reached on the contract amount, management companies do not need to engage in any form of cost-containment to reduce costs.

Financing How a country finances its health care is of interest because it is inseparable from health policy and affects the utilization, organization and availability of resources.22The options for financing health care expenditures include: public financing in which case the source of funding can be government revenue or communally organized through employment related insurance schemes, or compulsory national health insurance. Financing can also be private, in the sense that individuals are responsible for paying their own health care directly out of pocket or through voluntary health insurance. Most countries, particularly since the collapse of the Communist system, employ a mixture of public and private financing in varying proportions. Different health systems have different priorities in the financing of health care which generally include: equity, quality, efficiency and cost control. Equitable financing asks the question, “Are financial burdens shared fairly”? This question deals with the issue of financial burden and capacity to pay for care. To be equitable, richer members of the society must pay more for health care, and there should be equal access to care, regardless of income level. Efficiency in health care financing means that resources are allocated most effectively to produce better health, that health services are being produced in an efficient way and that the administrative costs of running the system are minimal. Quality of care deals with the technical quality of services and patient satisfaction, while cost control in financing assesses the mechanism/strategy used to control costs. Emphasis placed on the preceding goals varies by country. To one, it may 48

be equal access for all citizens; to another, it may be ensuring a high standard of care, and yet to another, the prime objective will be economic efficiency.

Public Financing Health service financing in the Kingdom is predominantly by the government which accounts for over 80 percent of total expenditures. Individuals and charitable organizations play an important role by donating money or building facilities for public health care programs, however, as a percentage of total expenditures, this source is negligible. Government financing is through annual budget allocations to individual ministries and programs. Health agencies whose sole activity is health services, e.g., MOH, Saudi Red Crescent Society and specialist hospitals, get their funding allocations, which are solely for health services, from the annual budgets and in accordance with the series of FiveYear Development Plans. On the other hand, the other public sectors involved in the provision of health care services such as MODA, the National Guard, MOI, the universities, etc, allocate funds to health care programs from their overall allocations in the government budget. Final decisions on funding allocations to health services, as in other public sector programs, are taken by the council of ministries with approval from the Custodian of the Holy Mosques, the King. Occasionally Royal Decrees are issued for allocations of additional funding for special health programs. In addition to funding government sector agencies, the government has a policy of encouraging the growth of the private sector in all sectors of the economy, including that of health care. Government funding has been the source of growth in private sector health facilities; interest-free loans and land are given to qualifying individuals or organizations wishing to set up a facility. To guarantee the visibility of some private hospitals, a number of beds are set aside for the use of government patients, thereby insuring that at least a break-even number of hospital beds are occupied.

Occupational Hazard Insurance As discussed earlier, occupational hazard insurance is one of two branches of a social insurance scheme operated by the GOSI. Employers (mostly private) contribute 2 percent of payroll on behalf of their employees. Health services to subscribers are provided by one of two GOSI hospitals or by private sector hospitals. Over 1.2 million subscribers are enrolled.23

Private Sector Funding Private sources of financing are predominantly through private, out-of-pocket payments for services received mostly in private hospitals and clinics. The private sector is increasing alongside the public and provides a full range of services (primary to tertiary) mostly on a fee-for-service basis. Some of the large private hospitals have the latest diagnostic and other medical equipment, and are virtually in direct competition with 49

public specialist hospitals for provision of highly specialized services. Hotel-like accommodations and amenities, and extra ancillary and diagnostic services, are increasingly offered to attract the affluent patient. It is a common belief that more ancillary and diagnostic services are offered in private hospitals to increase the bill. As mentioned earlier, the MOH approves the price of services offered in the private sector, but not the number of services considered appropriate, which leaves room for greedy providers to offer unnecessary services. Because of ignorance, patients tend to associate the high number of ancillary and other diagnostic services with quality care. The major sources of private financing are Saudis and private companies. Private companies are required by law to provide medical care to their expatriate employees and their dependents. On the other hand, Saudis and public sector employees who use private sector fee-for-service health care, do so for a variety of reasons. The study cited earlier on the choice of public versus private hospitals, also revealed the tendency to associate goods and services received without payment with low quality.24 Patients are not able to evaluate the quality of medical care, but rely on such proxy measures as politeness by the receptionist, the amount of time spent with the doctor; the number of diagnostic procedures, waiting time before being seen or going through a treatment procedure and even the hospital environment, as a measure of quality.25 Saudis are the chief users of private sector services, accounting for over 65 percent of inpatient and outpatient services in 1995.3 Another source of private funding is the out-of-pocket payment for nominal charges levied in a few specialist hospitals. Both King Faisal Specialist Hospital and King Khalid Eye Specialist Hospital charge nominal fees for varying types of service. The charges do not cover the costs of services provided, except in cases of self-referral. The charges are said to be disguised to curb abuse. Whether or not the nominal charges are sufficiently elevated to deter such abuse or preference for highly specialized hospitals, is an issue explored in Chapter VI Strategic Issues and Recommendations. Some MOH hospitals are also beginning to charge a proportion or full cost of services to self-referred patients. Prince Salman Hospital in Riyadh, and two others in Mekkah and Jeddah, now charge the full cost of services to non-Saudis, regardless of referral. Private funding sources are currently estimated at between 18-20 percent of total financing. As mentioned earlier, this does not include the costs of private management companies who manage/operate all or some aspects of public sector hospitals. A good bet, however, is that private sources of funding will increase significantly in the near future. Much of the growth in the Kingdom’s economy is in the private sector, thanks in large part to a government policy of encouraging private participation in all aspects of the economy. Given the current economic situation, which has seen a constant decline of government revenue in the last several years, and the increasing pressure of health expenditures on the government budget, there is no doubt that the private sector will be required to play a greater role in funding health services in the Kingdom.

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Voluntary Insurance The highest religious body recently ruled that the concept of cooperative medical insurance is consistent with Islamic teaching. The ruling paved the way for the National Company for Cooperative Insurance (NCCI), which has been active in other fields of insurance, to offer a medical insurance policy. The medical insurance policy is usually taken out by institutions to cover their employees and dependents. Employers pay a fixed amount for providing their employees basic medical coverage, typically for a period of one year. Coverage may be for inpatient services only, or for both inpatient and outpatient services, and normally include expenses incurred for room and board in the hospital (within or limited to a maximum rate per day of stay) and physician charges per person, per visit.26 The insured are issued with medical identity cards containing relevant details required to be presented to any of the medical institutions determined by NCCI. A deductible amount is required at the point where service is provided. The deductible is said to be for the purpose of making the insured conscious of the value of medical benefits provided them. There are very few private local medical insurance companies in the Kingdom, and so NCCI faces no competition. This might soon change with the new ruling on cooperative medical insurance by religious authorities. Also, the adequacy of the basic medical coverage - the exclusions and limitations - does not appear to be regulated by the MOH. Even though the policy is group coverage, contributions by holders appear to be experience-rated. As time goes on, these and other issues related to medical coveragewill have to be regulated by the health authorities. On the other hand, it is commendable that the company uses deductibles to deter frivolous use of services, which is normally a serious problem with health insurance.

Health Maintenance Health maintenance coverage of private company employees, individuals and families, by some private hospitals, is becoming a trend in certain big cities in the Kingdom. Encouraged by the success in their coverage of banks and other company employees, some private hospitals in Jeddah are offering comprehensive health maintenance arrangements to private individuals. The hospital provides a comprehensive range (preventive to curative) of health care coverage to subscribers for a pre-agreed length of time, and the reimbursement is on a capitation basis. This method of reimbursement creates a powerful incentive for efficiency. Because payment is fixed prospectively (capitation), hospitals will try to produce services in an efficient way, and engage in prevention of diseases to avoid the more expensive prospects of hospitalization. In conclusion, even though the proportion of government budget allocated to health care continues to increase, thereby putting pressure on other equally important projects, the actual cash allocation has been falling. The declining government revenues make it unlikely that drastic increases in funding are forthcoming. As will be discussed in Chapter VI, an alternative source of funding to complement government spending is highly desirable, Also discussed in that Chapter is the issue of efficiency in the delivery 51

of services. Is it possible that, with increased efficiency, the health system could accomplish more with less than the 8 percent of GDP currently spent on health? The 8 percent has already been declared significantly higher than the regional coverage, exceeding the expenditures of many OECD countries.

Future Financing: National Health Insurance (NHI) It has become apparent that, given the declining GDP per capita associated with declining per capita cash allocations to health, private sources of funding must be increased to complement government in order to maintain even the existing program. A compulsory national health insurance program is one of the options being considered seriously to increase participation of the private sector in health care financing. The Sixth Five-Year Development Plan has as one of its objectives, the broadening of the funding base for an expansion in health services by introducing a system of health insurance for non-Saudis and their dependents.14 The first phase of a national health insurance (health insurance for non-Saudis) has been approved by the council of ministries. Saudi Arabia has currently what could be characterized as a national health service system similar to that of the United Kingdom’s National Health Service (NHS), normally funded through government revenue during annual budgets. Unlike national health insurance systems in which funds are specifically set aside for health services, NHS competes for funds with other national programs such as education, defense, etc. Funding health services under NHS is considered superior to NHI. In other words, in considering a national health insurance, the Saudi health system is actually stepping backwards. This is probably necessary because, unlike the United Kingdom, which can raise taxes to increase revenue, residents of Saudi Arabia do not pay taxes. Before focusing on the implications of the proposed NHI for non-Saudis (what to expect following implementation and ways of limiting the negative effects of the NHI program), the principles and theories of NHI are briefly described.

Brief Background on NHI National health insurance, also called social health insurance, is usually a statutory compulsory health insurance program for the entire population of a country. In some countries, NHI is part of the social security program, and the government plays a major role in policy and administration. The increased role of the government is said to be legitimized, among other reasons, by the existence of "market failure" arising from externality in the health care sector.27Externality arises when an action imposes costs or benefits to individuals who are no party to the action being taken. National health insurance is a form of direct demand subsidy, and theoretically stems from the externality in consumption. Externality in consumption exists when wealthier persons in a society do not want to see poor people go without necessary medical care, and feel good about contributing to increase the consumption of health care services for the less fortunate.28Pooling of resources through NHI by the government enables the low income groups, who might otherwise be unable to obtain necessary medical care, to have 52

access to basic services. It then follows, that to be seen as effective, NHI programs must ensure an increase in the capacity of the poor to obtain care, and wealthier members must bear a greater proportion of the costs. Some empirical studies show that consumption of health services increases significantly - perhaps more than double in some cases, with full coverage insurance compared with no coverage.29 Compulsory social health insurance is usually financed through a matching employer/employee contribution assessed as a proportion of payroll. The unemployed and indigents have their contributions met by the government or other social security or welfare programs. The extent of coverage, i.e., comprehensiveness is both a political and economic decision. The Canadian National Health Insurance Program is said to be efficient, in terms of administrative costs, because the coverage is universal, and benefits are comprehensive. Less time and costs are spent in determining who and what is covered. Of course, there are always two sides to any coin: savings on administrative costs could well be lost to other aspects of the program. National health insurance programs can be run by a private organization or a government agency such as the MOH. Regardless of who operates the program, the MOH normally has a lot to say. Services may be provided by private facilities, government facilities or a combination of the two. National health insurance differs from traditional, commercial (private voluntary) insurance mainly in the way premium contribution is assessed. Private insurance companies use experience-rating in others to select low risks and/or impose high premiums on high risks, while NHI programs use the same rating for the entire population, regardless of age, sex or prior medical history. Private insurers justify the use of experience-rating as a measure to guard against adverse selection. The problem of adverse selection arises because the buyer of health insurance may have better information about health status than the insurer. Those who have health conditions are therefore more likely to buy health insurance under a voluntary insurance system. Unless they are able to discriminate among insurance buyers through experience rating, insurance carriers might charge low premiums to high risk individuals and run at a huge loss. On the other hand, the premium might be too high for the low risk individuals who may then choose to self-insure. Private insurance carriers also have measures to guard against losses by controlling utilization of services which are usually politically unacceptable under a social health insurance system. Some of the measures are deductibles, co-insurance, limits, exclusions and maximums. Compulsory national health insurance is a response to failures in the private insurance market.27 Experience-rating, which is widely used by private insurers, is the most serious breach of the principle of cooperative health insurance. The very high premiums assessed on the high risks effectively exclude those with the greatest need for coverage - the poor and the sick - and so defeat the spirit of health insurance. Some private insurance plans actually spend time and money on the socially wasteful activity of attracting low-risk (healthy) individuals. On the other hand, the universality of NHI programs eliminates the problem of adverse selection. Enrollment in NHI programs is compulsory, since the population is larger, so the high and low risks average out. This guarantees that high users do not face exorbitant premiums, and low users do not face rates considerably

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higher than the actuarial fair premium. National health insurance programs are evaluated based on: impact on beneficiaries, incentive for efficiency and equity in financing.

The Proposed NHI Program The motivation behind the proposed NHI is two-fold: the need to ensure that everybody in the Kingdom has adequate medical care coverage, and the need to broaden the funding base for health care, such that the private sector’s contribution is increased to its fair share. The government policy of ensuring adequate health care coverage must be all encompassing - including Saudis and non-Saudis. The current, free-care policy covers Saudis, as well as public sector expatriates and their dependents. Medical care of the private sector expatriates and their dependents is the responsibility of their employers. While some companies have definite plans for the medical coverage of their expatriate employees, many do not. Employees of private companies that do not provide medical care try to take advantage of government policy which stipulates that medial care should be provided to any resident in the event of an emergency, regardless of sponsorship. Some of them wait until their medical condition deteriorates to a point where it may be accepted in the emergency departments of public facilities. Others fake emergency in order to be accepted and sometimes create chaotic scenes in emergency departments of public hospitals. The purpose of the NHI, among other things, is to guarantee access to medical care for those who currently do not have access and, in so doing, control the use of services and instill orderliness in medical facilities. Health planners will then be able to predict the need and demand for services and plan accordingly. Most of the growth in the economy is in the private sector, and this trend is expected to continue. By contrast, government revenue has been falling within the last few years. The NHI will ensure that the private sector contributes its fair share to the health care bill. When implemented, the program will raise revenue to eliminate the burden of private sector medical care expenditures on the government. The proposed program will be selfsustaining, and funding will be through employer/employee contributions to be assessed on payroll. A decision on the administration of the program, the benefits and delivery of services (provider arrangements), still awaits final approval by the government. The options being considered are probably the usual - statutory agency, private organization and the MOH. Whatever option is eventually adopted, there is no doubt that the MOH will be actively involved in policy and planning decisions. More than likely, and in accord with government policy of increasing private sector participation in health care, services to the first phase (NHI for non-Saudi enrollees) will be provided by private sector providers. The second phase encompassing the whole population is expected to follow after three to five years of implementing the first phase.

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First Phase: NHI for Non-Saudis According to the MOH, the first phase of the NHI program will cover only expatriate employees of the private sector and their dependents. Non-Saudis accounted for about 27.3 percent of the population of 16,929,294 in the 1992 census. In 1998 non-Saudis number about seven million. The employees range from unskilled, low-pay individuals, such as domestic workers and laborers, to highly specialized and handsomely paid professionals. A major step toward the NHI scheme has been gained by the MOH in the approval of the program by the council of ministries. A review of service utilization3 shows that, in 1996, non-Saudis accounted for 20.4 percent and 33.5 percent of admissions in MOH and private sector hospitals, respectively. In other government sectors, the proportion of non-Saudi admissions ranged from 6.7 percent in ARAMCO hospitals, to 46.4 percent at the Riyadh National Hospital. About 18 percent of the just over 56 million visits to MOH health centers were by non-Saudis who also accounted for 20 percent of kidney dialysis. Non-Saudis were not broken down according to sponsorship in the reports. However, given that private sector expatriates are not entitled to care in public facilities, it is highly likely that public sector expatriates account for most of the visits. For purposes of planning the NHI, it is highly unlikely that adequate data currently exist on the use of health services by non-Saudis. Similarly, data on the historical use of health services by some categories of expatriates do not exist. This might actually prove to be one of the toughest problems to tackle.

What to Expect It is difficult, if not impossible, to predict with any degree of accuracy the precise effect of the NHI program on the health system, because data on patterns of utilization by private sector expatriates do not exist. Even if such data existed, they may not accurately predict changes in demand habits of expatriates, once they are covered by insurance. What is certain is that the first phase of NHI will eliminate the economic constraints to seeking medical care from all private sector expatriates, in general, and the many unskilled laborers and domestic workers, in particular. Most expatriates in this latter group currently do not have legitimate access to medical care, except in cases of very serious, sometimes life-threatening, medical problems, for which they are provided care in emergency departments of hospitals. Less serious health problems are treated by drugs purchased at the pharmacy, while minor problems are simply allowed to run their course. A sharp rise in the overall utilization of health services in the Kingdom will definitely follow the implementation of the first phase of the NHI program. The empirical studies referred to earlier show that consum tion sometimes more than doubles with introduction of comprehensive health insurance.29 The increase in consumption of health services will be filling health care needs that existed all along. All the low-skilled workers who could not get care in the past will have access to care when needed. While part of the increase in consumption will serve to fill genuine medical needs, the balance will definitely stem from moral hazard which is a problem with insurance coverage. The term “moral hazard” is used by health economists to describe the tendency 55

for the event being insured against to occur more frequently than usual.30 Health insurance tends to lead to frivolous and unnecessary over-utilization of medical services, unless there are financial incentives not to do so. This is in part because free care creates a situation in which marginal benefit tends to be greater than marginal cost, even to a rational consumer. The fact that the additional benefit is insignificant, compared to the cost of producing the services, is not taken into consideration. The current health system (NHS) is similar to a system of national health insurance, in that it does not generate enough economic incentives against over-utilization and frivolous use of services. Evidence of over-utilization of health services and inappropriate use of highly specialized, free-care, public facilities for low-level care has been widely reported. Unless adequate measures are in place to control utilization, after introduction of health insurance for non-Saudis, the problem of inefficient use of resources might put the long-range financial sustainability of the system in doubt. The objectives of shifting costs to private sector equity in financing and instilling order in service utilization of public hospitals will largely be met. Since the program will be funded through private employer/employee payroll contributions, the cost of medical care of private sector expatriates will be borne by the private sector. Financing of the program will be equitable, since employers with elevated incomes and high-salaried expatriates are expected to contribute more, with respect to their employees, than low-income companies. The issue of a possible limit or minimum amount an employer can contribute for a single employee is one of the details to be resolved by the MOH. Instilling order and ensuring predictability in the demand for services will be possible, once all expatriates are covered by the NHI program. Regardless of whether services are provided by the public or private sector, the actuarial study will ensure predictability of service use. To summarize, the NHI program is expected to generate a significant increase in health services utilization and, hence, increases in health care expenditures. Even though the additional costs will be met by the private sector, the overall cost escalation must be a cause for concern by the MOH and the government. Allocating an increasing proportion of a nation’s wealth to health care makes such resources unavailable for savings and productive investments, and can therefore be troublesome. The MOH cannot take comfort in the fact that the escalating cost is met by the private sector. The private sector may write the checks, but the entire economy will pay the bill in the form of high prices for goods and services produced by the companies. It is for this reason that MOH must ensure that adequate measures are in place to prevent abuse in the NHI program. More than likely, government expenditures on health services will show a modest decline, or the rate of growth will be slowed down after implementation of the NHI.

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Future Financing: User Charges in Public Hospitals Alleged over-utilization and abuse of services and the decline in revenue from oil have led to increasing calls for a review of the free health care policy, and the need to seriously consider the participation of patients in the cost of health care through the imposition of user charges. It is argued that user charges do improve efficiency (cutting overutilization) and quality of health because of certain expected effects of prices on the behavior of patients.31 • • •

Firstly, user charges would reduce unnecessary use of services; Secondly, by coordinating prices among different levels of facilities, user charges could encourage appropriate use of first contact and referral facilities; and Thirdly, where fees are in place in a facility, exemptions for specific services, such as prenatal care or other preventive health services, could encourage consumption of these important services.

Out of concern for the new financial implications facing their patients, providers of services would be encouraged to limit practices such as over-prescribing drugs and use of highly specialized, diagnostic procedures for routine investigation of minor illnesses. Moreover, user charges are expected to provide an incentive for the provision of higher quality care, since patients who now have to pay will insist this. Regarding future options for financing the Saudi health system, some health economists argue that user charges be introduced first, before a national health insurance program. While acknowledging the need to exclude charges at the consultation level of primary health care, and for the poor, the need was emphasized to establish the link between cost and health services in the Kingdom before embarking on any health insurance. Going from the current national health service system directly to national health insurance may be seen as something of a step backwards. One of the conditions that make an event insurable is the risk of loosing a substantial amount of money, if the event occurs.32The need to buy health insurance coverage stems from the risk of loosing a huge amount, in the event of sickness. Risk-averse individuals, those who buy insurance, prefer the certainty of loosing a small amount on insurance premiums, rather than the risk of loosing a greater amount, if sickness should occur without insurance coverage. To Saudis and the public sector expatriates, there is currently no risk of loosing money in the event of illness, no matter how catastrophic. Yet, efficiency considerations require that some linkage be established between consumption and payment. In the absence of such linkage, gross over-utilization of medical services will continue. Introducing user charges in public facilities is also advocated on the grounds that most Saudis can well afford the user charges required to complement government funding and curb over-utilization. Elimination, or even serious cuts in government funding is not currently contemplated. Therefore the charges, if introduced, will not be intended to cover the full costs of services. On the other hand, the economic reality is that the private 57

sector is becoming dominant, and many Saudis are becoming more affluent. It seems reasonable to expect people who spend huge sums on vacations and other leisure items to contribute a fraction of the cost of their health care. Furthermore, if the long-run financial sustainability of the Saudi health system has been put in doubt because, as is widely believed, of over-utilization and inefficient use of resources, then those responsible for it should bear the costs. A case in point is the problem of custodial level care patients in hospitals involved in the provision of acute care, which has been mentioned already. Not only are user charges necessary in such situations, but the charges should be sufficiently high to discourage such abuse. Patients who dictate the type of specialized diagnostic procedures to be used by medical professionals for investigating trivial and routine medical problems might review the wisdom of their choice of procedure, if they had to pay a significant proportion of the cost of such unwarranted procedures. Saudis are well aware of the enormous wealth of their country, and generally regard free social services as their right, rather than a privilege. Most social services, including education, health services, utilities, etc., are provided free or at a highly subsidized rate. Government is generally expected to provide the highest possible quality of health care free of charge. The introduction of user charges will definitely not be accepted with any degree of enthusiasm and might even be resisted. It is not uncommon to see a Saudi protest vehemently to a pharmacist in public hospitals, at the suggestion that the prescription need be filled outside at the patient’s expense. In short, the population has grown accustomed to having the government provide things free of charge; therefore, a smooth introduction of charges for health services in public facilities will require great ingenuity on the part of planners. Yet, charges will inevitably be imposed, and at levels high enough to raise funds and deter frivolity. Introducing user charges in public hospitals may not be as dramatic a step as it might appear. The status quo is already changing in that patients, albeit grudgingly, are increasingly having to fill some non-prescription drugs outside public hospitals, and paying nominal fees out of pocket. However, the clearest indication that Saudis can afford, and are willing to pay for medical care, is the extent of use of the fee paying services provided in the private sector. Saudis account for about 70 percent of inpatient and outpatient services provided by the private sector, and despite the level and number of facilities in the Kingdom, some still travel abroad for medical care. A combination of the perception of good quality care in the private sector and the normal perception of low quality (which services received free of charge attract), explain the use of private sector services by individuals with access to free services in the public sector. This may also signal dissatisfaction with the public free care. To be effective, and in order to make a serious impact on the health system, user charges must be extended to the other government sectors and specialist hospitals. Hospitals in this sector provide mainly tertiary and secondary level services, the abuse of which has greater financial impact than the preventive and primary care provided in some MOH facilities. It is also widely believed that these facilities have better and more expensive

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equipment with low utilization rates, frequently 20 percent or less,4 and thus attract people who can benefit from services of the low-level, general hospitals, and are therefore settings for the greatest misuse of highly specialized procedures for medical problems requiring lower-level care. Again, exclusions will be necessary to make sure that high quality care is provided to the Armed Forces and anyone in need of such care. It will be foolish and irresponsible, for example, to require fees from accident victims or for occupational injuries. On the other hand, there is absolutely no justification for wasteful use of medical resources, regardless of sector or occupation. Politically, it is not feasible to reduce spending on health care which might seriously affect the quality of care. Since residents do not pay taxes, it is not feasible to increase revenue through taxation to sustain even the current level of services. User charges are an important source of revenue in situations like the Kingdom’s, where services cannot be cut, and taxes cannot be imposed. Household surveys, in countries where taxes are used, indicate that people are willing to pay for services that they deem beneficial to them, making user charges a less coercive way than taxation to raise revenues and finance public services. Moreover, efficiency, equity and social welfare can be improved, if additional revenue generated is used to provide services to under-served areas or programs. User charges offer several advantages, including: • • •

encouragement to both consumers and providers to be cost conscious; helps control the use of services by imposing financial disincentives on the consumer; provides a link between financial responsibility and the provision of services which may be lacking under a national health insurance scheme; and • raising revenue. The most serious concern about user charges is the impact on poor people’s ability to seek needed medical care. There is evidence in developing countries with user charges that some groups with important health needs - the poor and those with communicable diseases or with vaccine preventable diseases - are not being met because of limited to access to care imposed by user charges.33 If the foregoing portrays user charges as a simple option for raising revenue and improving quality and efficiency, this is not the intention. Apart from the negative impact on poor people’s ability to seek needed care, administrative issues are equally important. The administrative costs associated with collecting user fees include: • • • •

costs associated with revenue collection where fees are retained for use in the facility; costs associated with their management; cost of training staff and publicizing the purpose of the fee and consultation; and costs due to other losses.

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If the collection costs exceed user charges, revenue will actually decline. Who should keep the revenue from user charges is another important administrative issue. If hospitals are simply supposed to collect the fees for transfer to the MOF, which is the case of the Kingdom, there will be little incentive to collect the fees. Finally, user charges essentially taxes patients at the point of service use, affect far fewer people than premiums, and may be negatively viewed as a tax levied on the sick. However, because user charges counteract over-utilization and frivolous use of services provided free of charge in public facilities, they are an important tool for achieving allocative efficiency. The same equity, efficiency and administrative concerns needed to evaluate a national health insurance program also apply to the design of user charges.34 To ensure equity, in most cases for the poor, some services must be exempt from charge. To ensure efficiency, charges must be set high enough to discourage frivolous use, but not so high as to discourage the use of needed or cost-effective services. And, as noted earlier, to be worthwhile, the lowest proportion possible of revenue should go to collection of charges and administering the fee system.

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CHAPTER SIX

Strategic Issues and Recommendations Five strategic issues are posited in this chapter. Each issue is discussed in detail and relevant recommendations are made. The box on the next page provides a summary of the following five strategic issues: • • • • •

Contract management of public facilities; Coordination of activities by health sector agencies; Cost containment; Long-term care facilities; and Physician managers.

Contract Management of Public Facilities Private management companies play a vital role in the operation of government hospitals (both MOH and other government agencies). The size of some of the contracts which run into billions of riyals for full operation management of hospitals used to be the preference of the government. And, as noted earlier, there has been a tremendous proliferation of hospital management companies of all shapes and sizes in the last few years. Government preference for contract management of hospitals by private companies probably stems from the need to avoid management by public sector organizations, generally believed to be less efficient than the private sector, and the predictability of financial commitment to health care. If contract management of public hospitals is the preferred option, this raises several issues. Are these management companies necessarily more efficient? How do the terms of the contract guarantee that rewards are linked to service performance such as quality, cost effectiveness and consumer satisfaction? Has the use of management companies increased predictability of costs of services? Manpower development and training in the health sector is an important policy objective for Saudization. What has been the contribution of contract management to the development and training of Saudis?

Cost Effectiveness The lack of data on cost of different alternatives does not permit categorical statements on cost effectiveness of hospital management by contract versus direct management. In the absence of such data, the author would caution against the assumption that because the management companies are private organizations, they are necessarily more efficient. Expressing skepticism about the cost effectiveness of management companies is not in 61

Box 1. StrategicIssues and RecommendedActions

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disagreement with some theories and principles of organization management. The Ljubljana conclusions assert that “The state (MOH) should row less and steer more in health systems.”35 This conclusion further states that MOH should only be involved in strategic planning, setting standards, monitoring, evaluating outcome oriented regulations, and never directly manage hospitals or employ medical professionals. The level of involvement of the MOH in hospital management varies by country and depends on performance records of management companies and management capabilities of MOH staff. Any attempt to adopt a system, just because it worked elsewhere, may be doomed. Accordingly, management by for-profit organizations is driven by profit motives. In other words, the management companies are in business to make a profit for their shareholders. This motivates conducts from submission of bids through actual operations in the hospital. It is therefore expected that their bids include actual anticipated costs plus a mark-up for profit. Some say contractors use service-costing chicanery to extract as much as possible. Because the bids of the management companies include profit mark-ups, their budgets obviously exceed the cost of direct management. Although the escalating cost of medical care is a serious concern for the government, there are no incentives for contractors to control costs. On the contrary, because payment depends on the provision of specified services, such services are provided, even when the need no longer exists. The limited data available indicate that the number of full-time equivalent employees per bed, in contract-managed hospitals, is higher than in directmanaged hospitals, and sometimes even exceed international standards. Most management companies are paid specific amounts for certain positions in the hospitals. The more positions and the higher they are in the hierarchy, the more money the company gets. It is therefore not in the interest of the companies to see a reduction in the number of positions, even when demand has reduced significantly or may have been overestimated. Some contractors have also been known to fill some positions with less qualified/experienced professionals than was specified in the contract. The motive is clear: to increase profit by recruiting cheaper, albeit less suitable employee(s) than the contract specifies. Some management company employees are paid very low wages, and in some cases, are not paid for several months. Some of these employees resort to using hospital supplies. Non-payment of employees is usually blamed on the government agency’s (MOH or other) failure to pay the management company on time. The bills eventually get paid, but no refund or replacement is ever offered for the supplies used, and the resultant low morale and lack of commitment of such employees affect not only costs but also the delivery and quality of patient care.

Quality of Service The quality of services provided by management companies should be called into question because of some inherent flaws in contracts. Adequate systems for monitoring performance of contractors are usually not available, and the links to payment are never specified. When the MOH decided to move from partial- to full-operation management contracts, some companies, that in the past provided specialized services such as catering, housekeeping/laundry, suddenly became total hospital management companies. Some of 63

them were successful because of the lack of a proper mechanism for evaluating hospital management companies. Awarding contracts for total management of hospitals to inexperienced companies on the basis of low-priced bids tends to penalize the more experienced and professional bidder and rewards the inexperienced, but less expensive to the detriment of the hospital concerned. Even when there is a financial penalty clause for non-provision services in the contracts, serious loopholes often exist. In some cases, the financial penalty is actually a cheaper option for the contractor than the provision of services. The problem of continuity and severe operational difficulties during highly disruptive contract changeovers is another aspect of contract management that merits scrutiny. Most of the contracts cover a period of three years. Given the considerably long time required to settle down in a hospital, and the equally lengthy process of preparing for hand-overs, the effective operation time for contractors is actually a lot less than the three year period. The constantly changing faces and abandonment of programs during changeovers mean that, instead of gaining in maturity and engaging in long-range strategic planning, contracted facilities are forced into restarting another short life cycle every three years. Other problems in contract management of public hospitals (discussed earlier) which merit examination include: • •

•

Confusion at the operational level, in the case of partial contracts, because of the lack of appropriate demarcations and clarification of responsibilities between contractors and government agency staff; Use of clauses/phrases that lend themselves to future and individual interpretation, e.g., terms like "western qualifications," "suitably qualified," "necessary," "suitable and required," unless they are quantifiable, lend themselves to different interpretations and possible abuses; and Widespread dissatisfaction, at the operational level, with the contractor's performance, resulting from the fact that contracts are generally awarded at the agency level. Staff at the operational level are often uncertain of contract provisions, cannot modify the contracts over which they have little or no influence, and have no budgetary controls (e.g., withholding and approving payment).

Future of Contract Management in Public Hospitals Even though a decrease in the number of contract-managed, public sector hospitals is or should be a desired and achievable government objective, contract management is expected to continue in the foreseeable future. The conditions which created the need to contract public hospitals out to management by private organizations still prevail. At the root of this need is the lack of enough employees in the government health sector with adequate skills in management and other areas to operate the highly specialized hospitals. The larger facilities, for the most part, have sophisticated equipment and engage in highly specialized procedures. To devote more time to the main goal for existence of the organization, and yet benefit from the efficiency and quality service of professionally qualified managers, they will continue to need the services of consulting 64

companies. On the other hand, given the right incentive structure, the government could quickly increase the capability to manage the majority of its hospitals. Finally, the preceding appear to dwell on everything that is wrong with contract management of public sector hospitals in Saudi Arabia, to the neglect of all the positive contributions by hospital management companies in developing the Saudi workforce. The setback and poor performance of some companies should not be seen as an indictment of hospital management companies whose efforts have made Saudi hospitals world class. In short, the high quality of care provided in the Kingdom’s hospitals would have been impossible without them. The use of management companies has significantly reduced the level of bureaucracy in dealing with the MOF and the CSB. Whereas several steps are required before the MOF releases money to an individual hospital chief executive, funding for a contract is relatively easy to secure. That some of the hospitals, managed by highly experienced management companies, provide excellent quality service, by any international standard, is not in doubt. However, as the pressure of expenditures on heath care intensified in government, the question is no longer limited to quality alone but also cost (economic efficiency). The question should increasingly center on value for money. Is operation of public sector hospitals by private management companies the most efficient way of running the hospitals? If so, are all management companies equally efficient? Are there aspects of the contracts that need to change in order to accomplish specific objectives? The preceding questions at least recognize the danger of assuming that contract management of public sector hospitals is the most efficient alternative, even in the face of some disturbing revelations. Given the recent reality of financial constraints as a result of declining revenue, inefficiency should no longer be tolerated just because things have always been done that way. Since the trend towards expensive contract management by public sector hospitals is expected to continue, a study should be conducted to compare the efficiency and cost effectiveness of hospitals that are managed directly and by contract. It is possible that contract management of hospitals is more efficient than direct management but could be improved. On the other hand, contract management of hospitals could be producing health services at unreasonably high costs, even if high quality may be partly responsible for health care cost escalation in the Kingdom, and therefore needs to be reformed or abandoned.

Recommendations At present, it is neither possible nor desirable to eliminate all contract management of public hospitals. Some very good hospital management companies have contributed, and continue to contribute, immensely to the higher quality of health services provided in the Kingdom. On the other hand, the poor performance of some companies cannot be condoned. The issue of economic efficiency and quality need be the most important factors:

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• • • • • • • •

Public sector providers must work to reduce or eliminate turnkey management, and outsource specific hospital functions that are not performed by agencies’ own staff and in-house management development should be a continuous process; A comparative analysis of directly managed and contract managed hospitals over a period of at least one year need be undertaken; The incentives, if any built into current contracts, should be reviewed and evaluated with a view to negotiating and evaluating contracts based on performance and on clinical outcomes; Contracts should cover longer intervals - say five-year periods - to avoid the disruptive and huge cost of change over every two to three years. The short intervals are not enough to implement some programs; Pre-qualifications of contractors should be used to establish their credentials, ability and track record; Avoid delays in the payment of sub-contractors and employees; Responsibilities, roles and relationships of management companies and contracting agency’s institutions need be clarified; and There should be ongoing monitoring of contracts.

Coordination of Activities by Health Sector Agencies Does lack of coordination among health providers contribute to waste? As mentioned earlier, all the health provider agencies, which number more than 12, enjoy a great deal of autonomy and independence in planning and delivery of service. It could be argued that these are separate systems within the Saudi health system. MOH, the agency responsible for national health policy, has little control or influence on the activities of other sectors. Even though funding of government sector agencies comes from the same source (government budget), there is no linkage among funds allocated to individual sectors. Each sector receives its own funding allocations. Even though MOH is responsible for the overall health of the population, it neither influences the level of funds allocated to other sectors, nor does it always have knowledge of the amounts allocated. The amount of resources, particularly those earmarked for high-tech, medical equipment, vary considerably from one sector to another. There is a lack of coordination, and interagency resource use is rarely practiced. For example, even though underused diagnostic and other expensive medical equipment may be available in a nearby health facility belonging to another agency, there are no checks to prevent another center from procuring the very same equipment. Some of the agencies have utilization rates as low as 20 percent for the sophisticated diagnostic and therapeutic equipment, indicating a need to review policies and procedures for procuring this equipment Since overhead, depreciation and other fixed costs of some medical equipment continue to run regardless of use, procurement of this underutilized equipment has been identified as a major source of health cost escalation in the Kingdom.

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Another problem for cost-containment arising from the procurement of underutilized equipment stems from the health economics maxim, “a built bed is a filled bed”. This maxim deals with the tendency to use health services, because they happen to be available. If a resource such as MRI or CT scan is available and underutilized, a physician may, for example, wish to eliminate the possibility of a tumor indicated by a minor headache. Other resources, such as manpower and bed capacity, also follow this rule. If there is a large supply of physicians in an area, they will try to keep busy by finding more tests to run, new needs for surgery and more patients requiring follow-up.36 In facilities with excess bed capacity, patients may be hospitalized days before and after surgery, or their conditions for admission may be lowered just to increase occupancy. This situation, which economists call “supply-induced demand,” has been supported by numerous studies. These studies show a positive correlation between the number of facilities and resources in an area, and the utilization of services, after controlling for differences in other factors.20 Studies have not yet been undertaken to verify the impact of health resource supply on demand for services in various sectors in the Kingdom. What is generally known is that the other health sectors, particularly the military (MODA, National Guard and Security Forces) and the specialist hospitals, have more high-tech diagnostic equipment, relative to the population they serve, than the MOH. The same is also true of highly specialized medical professionals. These facilities are highly attractive, even to those who are not eligible for care because of the level of resources. Some Saudis and expatriates resort to all kinds of tactics, including sponsorship and/or Royal Order in order to obtain care in these facilities. In the face of it, the extra services provided to individuals seem reasonable, particularly in situations of excess capacity or under-utilization. However, most of the highly specialized services are provided to individuals who need lower level care that could be provided in the numerous lower level MOH general hospitals, and are therefore wasteful. The specialists, university and military hospitals have a higher number of highly specialized, internationally known, and generously paid medical professionals than the MOH. This high number of professionals can be justified on the grounds that these are mostly tertiary level facilities. The Kingdom has a very high staff/bed ratio varying from 4 staff per bed for MOH hospitals to 9.7 staff per bed for the King Faisal Specialist Hospital. These staffhed ratios are high by international standards as shown in Table 6. France and Japan have staff per bed ratios that are about one third the US ratio and one third to one seventh the Saudi ratios Medical professionals in these agencies, even when of similar education, specialization and experience as those in MOH, attract sometimes more than double the salaries of their counterparts in the MOH. Other benefits are even more generous. It is sometimes amazing to note the earning differences in different sectors, particularly since the ultimate source of funds is the same.

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Table 6. Hospital Costs and Staffing in Selected Countries

Source: OECD Health Data 1998; KSA: Ministry of Finance and Economy

The average length of stay (ALOS) in MODA hospitals is 6.3 days compared to 3.7 days in the MOH facilities. The figure of 6.3 days is not high by international standards. It becomes a cause for concern when one considers that these are costly, highly specialized hospitals that ought to be involved only in acute care services involving referral, and therefore have a shorter length of stay. Table 7 presents the number of hospital beds, admissions, turnover and ALOS by provider. Long hospital stays are usually attributed to the elderly, a segment of the population to which members of the military hardly belong. In fact, the average age of members of the military is considerably lower than that of the entire population. Relatively long hospital stays and high costs per inpatient day must be a troublesome combination contributing to escalating costs in the Kingdom. In 1990, only 4.2 percent of the population of Saudi Arabia were over 60 years of age, compared to over 18 percent for OECD countries.37 The cost of hospital care in the Kingdom shows wide variation among the different provider systems. Operational statistics - especially financial data - are very difficult to obtain. Table 8 presents data obtained for some public sector providers. No private sector data are available. Available data for public sector hospitals show striking differences among systems and among individual hospitals. Annual operating costs per bed range from SR300,000 to SR1.3 million ($80,000-$350,000) among providers. The number of staff per bed varies from 3.8 to 9.7 persons. In 1995 the cost per admission varied by a factor of three.

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Table 7. Hospital Beds and Bed Utilization in KSA, 1996

Sources: Ministry of Health, Annual Health Report 1996; Ministry of Finance and Economy; and interviews.

* The King Fahad Medical City in Riyadh with 1,400 beds was completed in 1998 but is not yet operational. The cost of stays in military hospitals is more than double the costs in MOH hospitals. The average cost of hospital stay in a MODA hospital is about $4,933 (about $773 per day), while the average cost of a hospital stay in a MOH hospital is about $1,787 (about $480 per day). Annual operating costs per bed in the Kingdom range from $80,000 in MOH to $346,667 in the specialist and military hospitals. It is common knowledge that the cost of healthcare increases with frequency and length of hospital stays. A major explanatory variable for the difference in cost is most likely the number of staff per bed because personnel costs usually account for about two thirds of total hospital costs. This is borne out by an analysis of eight hospitals within one provider system (data not shown in the tables). The number of staff per bed shows a direct relationship to the annual cost per bed: the hospital with the lowest number of staff per bed (4.0) has a cost per bed of SR672,300 and the hospital with a staff/bed ratio of 8.8 has a cost per bed of SR1,567,200 or more than double. Size of hospital also seems to be a determining factor. The smaller of the eight hospitals have higher operating costs. The smallest (212 beds) has the highest cost per bed and the largest (1,014) has the second lowest cost per bed. No firm conclusions can be drawn however without taking into consideration the level and scope of services, location and case mix. For example, the large 1,014 hospital has a staff/bed ratio of 5.8. How much of its lower cost per bed is due to fewer staff or to its size or to other factors?

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Table 8. PerformanceMeasures of Hospital Systems in KSA, 1995 and 1997

Source: Ministry of Finance and Economy; MODA Statistics;Ministry of Health * The MOH expenditures on hospitals are overstated as the total MOH budget appropriation for 1995 was SR7,365 million. Cost per bed would be closer to SR200,000. ** Data for 3,378 beds (eight hospitals) or 81% of the 4,189 beds.

In light of the financial constraints facing the Kingdom, there is a need to review the activities of public sector provider, to ensure adequate returns on investment in health. Questions should be asked about the high cost of services, particularly in other government sectors. It has been noted earlier that costs in this sector more than double those in MOH hospitals. If this is justified by the fact that most of the hospitals in other government sectors are highly specialized facilities, the question then becomes - Are these referral facilities? If yes, why are they not used as such? Why are there no lowerlevel general hospitals to handle the less severe cases? Any member of MODA or the National Guard and Security Forces who needs hospitalization goes to the Armed Forces Hospital, King Fahad National Guard or Security Forces, respectively, regardless of the severity of the medical condition. Yet, these are very expensive tertiary level care facilities. If cost differences can be justified on the grounds that higher level or specialized services and procedures are provided, then this raises the issue of case-mix. Compared to the MOH, are these hospitals serving a sicker, possibly older population, or groups with other special demographic characteristics, which would justify the provisions of the level of care described? Or, are these highly specialized facilities used for the provision of routine primary and secondary level care? This creates a multi-tier health system in which those eligible for care in other government health sectors get primary and secondary level care in a highly specialized medical facility, while the rest of the population is treated in an appropriate level facility. Provision of high quality care is always preferred, but the use of acute-care facilities for provision of low-level medical care in a period of financial 70

constraints could be labeled irresponsible. It is possible that costs are higher in this sector, because highly specialized equipment and procedures are inappropriately used for routine cases. Wasteful competition for resources among health sectors is another counter-productive feature that adds to the cost of services. In an effort to outdo other sectors and be the best, high-tech equipment is purchased, and programs are introduced, with no justifiable demand, and inadequate preparation. In some cases, the programs never get off the ground, and the equipment remains unused until they become obsolete. The socially wasteful habit of luring renowned medical professionals from one sector to the other, either within the Kingdom or before arrival in Saudi Arabia, is also common. This practice obviously contributes to the high cost of such supposedly sought-after professionals. A major cause of health cost escalation in the Kingdom could be the fragmentation of public sector providers in their dealings with hospital management companies, pharmaceutical companies, recruitment companies and suppliers of medical equipment. Even though, collectively, the public sector has formidable spending power that ought to put it in a stronger bargaining position, these companies take advantage of the lack of coordination among them. Some sectors even go against the interests of other public sectors by offering higher bids and driving up prices.

Need for Integration and Cooperation In the author's opinion, any attempt to improve efficiency in the delivery of health care in the Kingdom, without addressing the issue of other government sectors and multiple-tier systems, will, at best, be marginally successful. It is widely believed that the other government sectors account for about 20 percent of hospital beds, although they claim over 35 percent of the budget allocated to the public health sector. The fact that the MOH has no major influence or role in the services of the other sectors is a serious set back. The MOH may not have a say in defense matters or even health services for armed forces during war, but it should definitely have a role in planning and allocating funds to all sectors. Integrating and coordinating activities of the various public sector providers will enable them to use some resources jointly and avoid the wasteful duplication of equipment and services. It will then be possible to have hospitals provide the services for which they are highly specialized to patients of other sectors, thereby increasing utilization rates and eliminating the need for nearby facilities to purchase the same equipment or start the same programs. A country as resourceful and wealthy as the Kingdom ought to have the best that is available in terms of health facilities and equipment. Some of the finest hospitals in developed countries are military hospitals. It is highly commendable that the armed forces have health facilities that could stand up to any military hospital in the world. Issue is therefore merely taken with the probable use of these highly specialized facilities for lower-level care and the relatively high cost of services in these facilities. To cut down or eliminate the use of highly specialized facilities for secondary and primary level care, 71

lower- level general hospitals should be built. It might even be necessary to close down some of the acute care beds, a seemingly drastic measure that may be the only way to prevent their use. It may not be possible or even desirable to unify the public sector health providers to deal with the problem of fragmentation mentioned earlier. It is however possible to have a single representative. A single agency negotiator acting on behalf of all the public sector providers in matters of recruiting professionals, purchasing of drugs and other supplies and contracting, etc., will definitely wield more power and therefore be in a better bargaining position than individual agencies.38 Discounts from bulk purchases and sharing information and costs are some of the benefits of single representation. Excessive capital investment, especially in hospital beds and high tech medical equipment, leads to unnecessary costs (via over-utilization) that will be financed by the government. When this occurs in the private sector, the providers simply pass on to the consumer the costs of unnecessary investments in high-tech equipment. Some portion of fixed and overhead costs of such underused equipment is usually included in the calculation of average costs which determine what prices patients pay. All patients, including those who never benefited from the use of such equipment, bear the cost. Excessive investments in equipment and bed capacity are financed by the government in case of the public, free-care sector, and by private individuals, in the case of private providers. Either way, the overall economy bears the high cost of largely unnecessary investments in equipment. Money spent in this way is obviously no longer available for investment in a more productive venture in the economy. It is for this reason that a mechanism is needed to control the supply side by subjecting the procurement of new, high-cost equipment or expansion of bed capacity to prior authorization, by a constituted body comprising representatives from all health sector agencies.

Recommendations The absence of coordination and integration of the activities of the various public sector health providers has been identified as a major source of waste that contributes immensely to the escalating costs of health services in the Kingdom. Duplication of very expensive medical equipment and other resources, unnecessary competition - instead of cooperation, and the absence of shared use of resources, are just a few of the factors responsible for cost increases. There is a growing awareness in all sectors that this cannot be allowed to continue. The problem is already receiving attention, and efforts are hopefully underway to remedy the situation. The Health Services Coordination Committee (HSCC) was created in response to this awareness. This being stated, the author is still tempted, given the seriousness of the problem of non-coordination of activities, to argue that the committee be empowered with a more ambitious and aggressive mandate. •

The Health Services Coordination Committee must be given the authority to perform its tasks without intimidation; the Committee should be composed not only of 72

• • •

•

professionals and experts in various fields, but also individuals concerned with economic efficiency; The Committee will need to embark on, or commission, a comprehensive study of public sector health services focusing on organization and services delivery, with a view to recommending ways to integrate and coordinate services; Such a study would identify the beneficiary categories of each sector and the nature of services rendered, e.g., primary health care, secondary, tertiary, emergency, etc.; It might be possible to assign duties for health service provision across sectors, based on which facility is better able (more efficient) to provide such services. In other words, it might be necessary for military beneficiaries to receive primary care services in the MOH facilities, and for MOH beneficiaries to receive radiography services in the teaching hospitals and tertiary care in military hospitals; and Duplications of rare specialty services, e. g., open-heart surgery and organ transplants, must not be allowed. It might be necessary to form a board with responsibility for overseeing the procurement and use of highly specialized, costly equipment in all sectors. Empirical evidence has shown better quality of specific procedures with higher volume, as the staff becomes more skilled in doing the procedure.

On the other hand, medical service of rare specialties must not be concentrated in one agency or region. Rare specialties and costly equipment/programs should be distributed among hospitals and sectors, taking into consideration the capacity for provision of particular levels of care, the need/demand for such service, and the availability/proximity of facilities having such specialties. • •

•

While referral definitely will be necessary to prevent duplication, it is important that beneficiaries of one sector be able to use the rare specialty services provided in other sectors. Patient referral systems between various sectors needs to be more developed; The comprehensive study of public sector health providers mentioned earlier should have as one of its components the determinants of patterns of use for highly specialized equipment. Underused or unused equipment should be transferred to facilities where full use can be made, irrespective of sector; and While it is not possible or even advisable to unify the public sector health providers, a single agency representative/negotiator would be highly beneficial. The agency could act on behalf of public health providers in matters of recruitment, purchasing and contracting. This would not only eliminate wasteful competition for resources, which only serves to drive up prices, but a unified position will result in better bargaining power by public sector providers.

Cost Containment Cost-containment in health care relates to the efficient use of available resources and raises several [policy] questions about a health system. For example, could a greater amount of services be provided for the same amount of expenditures, if these resources were used more efficiently? Are the large annual increases in medical costs, which contribute to an increase in overall expenditures, justified? The answers to these and other questions, pertaining to the efficient use of resources, are answered have an impact on the long-range financial sustainability of the Saudi health system. 73

The problem of long-run financial sustainability in the Kingdom is tied to costcontainment. Factors that have brought the issue of long-run financial sustainability to the forefront include declining budgetary allocations per capita by the MOH; late payment of hospital management companies; and delays and suspension of ongoing health/hospital projects. Some of these factors create the impression of a health system thithering on the brink of collapse. In addition to the growing interest in increasing private sector funding of health through the national health insurance program, an unmistakable impression is created that the health system is currently under-funded. As noted in Chapter IV Expenditures and Financing, the Kingdom already spends as much on health care as many OECD countries who have larger elderly populations, significantly higher than the regional average.39 Health services are overwhelmingly provided by public sector organizations, which are said to suffer from system inefficiencies. The operation of public hospitals was contracted to private management companies, probably as a way of increasing efficiency in the delivery of services. The question is, were these providers necessarily more efficient? In other words, do the terms of contracts, for example, establish linkages between rewards and service performance, e.g., in areas such as quality, cost effectiveness and consumer satisfaction? If inherent inefficiency is the main reason for escalating health care costs, simply finding other options to increase funding and relieve the government's burden, e.g., the proposed NHI program, or imposing surcharges, will only serve to address the symptoms, rather than the cause, and would therefore be short-sighted. Perhaps the current funding level is more than adequate to operate the system, if it were run more efficiently. How can one explain the level of health expenditures, significantly higher than the regional average and comparable to corresponding expenditures in OECD countries (Table 7). Why are the costs per inpatient day and the number of full-time employees (FTE) per bed in the Kingdom higher than in OECD countries (excepting the USA)?40There has been a proliferation of hospital management companies in the Kingdom over the past several years; how profitable is this business, and at whose expense?

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Table 9. Comparison of Health Expenditures and Hospital Use in KSA with OECD Countries, 1995-96

Sources OECD Health Data, 1998; Health Care Financing Review, Fall 1997, Vol. 19 No. 1 p. 161-162; KSA: Ministry ofFinance and Economy; Ministry ofHealth.

*

The United Kingdom counts intra-hospital transfers as new admissions.

How do health care expenditures in various sectors compare with one another and relate to the quantity and level of services provided? What, for example, explains the huge variations in salaries and other benefits offered to employees in different sectors? There is evidence that Saudi physicians vastly prefer to work in other government health sectors and are reluctant to work in the MOH and the private sector. What kind of incentive is being created to discourage this trend, and how consistent is this with government manpower policy? Patients needing only custodial care, which could be provided in less specialized, expensive health facilities (e.g., nursing homes and similar rehabilitation centers), often remain in highly specialized hospitals for a very long time. The cultural values that make such facilities unacceptable to Saudis is one factor that has been used to explain, or dismiss, the problem of long-term-care patients in acute hospitals. The question then becomes, are the cultural values, which prevailed when the society was less mobile, less developed, had fewer elderly, and very few, if any, women who worked, relevant to the Saudi society today, given recent drastic changes in these areas? There is no doubt that, because of the decline in government revenue with its attendant financial constraints, budget allocations per capita in health may have declined. It is, however, unclear whether this necessarily leads, as Dr. Umeh suggested, to a situation where operating the existing health programs will be difficult, with difficulties compounded by any attempt to expand health care coverage.10Critics of Dr. Umeh's position argue that, given the size and quality of services provided, the system is adequately funded. Symptoms of inadequate funding may be the result of attempts by all parties concerned to cling to lingering, wasteful habits acquired during the period of overfunding. 75

Numerous reports on the performance of certain facets of the Saudi health system point to the need for increased efficiency. National health service systems similar to that of the Kingdom, in which there are mostly no-fee payments by patients at the point services where services are provided, are said to lead to loss of perspective regarding health care delivery. The system of free care has been identified as a major factor in the escalating cost of health expenditures. It is blamed for the lack of cost-consciousness among all parties (patients, physicians, administrators). In turn, lack of knowledge regarding costs has been shown to lead to excessive use of medical services in situations where there is little evidence of effect on patient care. If lack of cost-consciousness by physicians leads to inefficient use of services, as has been found by several studies, then there is a need to worry. Since neither the physician nor, most importantly, his/her patients are at risk of loosing money, the tendency is usually to opt for the highly specialized procedure, even when a less specialized, less expensive procedure is appropriate. Physicians would definitely be more conscious of costs, if patients were expected to bear more of the financial burden, or if physicians were penalized for inefficient use of resources. Despite the overwhelming influence on the cost of medical care, as patients’ representatives in purchasing care, few physicians seem to know what it actually costs.41Most medical curricula rarely include courses focused on the economic aspects of medical care, and a recent study has shown that, in the absence of other cost-containment incentives, physicians’ education alone is not an effective basis for cost-containment strategies in hospitals.42 The finding of studies on physicians’ habits, most of which are conducted in countries where both physicians and patients are at financial risk of losing money in medical service decisions, suggest that effective cost-containment programs be introduced in the Kingdom to curb wastes. Certain studies suggest that unnecessary services, those with minimal benefits compared to the huge cost involved, services that will not alter the course of illness, and services involving a higher level of specialty in more sophisticated settings than are warranted, are widely provided.43Studies employing various criteria to determine usefulness have suggested that physicians order more tests than can be defended on the basis of need or outcome, while others point to growing evidence that some tests contribute little to patient care. In one hospital, reliance on tests was so excessive that only 5 percent of laboratory chemistry tests affected the clinical decisions for hospitalizing patients.44 Another study of a teaching hospital concluded that laboratory testing could be cut by up to 47 percent, without any apparent loss in the quality of patient care; in a teaching hospital, 48 percent, and 62 percent of leukocyte differentials on the medical and surgical services, respectively, were unjustifiable and affected patient management in less than 3 percent of patients.45 The main cause of inefficient requests for services by physicians, according to several studies reviewed, was the lack of knowledge about the costs of medical services. Saudi physicians, particularly those practicing in the public sector, do not only lack knowledge regarding the costs of medical services, they have little or no incentive to be costconscious. Since physicians practicing in the Kingdom are not different from other physicians, the lack of knowledge about medical service costs and practicing defensive medicine is bound to affect their conduct and approach to providing care. One can 76

therefore conclude that a significant proportion of laboratory tests, radiology and other diagnostic and therapeutic services being provided in government facilities in the Kingdom probably contribute little to patient care.

Cost-Consciousnessamongst Physicians Since the findings of numerous studies show that awareness of medical service costs has a restraining effect on physicians’ behavior in prescribing drugs, urgent measures must be taken to dramatically increase cost-consciousness among Saudi physicians. It is estimated that physicians control up to 80 percent of health care spending by ordering laboratory tests, diagnostic procedures and establishing admission and discharge policies. Even though excessive requests for services are wasteful, it is important to note that physicians generally order services for the sole purpose of providing the highest quality care to the patients. Wasting resources through excessive ordering of medical services is therefore unintentional, and the pursuit of quality at all costs would be hailed as a noble act, were it not for the inescapable reality that resources are limited. For the reason physicians do not intend to waste medical resources - rather waste results from the pursuit of efforts to improve patient well-being, a non-threatening means must be developed to signal wasteful behavior. A variety of cost-containment approaches have been employed to change physicians’ behavior and attitudes towards the control of health care costs. The main approaches involve education; training, e.g., through seminars, discussions, workshops, case reviews.46Topics covered would normally include costs and use of laboratory tests and x-ray examinations, pharmaceutical costs and the use of generics, discharge planning, appropriateness of level and setting for procedures and appropriateness of tests and therapeutic procedures. The purpose is to raise physicians’ awareness of the cost implications of specific services and to highlight wasteful habits. Peer review with feedback has been found effective in modifying the test-ordering behavior of medical residents. One study found that physicians who were informed of the charges for outpatient diagnostic tests, ordered far fewer tests than the control group; while in another study, daily feedback on inpatient charges resulted in highly significant reductions in average total charges, length of stay, room charges and diagnostic tests.47 Administrative changes in health facilities are also required to modify physicians’ behavior. Some habits which are inconsistent with cost-containment efforts are actually a result of institutional policies. Such policies must be identified and eliminated. Examples of administrative/policy changes which have the potential to cut waste include: • • • • • • •

eliminating routine chest x-ray on admission (unless indicated); requiring laboratory tests to be written in the medical order book, instead of directly into highly structured and convenient requisition forms; limiting the number of tests that can be ordered by residents; requiring prior approval for certain drugs and diagnostic testing; mandatory outpatient surgery; re-admission testing; and same-day surgery.

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Of course, the policy changes mentioned above are only possible, if senior management and administrators are committed to cost-containment. In situations where hospital authorities are interested mainly in the number of highly specialized procedures performed in their facility, which is regarded as a measure of importance and prestige, physicians are actually encouraged to use resources frivolously. The prestige motive as a motivational factor for public sector health administrators/planners can lead to serious inefficiencies and waste of resources, unless there are other restraining factors. Certificate of Need requirements, as will be discussed, are recommended to control unwarranted investments in medical equipment and facilities and to curb duplication. On the demand side, introduction of user charges, as discussed earlier in this chapter may serve as a powerful mechanism to heighten cost- consciousness and reduce the frivolous use of services. If patients bore the cost of medical services, there would be an economic incentive to seek a less costly, more efficient way of solving medical care problems. While protecting the more vulnerable (especially the poor and chronically ill), user charges must be set sufficiently high to deter unnecessary use of services.

NHI and Cost Containment Overall, health services utilization and expenditures are expected to rise sharply with the introduction of a national health insurance for non-Saudis. As mentioned earlier in this chapter, the increase will go essentially to serve the medical needs of unskilled or lowskilled expatriates who currently do not have access to health care. A good portion of the increase will also be a result of a condition known as moral hazard. Moral hazard is the tendency of the event insured against to occur.30 In other words, the existence of medical insurance leads to a significant increase in medical services utilization. Unless there is adequate management of service utilization and appropriate economic incentives, abuse and over-utilization of services may expand to an order never seen before. NHI lacks the same economic incentives, as does the current, free-care system. With patients paying almost nothing at the point of service delivery, whether under NHI or the current system, marginal benefit is always more than marginal cost, which to the patient is close to zero. The fact that costs will largely be borne by the private sector is hardly a cause for rejoicing. The private sector simply adds the new, high cost of medical bills to the cost of production, which is, in turn, reflected in the prices consumers pay for products/services. If the high cost of employee medical care leads to overall high costs of production, local industries become less competitive, and the whole economy suffers. It should therefore be recognized that, although the private sector may write the checks, the entire population will shoulder the increased costs of medical care. Planners of the NHI program must ensure that effective cost-containment programs are in place to prevent any abuse which could not only bankrupt the NHI program but threaten the long-term financial sustainability of the entire health system. While some degree of waste is almost inevitable, a review follows of measures likely to effectively control utilization by creating financial/economical incentives for both consumers and providers. 78

Deductibles and Co-Payments Out-of-pocket payment at the point of service delivery, no matter how small, is said to have a deterrent effect on unnecessary demand for services. On the other hand, the absence of payment at the point where services are provided, regardless of the size of private contributions, confers the sense of free care and may lead to abuse. In the latter case, both consumers and providers under pressure in crisis situations, seem to be unaware that medical services cost money. When there are no charges, even some individuals who just happen to be in a health facility for other reasons, use their presence there as an opportunity to seek care. Some cost-containment measures that are used to prevent abuse of services, and so minimize the costs of insurance programs that must be introduced, include coinsurance, deductibles and co-payments. Coinsurance is widely used in the private insurance market. A pre-specified proportion of costs incurred (commonly 20%) is paid by the insured, under the coinsurance provision. According to this provision, the higher the total cost of care, the higher the out-of-pocket cost to the insured. A coinsurance provision therefore acts as a powerful incentive for the consumer to seek needed care, and from the least cost-efficient provider. A coinsurance provision is used mostly when providers are reimbursed on fee-for-service basis, sometimes, in addition to deductible provisions. Under deductible provisions, insurance carriers do not pay for services until the deductible amount has been exceeded. For example, under a provision requiring an annual deductible of $200, the carrier will not pay, until the insured has paid the first $200 - either at once or after several consultations. In the event that the insured does not exceed deductible amount, the insurer incurs no cost during the enrollment period. In addition to creating the incentives to seek absolutely needed care, deductibles are said to reduce the cost and paperwork involved in billings for very low-cost services. The problem sometimes encountered, when the deductible has been reached, is that the insured has no more economic constraint, and may choose to be frivolous in the demand for health services. To make deductibles more effective, they are sometimes used in conjunction with coinsurance or co-payment. Whereas deductible amounts are fixed for an enrollment period (usually one year), copayments are made for each visit or episode of illness. For example, there could be a copayment (out-of-pocket payment) provision of $10 for primary-level physician consultation or an outpatient visit; $50 for every hospitalization; $5 for lab work, and so on. Co-payments are best suited to control utilization of service in NHI programs such as the one being proposed for non-Saudis. When used under NHI, co-payments must be set sufficiently high to discourage abuse, and yet not too high to exert negative impacts on the ability of those with low incomes to seek health care. The sole purpose of copayments under the NHI program should be to discour ge frivolous abuse of service. To avoid adverse effects, those with low income and certain essential services might need to be excluded from the co-payment scheme.

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Utilization Management Regardless of who operates the NHI program - MOH or another body, and who provides the service - it is crucial that the MOH regularly monitor service utilization. In addition to requiring insurance agencies and provider organizations to have a well-developed utilization management program, there must be a team of MOH officials charged with the responsibility of regularly monitoring utilization patterns. The following utilization management tools are used by managed health care organizations (Health Maintenance Organization (HMO), Private Provider Organization (PPO), Independent Provider Association (IPA), etc.) in the United States and have proved effective in controlling health services utilization, and, therefore, are highly recommended for the NHI program: • • • • • • • • •

Use of primary care physician, General Practitioner (GP) to act as gatekeeper for services; Prior-approval requirements for referrals and high level procedures; Mandatory outpatient surgery; Pre-admissions and same-day surgery; Maximum allowable length of stay for various diseases; Mandatory use of generics; Charge auditing; Discharge planning; and Case management.

To ensure that utilization of service falls within the estimate, services should be provided using the managed-care model which is effective in controlling utilization. Otherwise, costs incurred for services to the insured may far exceed the revenue from payroll taxation, thereby making the self-sustaining policy untenable and requiring government bail-out, or the program will fail.

Provider Reimbursement Provider payment mechanisms have a profound effect on health care cost-containment. The extent to which the utilization tools are used and the location of responsibility for their implementation, depend on the method of provider reimbursement. The principal provider payment methods include: budgetary transfers, capitated payments, fee-forservice and case-based payments. Budgetary transfers are the most common form of provider payment in health care.49This is the payment mechanism used by the Kingdom for the funding of health services provided in the public sector. As in other sectors of the economy, the Kingdom’s health budget is set out as line-item allocations to specific categories such as salaries, projects, operations and maintenance. Rules and regulations prohibit public managers from switching funds across line items, unless approval is received from the MOF. Interim adjustments are sometimes made, either during or at the end of the budget period, especially if individual line items completely run out of money. A major problem with line-item budgetary transfers is that managers have limited accountability for performance, except perhaps for ensuring that each line item is fully expanded. This form of budgeting, which is often an important part of most centrally-directed health systems, 80

does not provide adequate incentives for cost-containment. To the contrary, public managers engage in wasteful spending to retain or attract large budgets, since unexpended funds are usually not retained by the facility under a line item. On the other hand, a global budget, which involves payment fixed in advance to cover aggregate, rather than line-item expenditures in a given period, gives some flexibility to managers. Under a global budget, managers are free to re-allocate expenditures across line items as needed for efficient management, and are therefore accountable for efficiency in performance. At the institutional level (for instance hospitals), global budgets signify that the institution has considerable discretion over the use of the funds in the fixed budget. One major drawback is that once fixed, the budget is difficult to amend over the budget period. On the whole, a shift to global budgeting from the current practice in the Kingdom of line-item budgeting, would permit more efficient use of resources. Global budgeting has its own drawbacks and should only be seen as a useful interim step between the present standard practice of line-item budgeting and the adoption of the more efficient capitation or case-based reimbursement. Physicians and other health professionals in the Kingdom are salaried employees of either government or private sector health facilities. Salaried employees have no incentive either to be efficient (because no additional income is possible), or to create demand for services which are possible under fee-for-service reimbursement system. However, in the case of the Kingdom, where costs of services provided in the public sector do not fall to the patient, and there is an abundant supply of high-tech medical equipment for diagnosis and treatment, the tendency is to rely on more highly specialized procedures than are necessary which also invariably cost more, thereby leading to significant waste of resources. The issue of lack of cost-consciousness as a factor in physicians’ wasteful use of services was described in an earlier paragraph in the present chapter. In addition to improvement in physicians’ knowledge about costs of care, more positive economic incentives, e.g., a bonus, might be necessary to encourage health professionals to engage actively in cost-efficient habits. Physicians in the private sector, even though they are reimbursed on salary basis, may engage in wasteful practice behavior for a different reason from their public counterparts. Private sector providers (hospitals, clinics) are mostly reimbursed on a fee-for-service basis. An increase in the number of services provided leads to increased revenue, and hopefully profit. The physicians may be encouraged by owners of private health facilities to increase revenue by providing more services (diagnostic procedures, longer patient stays, etc.), some of which cannot be justified on the basis of need or outcome. Fee-for-service reimbursement has the most negative impact of all payment methods on cost-containment.21 It promotes excessive use of services, because providers have a financial incentive to increase the volume of services, and consumers rely on providers for information on their need for services. This phenomenon, known as supplier-induced demand, is particularly aggravated under third-party payment arrangements, as in the proposed NHI program, or government payments for health services provided to citizens.50 Evidence from all countries where fee-for-service is applied, clearly demonstrates that it leads providers to increase service volume. Yet, apart from the very limited supervision of fee schedules in the private sector, no attempt is made to determine the extent of supplier-induced demand in the Kingdom’s private health sector. 81

Approaches to cost control under fee-for-service arrangements include controls on fee levels, limits to total value of payments and cost sharing by consumers. Evidence suggests that incentives to providers are likely to have a more significant impact on services used than demand-side measures.51Cost sharing alone is not sufficient to fully counteract increases in volume likely to be induced by providers. In situations where the third-party payer acts purely as a financial intermediary and makes no effort to exercise control over utilization, cost escalation is most rampant. It is naïve and a short-sighted mistake for MOH, or any other government body, to take the position that, since most costs arising from fee-for-service payment in the private sector are met by private individuals and companies, it did not matter whether such costs result from an unnecessary volume of services induced by providers. The welfare loss to the society as a result of this mistake, does not stem from the higher cost of health care; it stems from the cost of the unnecessary portion of service provided and the higher prices paid for resources because of the artificial increase in demand. Public sector providers also pay more for resources as a result of the greater demand for such resources. Because private health providers in the Kingdom have a financial incentive to increase the amount of services to consumers, some of which are unnecessary, consumers tend to equate this with high quality. The readiness by private sector providers to perform a greater number of tests and employ more highly specialized procedures than is probably necessary, is often seen as evidence of high quality care. Of course, the use of more tests and specialized procedures is bound to produce some beneficial effects. The question, however, is whether such benefits justify the huge costs involved. Case-based reimbursement is a provider-payment method under which the provider is paid a predetermined amount covering all services per case or episode of illness.52The basic method is to bundle services into distinct case categories that are reasonably homogenous with respect to resource use, and reimburse a fixed amount per category. By tying provider reimbursement to output, measured in terms of a diagnosis or case characteristics, the provider has an incentive to minimize the resource content of services provided. Case- based reimbursement is now a major mechanism for hospital payments of Medicare patients in the United States. Reimbursement is based on diagnostic related groups (DRGs), and is said to have led to a substantial decrease in the growth rate of the U.S. Government's inpatient and total payments for Medicare. Other countries that use case-based reimbursement include Argentina, Brazil and Hungary.53 The two major problems with the case-reimbursement method are related to coding bias and case selection, as well as quality of care, because the providers' financial interest lies in accepting cases for which the preset reimbursement rates exceed the expected cost of services actually required. Case-based reimbursement may encourage providers to attract patients at the low-cost end of the case-based reimbursement category. In order to attract more money, hospitals sometimes diagnose patients into a highly-paid case category, and code medical records in such a way as to increase payments.' Also, the incentives to reduce costs per case raise concerns about the quality of care, and thus, the health status of patients whose care is reimbursed on a case basis. It is therefore crucial that effective programs of quality assurance and utilization management be in place to monitor quality 82

of care and case selection and that biased coding does not render the payment scheme useless. Under a capitation payment scheme, providers are reimbursed a fixed, prospectivelyagreed amount per person, per period, regardless of the quantity of services provided. In this case, providers share the economic risk of losing money, in the event that cost of services provided exceed the pre-agreed amount. This creates a powerful economic incentive to minimize excessive use of services. Of all payment methods, reimbursing providers under capitation has the most positive impact on cost-containment. To minimize cost and thus increase profit, providers seek to reduce the amount of services, particularly the more expensive, inpatient care, through using the least costly combination of inputs and preventive services. The capitation payment of providers is highly recommended under the proposed NHI program. It is a preferred option, because it creates the incentives to innovate costreducing technologies, encourage use of lower-cost alternative treatment settings and engage in preventive health. Such a scheme must, however, have adequate regulatory programs to ensure that quality is not compromised in the attempt to reduce costs.55 Capitation payments will have to be adjusted for individual risks, and funds offered must be adequate for the services, otherwise providers will try to select those least likely to use expensive services, thereby limiting access for the chronically ill. This will then mean that such people deterred from enrolling will need to fall back on public programs. With national health insurance becoming increasingly likely, provider payment methods must be scrutinized very carefully because of their potential to pose problems later. It will probably be necessary to use a mixed system, as no single option may be suited to the entire Saudi health system. One can conclude that neither the current line-item budget transfer in the public sector, nor the mostly fee-for-service reimbursement in the private sector, has positive effects on health cost-containment, because they do not generate any incentives for efficiency. On the contrary, these two payment schemes have the highest potential for cost escalation in health care. Capitation and case-based payment have the best effects on cost-containment. Both payment methods involve the assumption of some financial risks by providers. Efficiency in the delivery of care and thus cost-containment is a result of providers’ attempts to guard against loosing money. In systems with an effective regulatory body, evidence shows that cost-containment does not necessarily lead to low-quality service. 56

Certificate of Need Certificate of Need (CON) requirement is highly recommended to control further proliferation of high-technology medical equipment in the Kingdom, and will not aim to prevent the procurement of any state-of-the-art medical equipment which is deemed necessary to improve or maintain high quality service. The CON committee may, however, need to weigh the contributions/benefits of such equipment, or expansion, against costs involved. Organizations wishing to purchase equipment covered by the CON requirement, will need to certify the following, in addition to other measures that the committee might deem necessary: 83

• • • • •

No existing equipment is a suitable alternative to the one intended, and there is enough need to justify buying new equipment; Evidence of this need, e.g., a long waiting list, long travel distance for such service, use of more painful/less suitable alternatives, will have to be verified; Such organizations will need to certify that no other facility in the area has the desired equipment or would allow the use of their equipment; All CON applications will need to be endorsed by similar facilities, regardless of agency, in the service area; and The organization will also certify the expected effect of the new equipment on the institutions, such as increase in number of personnel, increase admissions, surgeries and changes that might occur as a result of that.

The CON committee could be a standing committee or be part of the overall coordination and integration commission which is proposed next. Either way, it is very crucial that the CON committee represents all health sector agencies. The escalating cost of health services in the Kingdom is partly blamed on the duplication of resources and services resulting from lacking coordination of activities by different health provider agencies. There is therefore a need to establish a proper coordination committee comprising senior officials from all public provider agencies. This committee will coordinate health planning among public providers; ensure joint- or inter-sectoral use of resources; regulate/control investment in expensive medical equipment and other expansions and ensure that the need for medical care is met at the appropriate level. The coordination committee will have an important role in the formulation and implementation of development plans. Finally, attempting to exercise control over the activities of the different government sectors through the coordination committee is expected to be difficult and vigorously resisted. Change, in itself, is always threatening, as some would prefer continuation of the status quo. Loosing a measure of authority is normally resented. Most importantly, each of the health agencies (sub-system) represents an important constituency, e.g., MODA, the National Guard, Security Forces, universities, and success in obtaining funds and developing highly-sophisticated hospitals extends the domain of activities and enhances prestige and the sphere of influence.57 Program directors of these agencies are not accustomed to control and regulatory pressures, and some, at least initially, will vehemently oppose any committee that attempts to impose cost-containment/efficiency measures. If the committee has its mandates and support from the highest level in the agencies, it should not be deterred by such protests. On the other hand, if the creation of this committee does not have firm support and commitment from the highest possible levels, and leaders simply pay lip service to the idea of coordination, things will remain as they are, or may even get worse. Such a committee simply exposes itself to ridicule by individuals who would prefer to run things the way they have always been run, even though the current economic situation makes their position untenable.

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Recommendations The facts are that the Kingdom spends as much on health care, in relative terms, as many OECD countries, and more than the regional average. The cost per inpatient day in the Kingdom is considerably higher than in OECD countries (excepting the USA), and the staff-to-bed ratio in the Kingdom is higher than all OECD countries. The following are cost containment measures aimed at both the supply and demand side:

Providers • Increase cost consciousness among physicians, administrators and other parties •

• • • • • • • •

• •

involved in the provision of health services; Introduce a CON requirement to control the supply side by subjecting the procurement of new, high-cost equipment or expansion of bed capacity to prior authorization by a constituted body, comprising representatives from all health sector agencies; Analyze and select a payment option that would create incentives to reduce costs and improve performance of public hospitals; Introduce a reimbursement mechanism that would create incentives for efficiency among physicians and other health professionals; Use generic drugs where possible, and introduce/increase the use of the single-dose method of drug dispensing; Strengthen the referral system, and place greater emphasis on preventive health care; Less specialized, long-term care facilities must be developed for provision of that level of care; Explore reusable alternatives to disposable supplies; Government health providers should engage in bulk/group purchases to take advantage of quantity discounts, and enhance bargaining power; Analyze the number and categories of employees to ensure that an excessive number of employees, and/or that higher level professionals than necessary, are not used to provide services; Hospital/health administrators must be required to have a good background in health economics. Regular seminars on economic efficiency must be organized; and Health economics should be part of the curriculum in colleges of medicine, health colleges and other programs involving provision of health services and administration of health facilities.

Consumers • Introduce user charges to check over-utilizationlabuse of services; • • • •

Patients consulting specialists without referral, and those using acute hospitals for long-term care, should be made to pay the full cost of care; Deductibles, co-payments and co-insurance provisions must be included in the NHI program to counter moral hazard; Use an effective utilization program to control service use; and Public education and awareness about costs.

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Long-Term Care Facilities Compared to the OECD countries that together have populations with an average 18 percent over 60 years of age, Saudi Arabia, with a 3.3 percent of its population aged 65+ years, is a young society. However, the worldwide trend of growing proportions of elderly is manifesting itself in the Kingdom. There has been remarkable improvement in the health, social and economic status of Saudis in the last twenty years. Government's commitment to improving the quality of life of the people through extensive investment in health resources and other social amenities has produced impressive results. Saudis now have health status indicators comparable to the more developed societies. Life expectancy at birth rose 60 percent, from 44 years in 1960 to 70 years in 1996. Saudis have access to many of the highly specialized medical innovations that have been credited with the decline in mortality rates among all ages. There is no longer a need to go abroad for treatment, and illnesses that were once fatal, are no longer so. A growing proportion of Saudis are surviving into the oldest ages, i.e., 85+ years, as the age at disability or impairment onset increases. The enormous economic growth and the consequent change in lifestyle has also. resulted in the emergence of previously rare diseases such as road traffic accidents, obesity, diabetes mellitus, stroke, cancer and various cardiovascular disease. Even though access to high-tech medical care means that an increasing number survive, survival is frequently accompanied by diminished capacity for independent functioning.58 The net effect of this high survival rate and a growing number of elderly people over 85 years of age is expected to be a marked increase in disability prevalence. Being very old and/or having some form of disabilit , are some of the risk factors reflecting the need for formal long-term care arrangements. 59 It is difficult to translate the growing number of elderly people into the increased need for formal or informal, long-term care services in the Kingdom. For one thing, simply being old does not imply a need for long-term care. Functional capacity and activities of daily living determine the extent of need for long-term care. Even when the need is indicated, the setting and how the need is met are determined by cultural and historical factors, as much as availability of suitable facilities.60 About 3.3 percent of the Kingdom's population of 18.3 million is over 65 years of age, and an estimated 0.8 percent are over 75 years old. Studies on age and chronic illness show that the activities of 60 percent of those aged 75+ years are limited by chronic illness, while 20 percent are prevented from carrying out basic activities of daily living. Among individuals over 65 years of age, it is estimated that chronic illness prevents about 10 percent from carrying out basic activities of daily living.61 The number of elderly Saudis who cannot perform basic activities of daily living, and therefore are dependent on others, is about 55,000. Other disabled individuals under 65 years of age also need long-term care. Even though these statistics serve as major predictors of the need for nursing homes or other long-term care facilities, it is unlikely that Saudis would elect to send relatives to such facilities, if they can admit them to acute 86

care hospitals or can reasonably cope with the situation at home. Even if institutionalization is acceptable, considerably less than the 5 percent of those aged 65+ years, as is the case in the United States, will be institutionalized because of close family ties. It is estimated that the cost of a one-year stay in a long-term care facility, such as a nursing home, would cost $24,000-$32,000.62 On the other hand, the costs per year in hospitals of the Kingdom range from $80,000 in MOH hospitals to $346,666 million in some specialist hospitals.63 Efficient use of resources would indicate that long-term care should be provided in the less specialized and less expensive long-term care facilities. Yet, services for the frail elderly in the Kingdom are essentially provided in one of two settings: at home with family or in acute-care hospitals. Elderly people with no close relatives and no infectious/contagious diseases are cared for in the rehabilitation facilities operated by the MOLSS. At the moment, no nursing home, in the strict sense (U.S. definition) is available in the Kingdom. The rehabilitation facility, as the name implies, aims to help individuals with various disabilities live a useful and active life through occupational, speech, etc. therapy. Such facilities are not suited to care for the frail and chronically ill who need skilled nursing and other custodial services. The Prince Salman Center for the elderly is essentially a social and recreational facility for relatively active individuals. Moreover, the facility does not provide residential services and is therefore a day-care facility. There are similar facilities (rehabilitation and centers for the elderly) in other big cities, such as Jeddah and Mecca.

Attitudes toward Institutionalization of the Elderly Noticeably lacking in the impressive number of health facilities developed in the Kingdom are facilities for long-term care of the elderly and chronically ill. The lack of funds to develop such facilities is obviously not the reason for their absence, as there are numerous very expensive, acute-care health facilities. Lack of need for such facilities also cannot explain the absence. As noted earlier, a growing number of Saudis are surviving strokes, heart attacks, road accidents, etc, and living very long lives. The society, owing to rapid economic development, has become very mobile, and an increasing number of women are working. All these factors point to the increasing need for facilities offering formal, long-term care for survivors of once-fatal illnesses whose capacity to function independently has been severely curtailed. Facilities for long-term care of the elderly and chronically ill have not been developed in the Kingdom, because despite the need for such facilities, there is no demand. To highlight the pervasiveness of negative attitudes towards institutionalization of an elderly relative, Dr. Rashid Aba Al Khail, in his doctoral dissertation, categorically stated that, “It would be religiously condemnable and socially reprehensible for a son to send his parents to a nursing home instead of taking care of them at home.”64 To individuals who hold such views, and studies show a good many do, facilities like nursing homes are simply not options for provision of long-term care for the elderly. In his yet unpublished study of Saudi attitudes towards institutionalization of the elderly, Dr. Joseph Umeh found that most (68%) of the respondents would not send their elderly parents to nursing homes. The few respondents who would consider such an option under an extreme 87

situation came from Jeddah and Darnmam. Respondents were aware of the cost implications of various alternatives for provision of long-term care. However, knowledge that long-term care facilities, like nursing homes, are the most efficient way for providing that level of care, did not deter them from rejecting the option. Respondents based their objections to facilities, such as nursing homes, for long- term care of the elderly on cultural grounds, and cited the religious requirements that one be kind and lower the win s of humility to his/her old parents and not treat them with contempt or repel them.65 On closer inspection, one could conclude that the negative attitudes towards nursing homes have their roots in culture, rather than religion. The religious requirement stated in the previous paragraph is not necessarily contravened by placement of relatives in nursing homes or similar facilities. A good nursing home can provide an environment where family members could continue to show love and affection to the elderly. Furthermore, if nursing homes are eventually accepted in the Kingdom, it is expected that only the very frail, extreme cases, more likely individuals who can hardly recognize or communicate with their families, will be placed there. Many families will continue to provide informal care up to that point and should be encouraged to do so. Respondents were aware of the problems of long-stay patients, chiefly the chronically ill elderly in hospitals providing acute care. In his study of long-stay patients in acute, shortstay hospitals in Riyadh, Othman Abahassein found that 11 percent of operational beds in the hospitals studied were occupied by long-stay patients. The duration of stays ranged from 4.7 percent in university hospitals, to over 17 percent in the Armed Forces hospitals.19 All the hospitals are highly specialized, acute-care facilities and teaching hospitals. Why was cost not a factor in respondents’ answers? It was noted in the section on reasons for increases in expenditures that the free-care policy contributes significantly to over-utilization and abuse of services. Because patients and their families do not bear the cost of long-term care provided in acute-care hospitals, or any government facility for that matter, costs do not seem to matter. And since a specialist hospital is perceived to provide better quality care than nursing homes, even if unnecessary, it is preferred by patients and family. If patients were faced with the prospect of paying $24,000 versus $240,000 per year for mostly custodial-level, long-term care, their choice of setting would be a bit more rational. The respondents in the Umeh study agreed that there was no reason to bother about the economic efficiency of any program, as long as some people benefit from it. The free-care policy of the Kingdom, which guarantees access to all levels of health care in public facilities, is responsible for the impressive improvement in the health status of the population. The policy is also said to have led to the lack of perspective on health care by both consumers and providers of care. All parties concerned seem to forget that services cost money, and the fact that the government pays for it does not mean it should be wasted. As with Abu Al Hussein’s study, Dr. Sulaiman Al-Shammari found in his study of the “Determinate of the length of patients’ stay in hospitals in Saudi Arabia: A Case for Building Nursing Homes,” that a high percentage of patients did not require inpatient care and could have been cared for at home. Even though 70 percent of patients’ 88

homes were suitable for care of the patient, about 60 percent of relatives and 50 percent of patients preferred inpatient care.66 The foregoing clearly attributes blame for the problem of long-stay patients in acute hospitals on the demand side: to the preferences of patients and relatives for inpatient care. However, because there are no nursing homes or similar facilities, even the few patients who would have accepted such settings remain in acute-care hospitals. Patients needing only skilled nursing care that could be provided in a long-term care facility, but that is beyond relatives' capacity to provide, are kept in the hospital until they are well enough to go home. If patients and doctors do not have long-term care facilities as an alternative to care at home or in the hospital, then part of the blame falls on the supply side - that is, with health planners in both public and private sectors. The inefficient use of acute-care hospital beds for the provision of long-term care has been identified as a product of the following factors: • • •

Cultural and historical attitudes towards the use of long-term care facilities, such as nursing homes for care of elderly relatives; Government's free health care policy which shields patients from the cost implications of preferences for inpatient care; and Lack of a viable alternative, long-term care facility where less severe cases can be transferred.

In the past, this was not viewed as a serious problem, at least not to the extent it is viewed now. The declining government revenue simply makes inefficient use of resources no longer tenable.

What should be done? The cultural norms and attitudes toward parents have their route in Islam, as in most religions. It is important to note that attitudes of Saudis toward institutional, long-term care of the elderly is mostly sociocultural. It is the feared reactions of significant groups (peers, colleagues and other family members), rather than religious obligations, that influence attitudes. However, to be widely accepted, efforts to change negative attitudes must involve religious authorities. Health planners must ensure that positive information about the usefulness of caring for frail, elderly people in a less costly, long-term care facility setting is circulated in the most credible of situations. The most acceptable venue to make the point that long-term care facilities do not contravene Islamic teachings is in the mosque. If necessary, a widely publicized religious ruling on this should be obtained. Other socioeconomic changes occurring in the society that necessitate use of efficient methods for the delivery of long-term care for elderly people must be effectively pointed to the population. For example, Saudis need to realize that: • •

The elderly population will continue to grow; In increasing numbers, women are going to work, leaving few available to take care of a dependent elderly; 89

• •

The society is becoming very mobile, making it difficult to cater for frail, elderly people in a non-institutional setting; and The cost of inpatient care for chronically-ill elderly people is unacceptably high.

The economic progress and social changes are here to stay, and no one can turn back the clock. Saudis need to know that no culture condones sending an elderly relative to an institution.67 People are sent there when it becomes inevitable, usually because families can no longer cope with the deteriorating health and mental condition, and the cost of placement in acute hospitals is exorbitant. There is no doubt that Saudis will hang on to their beloved relative, probably longer than most cultures, until they are no longer able to cope. In other words, facilities resembling a nursing home in the Kingdom will be used only as a last resort. It should however remain an option to avoid the use of highly specialized and expensive, acute-care hospitals for skill nursing level care. The point where it may be impossible for some Saudis to provide informal, long-term care to their elderly relatives may be long in coming, but it will come. Evidence suggests that when there is a perceived quality and/or convenience in obtaining health services, most Saudis are prepared to pay. This is demonstrated by the use of private sector, fee-for-service health care providers. Even though Saudis are entitled to free health care in all public health facilities, they account for the use of over 65 percent of private sector services. It will however take an exceptionally rich person to ignore the difference between $24,000 and $240,000 per year - the difference in cost between nursing-home care and care in some of the specialist hospitals. Some of the elderly patients who have been discharged from acute-care hospitals remain, because their families refuse to take them, even when their homes are suitable for care.” Given the financial constraint that prevails in the Kingdom, it is no longer conscionable to impose such unnecessary costs on the government. Families may retain the right to decide where long-term care for their elderly relative will be provided, as long as such a decision does not impose any unreasonable cost on the government or any other party. In other words, there should be a policy requiring that the cost of long-term care services provided in acute-care hospitals to be fully paid by patients or their relatives in situations where they reject the appropriate long-term care facility for that level of care. The acceptance of such facilities is the test of whether any campaign or promotional efforts to change the negative attitudes of Saudis toward institutions for care of the elderly is effective. If a promotional campaign has been effective, individuals will be willing, for example, to transfer their relatives from acute-care hospitals or home, to a nursing home. Testing the effectiveness of such efforts therefore requires the availability of long-term care facilities which unfortunately are currently lacking. Since care of the elderly in a facility such as a nursing home, does not contravene Islamic teachingsper se, it would be highly beneficial to develop such facilities at the same time that attempts are being made to change attitudes.

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The respondents to Dr. Umeh’s questionnaire accepted long-term care services for the elderly in a hospital setting. A long-term care facility within a hospital is therefore expected to be preferred over a free-standing one. To ensure a high acceptance level, the initial, long-term care facilities may need to be located within a hospital. For example, in situations of excess capacity/low occupancy, an existing acute-care ward or a number of beds may be converted for long-term care use. Alternatively, entirely new buildings/wards within the hospitals may be necessary. The swing-bed model, widely used in the United States, enables hospitals to use beds interchangeably to provide acute or long-term care to patients, depending on prevailing need.68 Conversion to long-term beds considerably lowers the cost of maintenance and services provided. The cost of highly specialized equipment which must be maintained and staffed, as well as other specialized medical professionals, is eliminated. A long-term care facility, such as a nursing home, is usually staffed by nurses and their aids and is therefore considerably cheaper than acute-care facilities. The swing-bed arrangement may be suited to hospitals that have seasonal problems of long-stay elderly patients, or some of the specialist hospitals with a large number of outof-town elderly patients (referrals). Such patients may be kept in the converted long-term bed, until they leave or are transferred to other facilities. In the absence of less specialized, long-term care alternative facilities, patients who cannot be transferred or discharged immediately remain in acute-care beds. The swing-bed arrangement will obviously cost more than care provided in a free-standing, long-term care facility, but the flexibility of re-conversion to an acute bed, when needed, and greater acceptability by the population, may be an advantage. Findings of studies on the impact of admission to long-term care facilities on the utilization of inpatient acute care services offer another justification for the urgent need for long-term care facilities - either in or outside the hospital. Studies show that residents of nursing homes, even though sicker than their community counterparts, are significantly less hospitalized. Even after controlling for the peak level of medical services arising around admission, nursing-home residents showed a significant reduction in both the number of admissions and outpatient hospital visits.69 Long-term care facilities will reduce the growing pressure of long-stay elderly patients on acute-care hospitals. Of course, the options for care of long-term, chronically ill, elderly people is not limited to care at home, long-term care in a residential setting or in hospitals. Other options include: adult day-care services which offer social services, e.g., crafts, discussion groups on current events, transportation services, hospice services and case management. The purpose of most of these other options is to keep these people out of acute-care beds; to delay or prevent as much as possible, institutionalization and provide respite for family care-givers. The point has repeatedly been made that Saudis would, even after institutionalization of the elderly is widely accepted, keep their elderly relatives at home, until it becomes impossible to do so. Availability of these long-term care alternatives bridges the two extreme gaps - acute care facility and home care.

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Physician Managers A good number of senior Saudi physicians are either full-time administrators or combine administrative functions with clinical duties. The chief executives of some of the highly specialized hospitals are medical doctors, so also most hold key positions in the MOH. The impetus for this was the rapid expansion of the Saudi health system. A large number of hospital administrators was needed to run the facilities, while only very few Saudis had the training and experience necessary to run the very highly specialized hospitals.70 Foreign hospital management companies provided the managerial skills and services on a contract basis. Senior Saudi employees in such hospitals were mostly physicians who had to combine their clinical duties with supervision of foreign management companies. With time, these physicians acquired some administrative and managerial skills and became the logical choice for the replacement of foreign health administrators. Administrative positions in hospitals, most of which are in the bigger cities, also dovetailed nicely with the desire of some Saudi physicians to remain in the urban areas. Because doctors are familiar with the issue of patient care, the system felt more comfortable leaving the operation of hospitals in the hands of doctors than some inadequately trained health administrators. Management of hospitals and other health facilities in the Kingdom by physicians, raises two issues: 1. Are these physicians adequately trained to manage hospitals, in light of the growing complexity of the system and the pressures of declining fund availability? 2. Given the relatively low proportion of Saudi physicians in the national total, and the high cost of training doctors, is it an efficient use of resource to use physicians for administrative duties? It takes above-average level intelligence to go through a medical education. So, it can safely be assumed that most physicians can handle academic training programs in hospital/health care administrations. Ordinarily however, medical school curricula do not provide any training in administration, economics, finance, human resource development or related fields. Yet to be effective in the running of health facilities, these training programs are crucial. Not only are physicians insufficiently trained in economics and finance; these subjects sometimes seem to run in direct opposition with their beliefs. There appears to be a conflict between physicians' commitment to providing the best possible care, and the need for concern about economic efficiency. Physician administrators, because of educational training and background, will always lean towards quality - even at the expense of economic efficiency. On the other hand, lay (non-physician) hospital managers are sometimes criticized for excessive concerns with costs - possibly at the expense of quality of care. Interference by lay hospital managers in medical and clinical decision-making cannot be tolerated. However, while it is important that quality of care never be compromised, one must recognize that because the availability of resources is limited, they must be used efficiently. The excessive pursuit of quality, which mostly 92

manifest itself in unwarranted use of higher-than-necessary . levels of procedures and settings, also cannot be tolerated. The second issue raised by physician administrators in the Kingdom is the wisdom of using such scarce and expensive resources for purposes other than clinical practice. The shortage of Saudi physicians and other health manpower has been a serious preoccupation of health authorities for quite some time. With the proportion of Saudi doctors less than 17 percent of total, and considerably less in some sectors, there is a feeling in some quarters that the system can ill afford the use of physicians in administrative positions. Even though, because of cultural background and other things, Saudis are best suited to providing primary health care in the Kingdom, less than 4 percent of primary-care physicians are Saudis. Rural dwellers who would benefit more from physicians of the same language and culture, are having to deal with foreigners, some of whom have different languages and cultures. This may affect the quality of care provided. Owing to the level of resources and time invested in medical education, physicians are generally better paid than administrators. It therefore follows that using physicians for administrative duties other than those related to medical and clinical services, is inefficient. Efficiency in production requires that the least-cost combination of input be used in production. For example, it should be seen as wasteful to use a physician on a salary of $3,000 in a position that could satisfactorily be managed by an administrator on a salary of $2,000. There is no doubt that because of their clinical background, physician administrators can make clinical decisions that lay administrators cannot. That is precisely why there is always a chief of medical staff or similar position in hospitals. It is not necessary or even advisable to combine the two functions. In any case, except in very small hospitals, the chief of medical staff position always exists, along with the physician administrator position. In conclusion, because of the increasing complexity of the Saudi health system, physicians in administrative positions must first of all acquire the necessary training in management, economics, etc. Hospital administration is not a natural extension of medical school training. Furthermore, the wisdom of using physicians as administrators, during this time of shortage of Saudi physicians, needs to be critically examined. The physician has to work as a clinician for a minimum of ten years, and if he has the art of administration, he must acquire the science before he gets involved in health management.

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CHAPTER SEVEN

Conclusions The previous chapters highlighted the achievements and areas of weakness or shortcomings of the health system in the Kingdom of Saudi Arabia. Certain reviews of issues included proposed solutions, and for others, the author suggested actions to remedy existing situations. Areas with room for improvement span the entire spectrum of health care delivery - from organization of services through delivery, financing, quality and efficiency in delivery. To signal areas requiring improvement does imply an indictment of the health system. There is hardly any health system that does not need to improve on certain aspects of practice. The dynamic nature of the health care industry itself, with a constantly changing environment, new technology and practices, new, emerging diseases, the increasing burden on government budgets, etc., demands a continuous effort at improvement. This final chapter presents a summary of two sets of mutually reinforcing recommendations: (a) those made at a national Symposium on Health Sector Development and Reform held in Riyadh on December 5-8, 1998; and (b) those made by the author in the previous chapter. Both sets of recommendations, if adhered to, will greatly improve performance in various aspects of the health system. This is an attempt to match most of the recommendations with action guidelines, for future reference.

Recommendations of the National Symposium on Health Sector Development and Reform The symposium was organized in five thematic sessions and each session produced a set of recommendations. In addition, the plenary half-day panel discussion agreed on a set of overall recommendations. Both sets are reproduced below.

Session : Achievements and Challenges 1. Document the development of the health sector and record the accomplishments during the past one hundred years by supporting studies and research. 2. Classify the advantages and disadvantages of the current health system and establish specialized technical committees for the purposes of studying and analyzing these issues, providing information on a scientific basis and enabling the concerned authorities to recommend a comprehensive national plan for health system development. 3. Classify and analyze the challenges in terms of political and social aspects and suggest mechanisms and methods of dealing with and accommodating to these challenges. 94

4. Increase the share of the private sector in financing and providing health services and reduce the share of the public sector in financing health services. 5. Contain health sector expenditures by applying policies of best utilization of financial and human resources, of expanding the procurement and purchasing policies for pharmaceuticals, medical supplies and consumables, and preventive and periodic equipment maintenance contracts. 6. Develop an extensive media plan to prepare the public opinion in sharing a portion of the health services costs as well as educate community members about cooperative health insurance. 7. Control the establishment of new governmental hospitals, commence gradually the privatization of government specialist hospitals, and support the private sector and private investment.

Session: Healthcare Financing 1. Find equivalent substitute resources to finance the health care sector. 2. The private sector and individuals should participate in sharing health care costs, especially for medical services rendered at the secondary and tertiary care levels. 3. Increase the amount of financing allocated to the private health sector out of the total national health budget. 4. Collaboration between the public sector and the private sector to provide health services with the government maintaining responsibility for providing primary health care free of charge to its citizens and to pilgrims and Muslims from outside the Kingdom who come to Holy Makka to perform Omrah. The private sector should finance and provide a larger share of health care and the costs of these services should be covered by the individuals and by insurance companies. 5. Encourage the establishment of several companies for selling cooperative health insurance 6. Gradual application of cooperative health insurance as a substitute resource for financing health services provided to the citizens and the expatriates working in the Kingdom.

Session: Healthcare Provider Payments 1. Review the current health accounting system and put it on a modern accounting basis. At the same time, take into consideration the country’s actual needs and the religious, political and social factors along with the possibility ofbenefiting from the experience of other countries that are ahead in this field. 2. Relate payments to providers to the level of effectiveness, efficiency,productivity and performance. 3. Spend generously on health education because it represents an investment for the government in the long run. 4. Encourage other sectors ofthe economy to invest in the health services sector.

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5. Develop methods of monitoringand evaluating performance and introduce rewards and incentives to improve the performance and the productivity as well as paying attention to the working conditions in the health institutions. 6. Develop methods of evaluating technical manpower in the health sector concentrating on their level of performance and effectiveness. Also, relate the degree of effectiveness and performance with moral and financial incentives and promotion.

Session: National Health Accounts 1. Establish a national board for health information systems and provide it with the required financial andtechnical resources. 2. Encourage and support field statistical studies and research at the national level; provide the required experts to study and analyze these results, specifiy the national averages and indicators and compare them to international indicators. 3. Develop plans, policies and systems to maintain the acceptable indicators, standards and averages and to upgrade unacceptable indicators to recognized international levels. Environmental and social factors as well as the standard of living should be taken into consideration. 4. Set-up a national registers for various categories ofprofessional and technical manpower in the health field. It is necessary to link registration with issuing licenses to practice the profession along with specifications of terms of reference, scope of practice, and the requirements for continuous education andtraining. 5. Re-registration and licensing to practice the profession should be linked to the professional development and continuous education and training in the field of specialty. 6. Provide researchers and planners with population statistics and their geographic and demographic distribution.

Session: Human Resources Development 1. Encourage Saudi Universities to admit more students in scientific and applied specialties by reforming their educational systems and determining their objectives and responsibilities according to the Kingdom’s labor market needs. 2. Enlarge the base of colleges and institutions concerned with the health services sector and its various medical, technical and administrative needs by better utilization of financial resources and educational staff 3. Encourage the private sector to invest in medical education and train technicians in the para-medicalservicesfield. 4. Pay attention to the work conditions and the work environment in the health services sector, offering suitable incentives to attract more national manpower to various health services specialties, and especially paying attention to the participation of the Saudi young females in the health services in a way which is in line with the religious teachings and social values ofthe Saudi society. 5. Strengthen the role of the Saudi Council for Health Specialties (SBHS) and provide it with the necessary personnel, financial and technical support that will assist it in developing training in the fields of medical specialties, nursing and continuous medical education. 96

6. The contribution of the Saudi Council for Health Specialties is necessary for providing advanced training programs in the field of para medical services. 7. Prepare a comprehensive national plan to specify the Kingdom's needs in manpower for various specialties and levels of health services. Project the quantitative and qualitative needs for developing this national manpower in the light of approved reforms by the concerned authorities.

Panel Discussion Main Recommendations Senior officials of different health sectors, members of the Health and Social Committee of the Consultative (Al-Shurah) Council, H.E. the Minister of Health, H.E. the ViceMinister of Finance and National Economy, H.E. the WHO Regional Director, Eastern Mediterranean Region as well as World Bank experts participated in the panel discussion sessions. The following main recommendations were put forward: A)

Establish a Supreme National Council for Health Services in the Kingdom. This council should have a general secretariat supported by the necessary human and financial resources so as to achieve the following goals: 1. 2. 3. 4.

B)

Establish a national task force representing the different health care providers in the Kingdom. This task force should report to the supreme National Council for Health Services and be responsible for: 1. 2. 3.

C)

To set-up a mechanism for the reform of the health system in the Kingdom. To set-up a phased health sector reform strategy and implementation guidelines. To set-up National Health Accounts for the Kingdom ofSaudi Arabia. To coordinate the process of providing health services among different healthcareproviders.

Implementing the mechanisms to develop and reform the private sector. Enhancing and supporting the advantages of the system as well as taking the necessary steps to overcome the disadvantages in the current system. Coordinating and taking the necessary steps towards promoting and developing the necessary manpower for the health sector.

Create a national health information system similar to health information systems in the advanced countries in order to serve the needs of the national health system and to meet its planning, development and organizational requirements.

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These three main recommendations are based on the acknowledgement that: 1. 2. 3. 4.

5.

There is a pressing need for reforming the Saudi health system if we want to maintain the current superior standard of health care in the Kingdom in the light of the new economic and social changes which the Kingdom has to cope with. The government will continue in providing free medical care for the pilgrims. Cooperative health insurance for the expatriates and the visitors should be initiated as the government should no longer shoulder the health care expenses for this category. Resources and facilities of government health institutions should be assigned to provide health services with reasonable cost for the expatriates and the Kingdom's visitors provided that the revenue for such services will be collected and retained by the service providing institutions to pay for the operating expenses well as to pay for capital expenses to improve the equipment and supplies. A mechanism should be found by which the Saudi nationals will pay part of the health care costs for specialized secondary and tertiary level care.

Summary of Chapter Six Recommendations Health Priorities and Health Policy There appears to be a mismatch between, on the one hand, the demographic and epidemiological profile of the Saudi population which suggest the need for greater emphasis on health promotion, disease prevention, and, on the other hand, the health delivery system with a large investment in highly specialized facilities and curative procedures. The Kingdom could be investing unnecessarily in highly specialized and expensive facilities unsuited for our situation. At best, these highly specialized facilities are inappropriately used for routine/primary level services. There is a need to identify the health priorities and develop a health policy that is consistent with the current and projected needs of the population. A comprehensive, population-based epidemiological assessment and hospital discharge surveys will be very useful in this regard. The disease burden in Saudi Arabia is following the now well known epidemiological transition typical in a shift from an economically less developed to a developed country. Vaccine-preventable, infectious and communicable diseases prevalent in the 1960's and 1970's have given way to diabetes, hypertension, motor vehicle accidents, cardiovascular and cerebrovascular diseases, cancer and mental illness.

Financing The rapidly increasing cost of health care is exerting pressure on government. There is a need to decrease the share of government spending on health and to contain increasing expenditures. The MOH is in the process of developing on a national health insurance program, which, if approved and implemented, hopefully will reduce government's share of total health expenditures. 98

To achieve the objective of containing the rapidly increasing costs of health care - not just for the government - under the NHI program: •

There must be an effective utilization management program to prevent abuse and over-utilization of services; •. Providers must be made to bear some risks by using a method of reimbursement that will generate adequate incentives for efficiency in use of resources; •. As mentioned earlier, a managed-care model is highly recommended; and •. Consumers/patients must be made to pay something at the point where services are received to prevent unnecessary demands. Of course, adequate care should be taken to ensure that this policy does not lead to the inability of those with low incomes to receive essential care. A portion of the public health sector budget should be set aside for discretionary use by hospital directors or regional health administrators, without having to seek approval from the ministry. In other words, financial responsibility and accountability should be delegated down the organization. •. Officials of the various government sector providers will need to conduct regular discussions with the Ministry of Finance on how their policies and procedures affect operational services; and • Budget transfers through line-item allocation from MOF to public sector health providers, which is the method of funding, is a payment mechanism that does not generate incentives for efficiency. Program-oriented budgeting should replace lineitem budgeting in the public sector. This will enable the public health sector agencies to gain a clearer understanding of the data needed to justify such budgets, and enable the evaluation of program performance. Relating budget estimates to specific health program expenditures (programs that themselves relate to well defined health policy objectives) could focus attention to outputs, rather than input, and on the accomplishments (health outcomes) that each category of expenditure achieved. Finally, program oriented budgeting could stimulate efficiency and cost effectiveness in health spending, since it allows the determination of unit/cost for various health activities.

National Health Information System (NHIS) The health care sector is information dependent; without the right information, decisions will be less accurate and less effective. If these decisions concern the health of citizens or relatives, it becomes obvious how much important it is to have the best information system available in the hospital where one is treated. Integrating the separate health information systems into a national health information network will: •

Increase and enhance the quality of care and support services, through information access and sharing medical/clinical knowledge and the resources between health care institutions; 99

• •

Develop and enhance access to databases such as the National Cancer Registry, Central Organs System, National Patient Registry, etc.; and Reduce health care costs by sharing information and human resources.

Recommended Actions • • • •

• • • •

A steering committee should be formed comprising HIS representatives of major health care providers, to guide the development and specification of standards, and oversee implementation of a NHIS. Each agency should enlighten their decision makers on the benefits of NHIS so as to acquire their support in meeting financial and other challenges. A pilot-based approach may be initiated in the Riyadh region, to include major health care providers, particularly those with advanced health information systems. In stages, the entire Kingdom will be covered. All health institutions should be encouraged to set up training programs for their staff in the information technology field, and to train a group of specialist on medical information technology so as to make a connection between the information administration and the medical field personnel. King Abdulaziz City for Science and Technology should provide major health institutions with the international information network (Internet) and the electronic mail services (e-mail). Conferences should take place on a regular basis to explore ways of enhancing the national health information system should be held to maintain momentum. Universities should be requested to cooperate with researchers in the medical field. Women should be encouraged to participate in the field of health information technology, as this involves minimal exposure and therefore suits the culture and facilitatesSaudization.

Saudization Progress is being made in increasing the number of Saudi health professionals. However, it will be quite some time before Saudis completely replace a significant proportion of non-Saudis. The sheer size of the Saudi health system, the growing population and the increasing expectations of consumers - all serve to increase the demand for services and professionals. On the other hand, there is a limit to the output from colleges of medicine and other training facilities. The higher the standards set, in terms of level of specialization/qualifications required to perform given tasks, the medical professionals/ patient ratio or medical professionals/bed ratio, the greater will be the pressure to increase the number of professionals. To increase the number of Saudi health professionals, the following actions are recommended: • •

Increase public awareness of opportunities in the health sector; raise the image of health professionals and the need for Saudi nationals to replace expatriates; Increase support to the facilities of existing medical and health colleges, in terms of resources to promote the educational standard, and increase their capacity to admit more students; 100

•

Review retention record of Saudi staff and study dropout rates, especially of female personnel; devise a means of reducing these rates, if necessary, by offering incentives for staff to stay in the workforce, e.g., more flexible working conditions; • Identify health needs and staffing requirements to ensure that excessively ambitious goals and professionals-to-population ratios are not being set; • Persuade the private sector to do more in the way increasing Saudi health professionals by offering scholarships, building colleges of medicine and training facilities, and offering attractive work conditions to Saudi professionals; • Increase the number of medical services and health colleges; • Review admission requirements to ensure that undue obstacles are not hampering the admission of more students to colleges of medicine and health colleges; • Introduce and encourage use of auxiliary health professionals, such as physician assistants, nurse practitioners, etc. employed in the western developed countries; • Link financial and other support measures provided by the government to private sector establishments to commitments for the training of Saudis and the achievement of Saudization targets; • Insure (with CSB) that certain categories of health professionals are not recruited from outside the Kingdom, by both private and public sector providers; and • Implement the suggestions Professor Sebai made several years ago, suggesting that suitably selected university graduates be made to study medicine for 3-4 years. Alternatively, a less demanding program, such as the Physician Assistant Program in the United States, for training of primary care and other specialties assistants, be introduced. These work under the supervision of physicians and could be a tremendous help in the area of primary health care in the Kingdom, where less than 2 percent are Saudis.

Healthcare Consultants Increasing roles for health care consultants, where appropriate, will provide an alternative to the engagement of entire hospital/health management companies. In times of scarce resources where quality must be maintained, the use of health care consultants is usually more cost-effective. Proficient health care consultants normally possess the following capabilities: Experience - a capability they have attained through training, exposure and solutions to similar problems, research, etc. Knowledge of the Health Sector - health care consultants have made investments in understanding the health care industry, in refinement of organizational change and methodologies that will fit different organizations. Objectivity - consultants bring a presence to the institution that is outside the organization’s structure, culture and policies - factors essential to credibility, as change management is undertaken. 101

Singularity of Purpose - consultants will normally focus only on the problem identified. It is their job to move an organization through the change process and to keep those who are assigned to the project, from within, focused on the undertaking. Access to External Sources - consultants, through relationships or internal investments, have access to comparative data analysis and experience from like organizations, as a result of previous engagements and existing relationships. Unique organizational problems are rare - others will have relevant experience that is relevant and valuable. Not all consultants are competent, and not all successful consultants and consulting firms have a culture that matches that of client organizations. In choosing consultants or consulting firms, it is important to ensure that: • • • •

Consultants have knowledge and practice in the health sector; Consultants are highly experienced; The results of consultations with previous clients were favorable; and There is a cultural fit between the client organization(s) and the consultant/consulting firm.

In defining the health care consultant’s role and contracting: • • •

• • •

Particular care must be exercised to outline exactly what the consultant is expected to deliver in the form of assistance, process, leadership, management and information; The use of intangible deliverables such as “facilitation and project management’’ should be avoided; Contracts should specify the scope, goals, expectations, deliverable lists, identify resources, support, timeframe dispute resolutions, financial and administration arrangement; For all health sectors, ensuring the transfer of knowledge should be one of the most, if not the most, important deliveries to be derived from any consultant contracts; A full-time project team, composed of consultants and the client’s middle management personnel, facilitates daily interactions which, in turn, produce crosspollination of methods and ideas - ensuring transfer of knowledge; and Formal and informal training should also be a key deliverable of the consultant contracts.

Carefully selected health care consultants provide organizations with skill and experience that would otherwise be acquired only in the long term. Some such skills are needed on a temporary basis, and others are transferable. For these reasons, the use of health consultants is the most cost-effective way of accomplishing certain organizational tasks. Health care consultants can be used as an alternative to hiring a permanent employee, or even as an alternative to hospital management companies.

Managed Healthcare in the Saudi System The author strongly recommends that health services delivery in the Kingdom - whether public or private - and particularly under the proposed national health insurance (NHI), adopt a managed health care (MHC) model. Managed care programs have been proven 102

effective in reducing unnecessary inpatient and ancillary service utilization, reducing utilization of expensive procedures and unnecessary, highly specialized services and shifting utilization to less expensive care options, such as emergency room to outpatient clinics and acute care to preventative care, ambulatory services and early detection. Health maintenance organizations (HMOs), widely available in the United States, are the best examples of managed care models. Variants of HMOs include the following: • • • •

Staff model HMO, in which the physicians are employed by the HMO; Group model HMOs, in which the HMO contracts with a multi-specialty physician group to provide services to HMO members; Network model HMO, in which the HMO contracts with more than one group practice; and The independent practice association (IPA) model, HMO contract with in dependent physicians to provide services to members.

The key characteristic distinguishing HMOs from other delivery systems is the prepayment for care that is provided. Providers of health services (physicians, hospitals) are paid a pre-determined amount per HMO member for an agreed length of time, regardless of the volume of services provided. The author recommends that the capitation reimbursement arrangement be used in the Kingdom, because in such a prepaid health model ofthe managed care plans, the burden is placed on the physician and other providers to control health care expenditures. Preferred provider organizations (PPOs) are associations or organizations of physicians and/or hospitals. These organizations contract with employers and insurers to provide comprehensive health care services to subscribers on a fee- for-service basis. Enrollees (from employers-insurers) are offered discounts, usually 15-20 percent, for services received from a selected set of physicians and hospitals. Services received by enrollees from the selected list of providers are not reimbursed fully. PPOs do not include some of the intrinsic cost and quality controls of HMOs, and services are usually reimbursed on fee-for-service basis. Both PPOs use HMOs administrative processes for controlling costs, such as negotiated provider discounts, selective contracting, utilization management and even fixed per capita pricing in capitated PPOs. Managed health care, particularly the PPO model, is now being used to varying degrees by some private hospitals. Such hospitals contract with employers (some private companies) to provide services to employees, also to the NCCI medical insurance subscribers. Except in case of emergency, where illness occurs in areas with no preferred providers, enrollees must use the services of the selected hospitals. The HMO model of managed health care is highly desirable for the Kingdom. To the maximum extent possible, all the fee-for-service reimbursement models currently prevalent in the private sector should be replaced with capitation payment models. Because providers (physicians and hospitals) reimbursed under capitation receive a fixed amount, and therefore have interest in limiting the amount of services provided, some cost-effective and cost-containment measures are used. The following utilization 103

management programs are used widely by HMOs and have been found effective in controlling health services utilization: • Use of the primary care physician (GP) to act as gatekeeper; • Required prior approval for referrals and high level procedures; • Mandatory outpatient surgery - same day surgery; • Pre-admission testing and same-day surgery; • Setting a maximum allowable length of stay for various diseases; • Concurrent stay review; • Obtaining second opinions on surgery; • Mandatory use of generic drugs; • Case management; • Discharge planning; and • Charge auditing. Based on the preceding list, it is evident that major cost savings by HMOs occur as a result of reductions in hospital utilization. Numerous studies indicate that patients enrolled in prepaid group practices (managed care organizations) were hospitalized 15-40 percent less often than those in fee-for-service arrangements71. A review of hospital and health services used in the Kingdom highlights the urgent need for a delivery system, such as a managed health care model, to drastically curb the frivolous over-utilization of services.

Establishing the National Health Insurance Scheme As mentioned earlier, a cooperative national social health insurance has been found to be consistent with Shariah law, and has been sanctioned by the current legal opinion as “a way of realizing social justice”. The MOH submitted a bill to the council of ministers establishing phased mandatory national health insurance, which has now been referred it to the Consultative Assembly. The purpose of the NHI program would be to: • Serve as an additional source for financing health, through wage-based contributions by employers and employees, thereby reducing the government share in total health expenditures; and • Transfer some of the social responsibilities for expatriates from government to employers. If all things go well, NHI would probably become the dominant health financing source in the future. Mandatory enrollment and contributions would safeguard the principle of equity and social justice. It is very wise of the MOH to plan to introduce the Cooperative National Health Insurance in phases. A gradual approach allows time to benefit from lessons learned as an increasing proportion of the population is covered, and the system grows and matures. It

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would be even more prudent to have a phased introduction of the NHI for expatriates. This could, for example, begin with large urban areas like Riyadh, Jeddah and Dammam, first covering the very large companies or companies with a determined number of expatriate employees. The next phase could cover the somewhat smaller companies, which may at this time begin encompassing other cities, until all expatriates are covered. An example of this phased approach is the NHI systems of South Korea and Taiwan. The NHI program began with firms of more than 500 employees, expanding to cover firms with more than 300 employees, then 100 and above, then 15 employees and finally attaining universal coverage, including the self-employed. A good number of preparatory steps have already been taken by the MOH, and progress at the political level is also well advanced. The Kingdom’s labor laws have been reviewed; NHI systems of selected countries have been studied/visited; the advice of WHO consultants has been sought; the GCC Health Planning Committee has been consulted; and a bill has been submitted to the Council of Ministers. However, many more preparations are necessary at the technical level, some of which include: •

Analysis of the current and expected disease burden of the population to be covered: defining the health needs of the population to be covered through an analysis of its demographic status, its epidemiological profile and the current and expected disease burden; • Identifying several benefits options, specifically benefit packages that meet the health needs of the beneficiaries, so that decision-makers may choose the appropriate option; • Estimating the cost of the selected benefits package, through detailed actuarial analysis, and projecting the cost over a five-year period; • Establishing the correct price for medical services through an analysis of the unit cost for services and a sampling of medical fees now being paid in the private sector; • Determining who would supply the defined benefits packages, e.g,, specifying the roles and responsibilities of the private sector, the public sector or an optimal private/public sector mix; • Recommending a process through which the government can reach agreement with providers on how they would be paid for their services, how to measure their performance and how they would share insurance risks, e.g., through fees for service, prepaid services, payment by case, capitation; • Deciding how, when and by whom premiums will be collected, and how the transfer of payments to providers would take place; • Establishing the administrative structure and management of the NHI, including physical space, equipment, trained staff and management processes; • Assuring the quality of medical services and determining a mechanism to stimulate efficiency in the service delivery process; and • Proposing a feedback mechanism to monitor the quality, efficiency, financial viability, competitiveness and affordability of the medical insurance system and take corrective action, when needed.

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Reengineering the Saudi Health System At the risk of sounding naïve, ambitious or appearing to have disruptive tendencies, the author strongly proposes that the principles of reengineering be embraced vigorously in all aspects of health care delivery in the Kingdom. The principle of reengineering calls for radical rethinking, and the proposed measures usually depart sharply from existing process. In short, reengineering calls for abandonment of traditional ways of thinking and elimination of the constraints of all past rules and regulations. The key words that revolve around reengineering are radical, large-scope and dramatic. To radically rethink how something is done entails large-scale redesign and changes in multiple processes and systems, the use of modern information technology, typically organizational and role restructuring; the ultimate expectation is that performance will improve by 50, 100 or 200 percent, rather than 5-10 percent. Because reengineering usually involves change on such a large scale, efforts sometimes fail in a big way. The list of obstacles to effective implementation includes: lack of commitment, poor communication, lack of focus and uneven participation. Those who fail are usually those who have given lip service to the idea of reengineering and who expected some magical solution to their organizational problems (the majority of bandwagon riders). They attribute their failure to the idea of reengineering, rather than their own attempts at implementation. Reengineering is a complex, long-term effort that challenges any organization, but it offers an useful approach in confronting the myriad of confusion facing the health care systems.

Why Reengineering in the Saudi Health System? A general attitude prevails throughout the Saudi health system that some dramatic steps must be taken toward improvement. Even though most services are free, the level of satisfaction appears to be declining, as evidenced by the increasing use, by Saudis, of the private, fee-for-service sector. Health authorities are, with increasing frequency, voicing serious concerns about efficiency in the production and use of services. Prevalent attitudes tend to reject complacency and views of the status quo, in acknowledgement of the need for dramatic improvement. Many health care agencies/hospitals clearly are engaged in efforts to enhance efficiency and quality of care. The organizations seek ways to perform the same activities with increased efficiency and quality, since the assumption is that the underlying processes are sound. There are incremental improvement measures, such as establishing quality assurance committees, introducing varying aspects of utilization management programs, increasing use of modern health information systems, increasing involvement of Saudis in health manpower and the use of referral networks and patient-flow control measures. While some of these actions are definitely producing some improvement, the financial concerns, the Saudization of the work force, hospital management factors, the issue of coordination among government health providers, technological factors (telemedicine/scientific medicine, computer-assisted therapy) all call for a dramatic, large106

scale organizational process and restructuring of roles, which reengineering can provide. Otherwise, only small- scale changes will leave a false impression of progress made, without ever achieving the high level of performance (with 50-200 percent improvement) possible under the principle of reengineering.

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Appendix

Figure 1. Health Regions in KSA

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Figure 3. Percentage of Immunization Coverage in KSA, 1996 (source: Ministry of Health, Annual Health Report, 1996).

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Figure 4. Incidence Rates of Vaccine Preventable Diseases, 1987-1996.

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Figure 5. Number of Cases Transferred Abroad for Treatment, 1982-1992.

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113

Table A1.Hospitals and Beds in All Health Sectors and Rate of Beds/10,000 Population (1992-1996)

114 Source: Ministy of Health, Annual Report, 1996.

Table A2. Total and Project Expenditure of MOH in 1st, 2nd, 3rd, and 5th Five Year Development Plans (US Dollars Millions)

115 Source: Ministy of Health, Annual Report, 1996

Table A3. Hospital Beds in Other Government Sectors by Specialty (1996)

116

Table A4. MOH Health Centers by Region (1992-1996)

117 Source: Ministryof Health, Annual Report, 1996

Table A5. Physicians,* Nurses and Allied Health Personnel** by Provider, KSA (1992-1996)

118 Source:Ministry of Health, Annual Report, 1996

*Including dentists

**Including pharmacists

Table A6. Financial Appropriation of MOH in Relation to Government Budget 1990-1997 (SR 1,000,000)

119

Table A7. Comparative Health Status Indicators (Most Recent Years)

120 Source:Demographic and health indicators for countries of eastern mediterranean, WHO, 1996

Table A8. Comparative Budgetary Resources Indicator (Most Recent Years)

121 Source:Demographic and healthy indicators for countries of eatern mediterranean, WHO, 1996

*as % of GDP

Table A9. Hospital Costs and Staff per Bed (Selected Countries)

122 Sources: Heath United States 1995, US Department of Health and Human Services OECD Health Data (Credes/OECD) KSA, Ministry of Finace and Economy

Table A10. Development Plans for Physicians Through 2025

123

Table A11. Development Plans for Dentists Through 2025

124

Table A12. Development Plans for Pharmacists Through 2025

125

Table A13. Development Plans for Nursing Staff Through 2025

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Table A14. Development Plans for Health Specialists and Technicians Through 2025

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Table A15. Directory of Healthcare Organizationsand Institutes

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Notes Al-Mazron, T., Al-Shehri, S., Al-Jeffii, M., Farag, M.K., Baldo, M.H., Khan, M.U. Saudi Maternal Child Health Survey, 1991. Riyadh, MOH, 1993. 1

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2

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3

4

Berbie, Girmay “Emerging Issues in Health Planning in Saudi Arabia: the effects of organization and development on the health care system.” Social Science and Medicine, 1991,33:815-24.

Kingdom of Saudi Arabia, Ministry of Planning. Development Plans 1-6 (1 970-2000) Riyadh (MOP Press). 5

Kingdom of Saudi Arabia, Ministry of Planning, Achievement of the Development Plans 1970-1997. Riyadh (MOP Press), 1998; 170. 6

7 Al-Baker, M.S. “Health Services Financing and Expenditures in the Kingdom ofSaudi Arabia, ” presented to the Inter-Country meeting on Cost-Containment in National Health Systems. Muscat, Oman. Oct. 27-29 1991, 16-21.

Kingdom of Saudi Arabia, General Organization for Social Insurance (GOSI), 13th Annual Statistical Report, 1993:342-44

8

“Much to be Achieved in Leaner Years”. Middle EAst Economic Digest, 1984. October 5: pp 39-49.

9

10 Umeh, J.C. “Health Care Financing in the Kingdom of Saudi Arabia: A review of the options.” World Hospitals, 1996,31 :3-8.

11 Kingdom of Saudi Arabia. National Health Information Network: Strategy Plan, Oct. 27, 199612-5.

Al-Baker, M.S. “Health Planning and Inter-relationship with national health information system in Saudi Arabia, presented to First Meeting of Regional/Advisory Panel on Health Information System.” Alexandria, Egypt, May 3-4, 1993: 14. 12

Mufti, M.H. “Status of Medical Informatics in Saudi Arabia”. Presented at the 1st Symposium on Computer and Information Technology in the Health Field. Security Forces Hospital, Riyadh, Nov. 20-22, 1995. 13

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14 Kingdom of Saudi Arabia, Ministry of Planning. Sixth Development Plan 1995-2000. Riyadh (MOP Press), 1996:169-1 85.

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Dr. Mohammed Mufti Dr. Mohammed Mufti is an orthopedic surgeon by clinical training and certification and the Chief Executive Officer of the Security Forces Hospital in Riyadh. Dr. Mufti obtained a M.B.M.S. from Riyadh University graduating with a First Honor Degree being the first Saudi to graduate from a medical school in the Kingdom of Saudi Arabia. Subsequently he earned a Master’s Degree in Administrative Medicine for Physician Executives from the University of Wisconsin-Madison in the USA. He is a Fellow of the Royal College of Surgeons and Physicians in the United Kingdom (F.R.C.S.), and a member of the American Board for Medical Management (A.B.M.M.) of the American College of Physician Executives. Dr. Mufti is a member of the Board of Trustees of the Saudi Council of Health Specialties. Dr. Mufti is a local and regional consultant on health care issues. At the institutional level he consults on hospital management, cost containment, optimal use of space of equipment and of manpower, and quality management; and at the policy level consults on strategic planning, health insurance and provider payments.

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Dr. Mufti holds academic appointments at Weber State University, Utah, USA as a Visiting Professor of Health Services Administration and an International Consultant to the Emergency Care and Rescue Program as well as at the Hahnemann School of Medicine in Philadelphia, Pennsylvania, USA as an Adjunct Associate Professor of Orthopedic Surgery. His numerous professional activities also include membership in twelve national and international specialized scientific committees in orthopedics, medical education, administrative and sports medicine, a reviewer and member of editorial boards for Saudi and international scientific journals, a participant in more than sixty national and international specialized conferences and symposia, and the author and co-author of more than thirty-five publications and books. He was a consultant in traffic medicine for WHO and in administrative medicine for local and international institutes.

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