Blog Post

Why Saudi Arabia's health care reform caught our attention

February 13, 2020

    Saudi Arabia faces many of the same health care challenges as other high-income countries: an ageing population, significant care variation, and over-utilisation of acute care.

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    In response, the kingdom launched a Healthcare Transformation Plan—part of their 'Vision 2030' plan that aims to revitalise and diversify the country's economy. The transformation plan's goals include increasing citizens' life expectancy, improving service quality and consistency, as well as containing costs.

    Here are three things from the plan we'll be watching closely in the coming years:

    1. New care networks modelled after England’s integrated care systems

    The kingdom will move providers into 'Accountable Care Organisations' (ACOs). These are corporatised public entities tasked with managing all health and social care for patients under a fixed budget. Each will have authority to allocate system resources to their population’s needs. The ACOs aim to address:

    • Insufficient or poorly distributed capacity across primary, secondary, tertiary, and other services;
    • Service quality and efficiency deficits, including workforce productivity; and
    • Unwarranted variation across ACOs and/or within each one.

    Despite the name 'ACO' being American, Saudi Arabia's version seems more akin to what NHS England has built. In 2016, the NHS announced plans to move all providers and payers into integrated networks. It first created informal provider clusters to prepare partners for the change, which are now transitioning into 44 'Integrated Care Systems' (ICSs). Saudi Arabia has spent the past two years developing 20 'clusters,' with plans to move the first wave to formal ACOs at the end of 2020.

    We're watching this to see if Saudi Arabia's ACOs experience the challenges that ICSs in the UK, Ontario Health Teams (OHTs) in Ontario, Canada, and ACOs in the US experienced. Namely, 'how do we make decisions as a collective?', and 'how do we meet our quality targets while cutting costs?'

    2. Saudi Arabia is the first country to truly dual process payment and care delivery reform

    The Healthcare Transformation Plan lays out an aggressive goal of moving ACOs towards a risk-adjusted capitated funding model rather quickly. During phase 1 of the reform, the Saudi Arabia's Ministry of Health will establish an Essential Benefits Package (EBP) that defines a core package of treatment and care with defined quality standards for all insured patients.

    Each of the 20 networks will then be paid to provide this suite of services to each insured individual. The networks' annual block budgets will include a mix of full capitation (reflecting the gross cost of the EBP for a population of individuals entitled to public coverage) and fractional capitation (reflecting the cost of delivering care in government sites to individuals without public insurance).

    Pulling off payment reform this quickly is uncharted territory, despite it being a necessary step to build an ACO. Even though OHTs have been developing for almost a year, there has been no suggestion of near-term payment change. And despite England beginning the shift to ICSs four years ago, only one ICS has made the move to a global budget.

    3. Unlike most jurisdictions, Saudi Arabia is prioritising private- and third-sector participation in health care transformation

    The Healthcare Transformation Plan calls for increasing private health care expenditure from 25% to 35% (an increase of about SAR1bn, or US$270M) of total health spending by the end of 2020 to help achieve two broader goals:

    • Economic diversification: As oil prices decrease around the world and production slows, the kingdom plans to grow other sectors to reduce its reliance on the commodity; and
    • Cost containment: As public health spending rises due to an ageing population and above average chronic disease rates, the kingdom is looking to the private sector to take on some of this spending and care.

    The country is priming the private sector for growth by opening up more revenue streams for private companies. For instance, the kingdom is allowing private insurers to offer supplemental health insurance to those with the EBP, public ACOs to sub-contract services to private companies, and foreign pharmaceutical manufacturers to establish public-private partnerships with the public sector. 

    Aside from the US, we haven't seen another market prioritise private sector growth while also reforming public providers (ACOs). We'll keep an eye out for the natural connections private organisations make with ACOs, as these relationships might signal where integrated care systems in other markets are in need of external support.

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