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Healthcare majors warned to prepare for challenges as acquisitions accelerate in GCC

27 FEBRUARY 2016

هذا الخبر متوفر أيضا بالعربية

With acquisitions in the GCC healthcare sector expected to accelerate this year, the region’s larger hospital groups have been told to prepare for serious challenges which could undermine profits from mergers with physician practices.

PA Consulting Group warns that while consolidation in healthcare can bring high returns, the bigger hospital groups must guard against the threat of losing key staff and customers.

Experts at PA say that acquisitions of smaller hospitals and physician practices can leave large healthcare groups with bigger management issues and have developed an approach designed to maximise the value of a merger and ensure you keep your best people.

“The key for any one of the large healthcare groups who are increasingly looking to acquire smaller hospital groups and free-standing physician practices is to maximise business efficiencies and lessen downtime of delivery of care,” said Joe Hawayek, healthcare expert at PA Consulting Group’s MENA office in Abu Dhabi.

“What is intended to happen after a merger, and what happens in reality, are often two different things. For instance, while acquisitions are designed to strengthen the bargaining position with insurers, healthcare prices are relatively standardised by regulators and insurers, and by a market that has a choice of providers.

“Some of the other major challenges faced after an acquisition is the blending of different organisational cultures, the merging of IT infrastructures and the balancing of local practice versus hospital group control.”
PA’s new advice on healthcare acquisitions follows extensive studies by the team at its Abu Dhabi regional offices.

PA Consulting Group says competition for customers has driven acquisitions in the healthcare sector around the world, and very notably in the GCC region with hospital groups acquiring physician practices in Dubai, Abu Dhabi, Qatar, Kuwait and Saudi Arabia.

In 2015, NMC Healthcare, the UAE’s largest private healthcare provider, acquired ProVita International Medical Centre, Abu Dhabi-based Americare Group and Dr Sunny Healthcare Group, a chain of six medical centres and three pharmacies in Sharjah.

Al Noor Hospitals acquired Rochester Wellness which provides rehabilitation therapy in Dubai and Muscat, and Dubai-based Aster DM Healthcare bought Riyadh’s Sanad Hospital.

Jason Harborow, Head of PA Consulting Group Middle East and North Africa, added: “Last year was a record-breaking year for the number of mergers and acquisitions in healthcare around the world, particularly in the GCC region, and analysts forecast that high-profile acquisitions will continue this year.

“Larger hospital groups stand to achieve 15% to 20% net profit margins after integrating a physician practice that has strong clinical, but less mature operational efficiencies. But they must devise new business efficiencies as their operations change and carefully manage the change on staff during the integration.

“People are a healthcare provider’s most costly and valuable resource, accounting for up to 60% of operating costs, and top performers are the first out the door at times of uncertainty.”

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