The aggregate income of listed healthcare companies on the Saudi Stock Exchange (Tadawul) declined 21 percent during the nine months of 2018, Al Rajhi Capital said in its latest report.
"Declining patient volume on account of expats departure coupled with rising operating expenses due to Saudization are the primary concerns for the sector," it added.
While the average number of patients dropped by eight percent in 2018, the private sector added four new hospitals so far this year, with total capacity of 1,020 beds and 185 clinics.
"The initial plan during project conception stage was to cater to expats but now has changed to Saudi nationals," the report noted.
The insurance sector continued to remain the major source of revenue for private hospitals this year, despite the negative impact of the exodus of expats due to dependent fees, amid rising government share in total revenue.
"Going forward, as the number of expats is likely to continue decline, we expect the revenue contribution from the insurance sector to remain under pressure," the report added.
According to Al Rajhi Capital, the contribution of the private sector to total healthcare spending is expected to reach 35 percent by 2020 from the current 25 percent, under the government’s National Transformation Program (NTP) 2020.
On the revenue front, the report advised the private sector to increase and diversify revenue stream by setting up more specialized clinics such as cosmetic, obesity, dental and delivery.
"These types of clinics offer high margins, along with immediate realization post-treatment, which will ease pressure on receivables," the consultancy added.
Meanwhile, the number of expatriate workers in the private sector reached 111,100 (89 percent) compared to 12,900 (11 percent) Saudis. The total number of doctors in private hospitals and healthcare centres reached to 33,800 with the Saudization rate of eight percent.
"The staff cost of hospitals in Saudi Arabia is likely to increase due to the government’s continuous push towards higher Saudization rate given the fact that Saudi worker gets higher salary than expats," Al Rajhi Capital stated.
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