Saudi Arabia: Foreign Direct Investment In The Healthcare Sector In The Kingdom Of Saudi Arabia

Last Updated: 15 April 2016
Article by Alain Sfeir

SAGIA has announced in early 2016 their plan to focus on priority sectors that have been identified to have a direct impact on economic and human development, including the healthcare sector.

Upon accession to the World Trade Organisation (WTO) in 2005, the Kingdom of Saudi Arabia (the Kingdom) made bilateral free trade commitments to the other members of the WTO with respect to curtailing limitations on market access and national treatment in various industry sectors. The Saudi Arabian General Investment Authority (SAGIA) - the governing authority for foreign direct investment in the Kingdom - has announced in early 2016 their plan to focus on priority sectors that have been identified to have a direct impact on economic and human development, including the healthcare sector. A part of this plan is to facilitate the entry of foreign investors into the Kingdom and remove any regulatory obstacles to investments by having meetings and sit-downs with foreign investors to identify their concerns and/or anticipated investment plans.

At present, the healthcare sector in the Kingdom is not fully open for foreign investors, and  SAGIA should grant licenses to provide healthcare services subject to obtaining the required pre-approval from the Ministry of Health (MoH). Healthcare services that can be licensed by SAGIA must not be included under the list specified by the Supreme Economic Council (the Negative List) which reserves certain economic activities to Saudi national participation.

According to the WTO Schedule of Specific Commitments on Services with respect to the KSA health related services (the WTO Schedule) and the SAGIA latest guideline, the permitted healthcare services that may be licensed by SAGIA are as follows:

(i) "Hospital Services CPC 9311" - licensed by SAGIA as establishment, management and operation of Hospitals; and

(ii) "Other human healthcare services CPC 9319 except CPC 93191" and excluding of course the services listed under the Negative List.

It is worthwhile noting that the United Nations Statistics Division (UNSD) maintains a statistical classification that covers product and activity classifications used in different countries around the world.

"Other human healthcare services CPC 9319", according to the UNSD classification, are broken down into the following sub-CPCs:

CPC 93191 – Deliveries and related services, nursing services, physiotherapeutic and paramedical services – this includes:

  • services such as supervision during pregnancy and childbirth;
  • supervision of the mother after birth;
  • services in the field of nursing care (without admission), advice and prevention for patients at home, the provision of maternity care, children's hygiene, etc;
  • services provided by physiotherapists and other paramedical persons (incl. homeopathological and similar services); and
  • physiotherapy and paramedical services are services in the field of physiotherapy, ergotherapy, occupational therapy, speech therapy, homeopathy, acupuncture, nutrition, etc. These services are provided by authorized persons, other than medical doctors.

CPC 93192 – Ambulance services – this includes:

  • services involving transport of patients by ambulance, with or without resuscitation equipment or medical personnel.

CPC 93193 – Residential health facilities services other than hospital services – this includes:

  • combined lodging and medical services provided without the supervision of a medical doctor located on the premises.

CPC 93199 – Other human health services n.e.c. – this includes:

  • services provided by medical laboratories;
  • services provided by blood, sperm and transplant organ banks;
  • diagnostic imaging services without analysis or interpretation, e.g. x-ray, ultrasound, magnetic resonance imaging (MRI), etc; and
  • other human health services n.e.c.

We note, however, that several UNSD classification codes are included in SAGIA's Negative List, namely UNSD code CPC 93191 with respect to the services provided by nurses and quasi-doctoral services, and therefore, all human healthcare services listed under this classification are prohibited to foreign investors. Services classified under codes CPC 93192, CPC 93193 and CPC 93199 as listed above should be normally open for foreign investment subject to the MoH's pre-approval.

Notwithstanding the WTO obligations of the KSA and the Negative List, the MoH still reluctant in providing approvals for the full range of healthcare services to foreign investors wishing to invest in healthcare sectors/services falling under CPC 93192, CPC 93193 and   CPC93194. In fact,  the MoH's regulations have not been amended according to the international commitments of the Kingdom, and the existing applicable regulations, namely the Private Health Institutions Law and its Executive Regulation (the Regulations), to this date require any private healthcare institution to be wholly owned by Saudi nationals, apart from Hospitals (as defined below).

According to the Regulations, which is the regulatory regime of the private healthcare sector in the Kingdom, a Private Healthcare Institution is defined as "privately owned healthcare institutions, which offer treatment, diagnostic, laboratory, rehabilitation, and nursing services (the Private Healthcare Institutions) and includes:

  • Hospitals: being a place equipped to diagnose, treat, and admit patients on inpatient basis.
  • General Health Centers: being a place prepared to diagnose and treat patients that offer at least three medical specialisations.
  • Specialised Healthcare Centers: being a place that focus on one medical specialty or more.
  • Clinics: being a place that is prepared for treatment and diagnosis of patients.
  • Radiology Centers: being a place for diagnostic imaging and radiology treatment.
  • Medical Laboratories: being a place that is prepared for conducting lab tests.
  • Same-day Surgical Facilities (i.e. ambulatory surgery centers): being a place that is licensed to admit patients for minor and medium surgeries, provided that patients are discharged on the same day of admission.
  • Supporting Medical Services Facilities: being a place that provides complementary medical and technical services and includes:

    - physical therapy centers, vision, nutrition centers; and

    - artificial limbs, or any other facilities that are classified as a supporting medical facility by the MoH.

  • Medical Transport Services Centers: being a place that includes transport and first-aid for patients before admission to hospitals in accordance with the standards and requirements of the Saudi Red Crescent Society."

The Regulations stipulates that, except for the Hospitals (as defined above), the Private Healthcare Institution should be 100% Saudi owned. This means ownership of foreign investors in Private Healthcare Institutions is limited only to Hospitals.

However, managing and operating Hospitals, General Health Centers and Specialised Healthcare Centers (as defined above) by foreign medical operator companies or foreign investors is not restricted and would be subject to certain terms and conditions to be determined by the Assistant Agency for Private Health Sector Affairs and the Central Board for Accreditation of Healthcare Institutions (CBAHI).

Furthermore, the MoH has recently required all Private Healthcare Institutions operating today in the Kingdom, including Hospitals, to be accredited by CBAHI which is designated as the official authority to grant accreditation certificates to healthcare facilities. CBAHI was formed by the Saudi Health Council as a non-profit organisation and has been operating to set the healthcare quality and patient safety standards against which all healthcare facilities are evaluated for evidence of compliance.

To stress the aforementioned points, it is now mandatory for all Private Healthcare Institutions, whether they are Hospitals or otherwise, in the Kingdom to comply with national standards set by CBAHI and obtain its accreditation through a survey process; CBAHI has emphasized the importance for hospitals to obtain such accreditation. It has been reported that if CBAHI discovers, at any time, that the hospital has not been truthful or did not meet the ethical standards, the hospital may lose its accreditation status which could put the hospital's operations in the Kingdom at risk for non-renewal of its licenses and other legal issues.

In consideration of all the above, the permitted healthcare services that may be carried out by foreign investors, and should generally be approved by the MoH and SAGIA, are as follows:

  • establishing and owning only Hospitals from the different types of Private Healthcare Institutions listed above after securing the pre-approval of the MoH;
  • management and operation of Hospitals, General Health Centers and Specialised Healthcare Centers, as defined above, subject to the MoH pre-approval; and
  • other human healthcare services CPC 9319 excluding of course the services listed under UNSD code CPC 93191.

Foreign Direct Investment In The Healthcare Sector In The Kingdom Of Saudi Arabia

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