Saudi Arabia’s healthcare sector is under pressure as revenue is estimated to plummet in 2020 due to the coronavirus pandemic, according to a report from Al Rajhi Capital.
Although healthcare use has surged due to the virus, demand has fallen for other medical procedures at private sector hospitals, including the most lucrative operations. The reduced demand may also mean private hospitals are lowering prices to try and stay competitive, according to Al Rajhi, hitting profits and stressing the sector’s business fundamentals.
“Going forward, the industry would continue to witness loss of business for at least next three to six months, which would keep the revenue under pressure. Along with this, lower oil prices might keep the receivables higher from both the government and insurance companies,” the report said.
Private healthcare firms are set to lose out from the general recession caused by the coronavirus pandemic, as citizens hard on cash begin to seek out public healthcare providers as cheaper alternatives.
Losses in income may also lead to less expensive and less procedures overall. Elective surgery, for instance, may experience a downturn as patients put off payments while the economic fallout of the coronavirus hits home.
However, various measures have been put in place to counter the impact on healthcare provider’s incomes. Remote medical consulting services, medicine delivery, and other home medical services will counteract falling revenue, the report said.
“These efforts might somewhat offset the impact on revenue due to lower utilization and prices,” it said.
Stimulus shot in the arm
Saudi Arabian authorities have announced economic stimulus measures worth over 120 billion riyals ($32 billion) to combat the fallout of the coronavirus.
For healthcare firms, these packages are likely to be very positive.
The stimulus package “is expected to be fruitful for the healthcare companies as the sector has high receivables from the government as well as about five percent of revenue is utilities expenses,” the report read.
Al Rajhi Capital expects the pandemic to drastically impact healthcare firms in the second quarter of 2020, with the situation to begin to normalize from the third quarter and onwards as lockdown procedures are eased.
“The uncertainty related to the coronavirus still abounds … The pandemic as well as the lower oil prices could increase unemployment or salary cuts, which may result in people not visiting private hospitals and getting free treatment in the public hospitals. This could also affect the financials for private healthcare companies,” the report concluded.
Saudi Arabia has reported 16,299 cases of coronavirus infection, with 136 deaths. There have been 2,215 recoveries of people so far.
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