New legislation paves route for private sector to take over public hospitals

The House of Representatives passed government-proposed legislation on Monday to allow the private sector to establish and manage public healthcare facilities.

This legislation reflects a vision President Abdel Fattah al-Sisi articulated in October last year to empower the private sector to manage and operate the state healthcare sector, something he claimed at the time would improve the quality and efficiency of these services.

Yet it comes on the back of changes that have already reduced access to public healthcare for the most vulnerable members of the public, with some noting that — as much as there is a stated desire to improve services — the initiative is being undertaken at a moment when the government is looking to cut costs.

Healthcare experts as well as parliamentarians shared with Mada Masr their concerns about the extent to which the bill will be conducive to improved healthcare quality and access.

What will change? 

The bill, which progressed swiftly through the House over recent weeks and gained final approval on Monday, lays out a path for private sector contractors to manage some of the state’s most successful health facilities as well as to establish new health facilities. 

It is set to empower the prime minister and health minister to issue tenders for management contracts for public sector hospitals to the private sector without first consulting Parliament — an exception to the standard process that legally requires parliamentary approval of all investments in public facilities.

The draft legislation, of which Mada Masr reviewed a copy, grants the prime minister and the health minister the right to determine how they want to contract private investors to manage public hospitals. Methods could include public tender, direct agreement, or other avenues outlined in the law on regulating contracts concluded by public entities.

Health Minister Khaled Abdel Ghaffar will be obliged to present a contract framework and to get relevant approvals, in response to which the bill then empowers the prime minister to license investors to establish or operate existing facilities.

Investors will be obliged to comply with a set of conditions. One of these pertains to the share the government will retain in the agreement with the private contractor. The bill doesn’t clarify whether this share indicates that the government will receive a proportion of the revenues from the healthcare facility or whether it indicates funds the government will pay to contracted investors in order for them to continue providing free healthcare services to citizens.

The bill specifies that contracts can last between three and 15 years, and that "all healthcare utilities, including equipment and medical devices necessary for operation, are to be transferred to the state in good condition at the end of the commitment period without charge."

Investors will also be obliged to retain service pricing in compliance with existing public health programs, at the government’s expense. The law "requires the investor to provide a percentage of the total healthcare services offered by the healthcare facility to beneficiaries of curative services at the expense of the state, health insurance, or the comprehensive health insurance system, at the same prices set by the state for providing those services." The percentage of the services to be provided at public healthcare prices set by the state is not specified, however. Meanwhile, the bill exempts investors from the 10 percent annual profit cap stipulated in the law on public utility obligations.

House Health Committee member Irene Saeed tells Mada Masr that “the investor has to profit,” explaining that, in exchange for management, the investor will be allocated beds that provide curative care services at private sector prices. However, the majority will be for public services, which the state will finance through treatment at state expense, health insurance, or comprehensive health insurance.

Former Doctors Syndicate board council member Ahmed Hussein raises concerns in statements to Mada Masr about the mechanism through which the government can compel investors to reserve beds for subsidized treatment.

An earlier iteration of the bill included primary healthcare units and family health units among facilities open for private investment, which were then removed during deliberations by the parliamentary health committee, which ended on May 15. The Health Committee exempted services such as blood and plasma collection, regulated by a 2021 law, and emergency services offered free of charge by the state from private investments proposed in the law.

The health committee also included provisions prohibiting “the granting of oversight for certain healthcare facilities and essential services provided by the state to citizens, including those with potential national security implications,” without further specifications.

Primary healthcare units provide preventive services such as vaccinations and essential treatment in outpatient clinics by family physicians who conduct initial consultations and treatment or refer patients to more advanced healthcare facilities. Family health units and centers deliver specialized services in pediatrics, internal medicine, gynecology and obstetrics, as well as minor surgeries and diagnostic services such as laboratory services and radiology.

Saeed says that primary healthcare units and family healthcare services serve the financially disadvantaged in all governorates by offering curative and preventive services that should not be subject to private interests. Meanwhile, she adds, the committee ensured that the bill stipulates that investors managing public hospitals must offer vaccinations and essential healthcare services at government-set prices.

According to Alaa Ghannam, a healthcare reform expert and the Right to Health program director at the Egyptian Initiative for Personal Rights, each primary care unit in rural areas typically caters to a population of 10,000 to 20,000 individuals, mostly from financially disadvantaged groups, and is operated by a very limited team of doctors and nurses. This is why primary care units are regarded as the gatekeepers of any country’s healthcare system.

Ghannam further explains that healthcare units, along with central, public and specialized hospitals, contribute essential data to the Central Agency for Public Mobilization and Statistics (CAPMAS) on birth rates, mortality rates, causes of death and various health and population-related information concerning preventive medicine, epidemics, infectious and non-communicable diseases, quarantine measures, family planning, and more. This data informs the state's health policies and should not be controlled by investors.

In terms of staffing in the hospitals that investors are to manage, the final version of the law requires investors to retain a minimum of 25 percent of the existing hospital staff, including medical teams, support staff, technicians and administrators, and will prevent them from hiring too many foreign staff, placing a cap on foreign staff at 15 percent of the hospital workforce at existing hospitals or up to 25 percent at new hospitals.

Saeed said that these percentages were established after the government initially insisted that investors be allowed to hire foreign nationals to constitute as much as 50 percent of the hospital staff, with the rationale being to bring in expertise in rare specialties and provide training for Egyptian doctors.

Abdel Ghaffar assured that there will be no competition for Egyptian professionals, adding that the fact that there are experts in some specialties does not detract from Egyptian doctors’ capabilities. “There is no shame in learning from those who have knowledge,” he said.

This government rationale is challenged by Hussein, the former member of the Doctors Syndicate’s board council and member of the Maserna Wahed (Our Destiny is One) campaign. Hussein raises concerns about the potential for investors to seek out cheap labor, such as doctors from East Asia or graduates from unaccredited colleges. "If European and other countries are facing a shortage of doctors and long waiting lists in their healthcare systems, and they are contracting with Jordan and India, where will we get doctors from?" 

Hussein adds that the draft law granted the health minister the authority to license foreign doctors to work in leased government hospitals without consulting the Supreme Council of Universities or the Doctors Syndicate, raising additional concerns that private sector contractors might employ unqualified doctors.

Meanwhile, Mahmoud Fouad, the director of the Right to Medicine center, tells Mada Masr that the sheer presence of foreign doctors and nurses will make it easier to raise service prices. 

Egypt’s public healthcare sector has been grappling with a shortage of doctors due to an increasing trend of resignations from government positions and professionals seeking opportunities abroad. According to data from the Doctors Syndicate, Egypt has 8.6 doctors per 10,000 citizens, while the global average is 23 doctors per 10,000 citizens.

Healthcare between the public and private sectors

The contention raised by the new law, according to healthcare experts and stakeholders, is not related to the principle of private sector involvement but rather its involvement in existing public health facilities when there is a need to establish more facilities and when there is no clear strategy for public private partnerships.

In an explanatory memorandum presented to the House, Abdel Ghaffar outlined the objective of the proposed law, namely the implementation of a presidential directive to uphold the constitution’s provisions on private sector involvement in healthcare services and to enhance the quality, efficiency and equitable geographic distribution of healthcare services. Article 18 of the Constitution stipulates that “the state encourages the participation of the private and non-governmental sectors in providing healthcare services."

In a statement released by the syndicate on May 2, Doctors Syndicate head Osama Abdel Hayy stressed that the law should be limited to incentivizing investors to build new hospitals to support Egypt's healthcare infrastructure and address the current severe shortage.

Ghannam likewise says that the country needs new hospitals to be established through public-private partnerships or under private management. Reservations about the new initiative revolve primarily around acquisition, even if temporary, and particularly of existing government hospitals, Ghannam says. 

Similarly, former Doctors Syndicate Secretary-General Ehab al-Taher says that those interested in investing in the healthcare sector should establish and manage "private" medical facilities that expand the capacity and services of the healthcare sector rather than taking over existing government facilities to run them for their own benefit, leaving only a limited share allocated for the original beneficiaries — the citizens.

According to CAPMAS’ healthcare service bulletin, public hospitals account for over 70 percent of the total beds in Egypt, totaling 88,597 beds. Egypt requires an increase in hospital bed availability from the current ratio of 1.2 beds to three beds per 1,000 people in order to meet the World Health Organization’s global benchmark.

Instead of leasing public hospitals to the private sector, Hussein believes that the state should instead invest in eliminating the bureaucratic obstacles faced by individuals who seek to open private clinics or hospitals. "Obtaining a license for a clinic costs no less than LE2 million, and in hospitals, it can reach up to LE10 million," Hussein said.

Health Ministry spokesperson Hossam Abdel Ghaffar stated an additional aim behind the legislation during a TV appearance in late April, namely that of enforcing the comprehensive health insurance law in second-phase governorates and preparing for its implementation in the most populous governorates. He added that the bill is intended to address deficiencies that were identified during the implementation of the system in first-phase governorates, attributed to the private sector’s sparse involvement.

In 2019, Egypt began implementing the comprehensive health insurance system, which offers mandatory healthcare services to all citizens in exchange for an insurance subscription determined according to income, with the state covering costs for the financially disadvantaged. The program was first introduced in the six least populous governorates: Port Said, Suez, South Sinai, Ismailia, Aswan, and Luxor, with plans for expansion into eight phases to cover the remaining governorates by 2030.

Ghannam considers the decision to tie the new law to the comprehensive health insurance system as a sign of poor judgment and floundering on the part of Egypt’s health officials. The comprehensive health insurance law defines the partnership framework between the public, civil and private sectors, Ghannam says, whereby the private sector delivers curative care to beneficiaries of the comprehensive health insurance authority's services once the General Authority for Healthcare Accreditation and Regulation verifies the quality standards at agreed-upon prices.

Rather than allowing the private sector to introduce new medical facilities to address current severe shortages in various specialties, the new law grants them the right to manage and operate existing public sector services. This effectively transfers service provision from the public to the private sector rather than allow for a facility management partnership, Ghannam says.

Partnerships with the private sector have already been implemented in the initial five governorates where the comprehensive health insurance system was introduced, Ghannam adds. The partnerships extended to radiology centers, clinics, pharmacies and ophthalmology hospitals, among others, alongside public hospitals and healthcare units in those governorates. The public facilities underwent maintenance, were equipped with modern medical devices, saw an increase in the number of medical professionals, and were transferred to the Egypt Healthcare Authority under the comprehensive health insurance system.

In light of this experience, experts who spoke to Mada Masr fail to see a clear strategy delineating the private sector's role in the new law and its integration in the comprehensive health insurance system.

The private sector's entry into the healthcare service field in various forms, whether through contracting with the government or other means, is internationally recognized, Ayman Sabae, a researcher at the Right to Health unit of the Egyptian Initiative for Personal Rights, tells Mada Masr. Nevertheless, Sabae adds, the proposed law lacks a coherent plan or strategic framework. What are the mandates of the private sector? Will it determine healthcare service pricing? Or alter the activities of a specific hospital or healthcare unit or its targeted demographic?

In this context, Sabae questions the identity of the investor for whom the law was drafted, asking, "Who is the investor waiting at the door and in need of this law?" He adds that government healthcare facilities currently offer low-quality services at subsidized rates. It is difficult to imagine the private sector pricing services at the same or similar rates, Sabae says, pointing to uncertainties about government spending on these facilities post-privatization.

For this reason, according to Ibrahim al-Zayyat, a member of the Doctors Syndicate, the government decided against leasing primary healthcare units to the private sector due to lack of investor interest. "The government will only lease its successful hospitals to the private sector," he adds.

The path to privatization

A government source from the Planning Ministry, speaking to Mada Masr on condition of anonymity, says that the law is a priority for the government as it alleviates the strain on the state's general budget.

The bottom line of the law, hence, as Fouad articulates it, is to reduce government spending to an unprecedented level.

The government anticipates receiving financial compensation from investors in exchange for granting them the right to manage and operate public healthcare facilities, Fouad says. Investors will price the healthcare service to generate profit, with the state paying a portion of treatment costs for financially disadvantaged patients at these facilities, a portion that may decrease over time. 

In the context of expenditure reduction, the government issued a regulation in March reducing the percentage of free treatment and raising prices for all healthcare services in the public and central hospitals, primary healthcare units, and family healthcare services on which the country’s most impoverished population relies.

Further to the ongoing move to curtail government healthcare spending and transition toward privatization, in June 2022, the government designated the healthcare sector in its state ownership policy document as a critically important social sector that would continue to be funded while allowing for private sector investment. The state gave the Sovereign Fund what it called a leading role in facilitating partnerships with the private healthcare sector to leverage assets and deliver high-quality healthcare services, aiming to alleviate the financial strain on the state.

Three months after the release of the state ownership policy document, Abdel Ghaffar announced the offering of three government hospitals — the Coptic, Heliopolis and Sheraton hospitals — for private sector management or development. A few days later, however, Abdel Ghaffar partially retracted his statements, confirming that only Heliopolis Hospital would be offered for private sector investment, with plans to establish a medical tourism department and provide specialized premium healthcare services.

At that time, Abdel Ghaffar emphasized that Heliopolis Hospital, one of five hospitals managed by the Curative Care Organization, an economic entity under the Health Ministry, operates on a fee-for-service basis and is self-funded. He refuted claims of "the state abandoning its hospitals, raising healthcare service prices for citizens, or privatizing the healthcare sector."

Commenting on past experiences, Zayyat, Hussein and others see that, while they believe that private sector involvement would improve service efficiency and increase the capacity of the healthcare sector, past experience of selling renowned public hospitals revealed that investors purchasing the majority of hospitals rarely led to an increase in capacity or quality and simply resulted in price hikes.

Following the Heliopolis Hospital controversy, discussions about the privatization of public hospitals subsided until Sisi brought the topic to the forefront once again in October last year during the closing session of the Hekayet Watan conference. Sisi announced at the time the state’s readiness to grant an undisclosed hospital, speculated to be the 500500 Cancer Hospital constructed from donations totaling LE10 billion, for management and operation by an international hospital. The government would procure healthcare services from the hospital and provide them to the financially disadvantaged individuals it determines.

In outlining his healthcare reform vision, Sisi stated, "If you want to ensure a successful path, the state should complete three-quarters of the journey and leave the rest to the private sector." 

Sisi elaborated on his vision for the state to construct hospitals meeting private sector standards and then hand over their management to the private sector: “If the private sector is to construct hospitals, this implies the allocation of land, then we start going down the land rabbit hole. And then there is design and execution, and then the fact that they would have to secure loans to establish the hospital. This would take five to seven years. But with me, it’ll take two years or even one and a half. I’ll then tell them, ‘I sped it up for you; now come and manage as if you built it, and I will buy the service.’”

In alignment with Sisi’s vision, preliminary measures were taken by the government toward contracting with Egyptian and foreign investors to manage major government hospitals that are self-funded, such as the Mabarra Maadi Hospital and the Dar al-Salam Cancer Hospital.

And as the current law was being deliberated, the General Authority for Investment and Free Zones (GAFI) listed opportunities on its website for the management of six major public hospitals, the establishment and operation of eight public health facilities, and the establishment of 18 other facilities under what it calls "investment opportunities in public healthcare."

GAFI has offered six public hospitals’ land and buildings for investors to manage, namely the Abu Tig Hospital in Assiut, the Red Sea Fever Hospital, the Kom Hamada Fever Hospital in Beheira, the Agouza Specialized Hospital in Giza, as well as the New Cairo Specialized Hospital and its extension and Heliopolis Hospital.

The authority has highlighted the competitive advantages of these facilities as they are distinguished by their prime locations, “good infrastructure and comprehensive medical services, intensive care units, nurseries, reception, emergency, and advanced surgical operations, and the fact that they are equipped with the latest medical devices."

Furthermore, GAFI underscored that the six hospitals serve areas with high population density. The authority advertised that investors can provide medical services during evening hours, implement telemedicine, as well as join the General Authority for Healthcare Accreditation and Regulations (GAHAR) to prepare for inclusion in the comprehensive health insurance system. Upon the entry of the hospital’s governorate into the system’s designated phase, the investors can provide services for the government and receive compensation.

The Planning Ministry source, who is close to Minister Hala al-Saeed, tells Mada Masr that the prime minister, taking on the mandates of the investment minister following the ministry's dissolution, has been recently involved with GAFI to devise a set of incentives to encourage investments in government healthcare. This would enable investors to offer public healthcare services at subsidized rates while also generating profits from the management of healthcare facilities, whether existing or planned for construction in the coming months.

Hussein, the former member of the Doctors Syndicate’s board council, says that GAFI is promoting the leasing of the best Health Ministry hospitals to the private sector without any legislation from the parliament or the president to regulate the matter.

But now that the legislation is ready, the path to privatization seems to be both ongoing on the ground and legalized by Parliament.