DUBAI HEALTH CARE CITY: A World-class Innovation Evolving in a Dynamic Environment.

Michael Matly

Managing Medicine, Harvard Business School, February 27, 2007

Partially funded by the INITIATIVE, Belfer Center for Science and International Affairs, John F. Kennedy School of Government, Harvard University

Purpose City, a discussion of challenges, as well as potential recommendations. Dubai Health Care City (DHCC) is ’s first business park/cluster, 20 million square feet devoted to health Context care along the entire value chain from education, clinical care, wellness/CAM, “To become the internationally spas, business (pharma/biotech), and recognized location of choice for quality health care entrepreneurship. Sheikh healthcare and an integrated centre of Mohammed, ruler of Dubai, intended to excellence for clinical and wellness set DHCC as a regional center of services, medical education and excellence while improving the quality research” (DHCC vision statement) of health care delivery in Dubai. In addition, the DHCC model serves to be Dubai, a tiny city-state, in the Arabian an opportunity to attract a significant Peninsula has undergone an impressive amount of Federal Direct Investment transformation in the last decade, into Dubai. Clustering health care has transitioning from a trade-hub to a become an attractive model in developed regional and global center of financial and developing countries alike with services, media, IT, energy, tourism, and India and Australia announcing their in the last three years: Health Care. own health care cities. From its first days, DHCC has been successful in Dubai can attribute much of its attracting a number of brand names economic success to the including Harvard Medical School, freezone/clustering strategy with the Mayo Clinic, Johnson & Johnson, creation of JAFZA (Jabel Ali Free Zone Wyeth, University of Pennsylvania, Area) nearly 15 years ago, one of the Boston University, American Academy world’s largest import/re-export port. of Cosmetic Surgery, and many more. This was quickly followed by the creation of , Dubai However, DHCC, despite its great Media City, and Dubai Industrial City. potential for innovating health care Freezones serve to attract foreign delivery, is facing a number of investment by providing a tax-free challenges. This paper serves to explore the context of the Dubai Health Care environment, 100% foreign ownership1, Creating a health care community, and government liaison services. focused geographically in arms length, would provide a number of exciting It became clear however that as the opportunities in terms of quality, region underwent its transformation, the competition, and economic development health care sector was still struggling. for the government. As Professor As one government official puts it, Michael Porter explains: “Dubai has become a leader internationally in a number of industries; clusters affect competition in however, Dubai’s health care arena was three broad ways: first, by still in the third world.”2 The Gulf increasing the productivity of Cooperation Countries (GCC) (Saudi companies based in the area; Arabia, Kuwait, Qatar, Bahrain, United second, by driving the direction Arab , and Oman) region was and pace of innovation; and third, undergoing a health care overhaul itself. by stimulating the formation of With Cornell’s entry to Qatar (thanks to new businesses within the a $750 million check from Sheikh cluster. Geographic, cultural, and Hamdan bin Khalifa Al-Thani) to institutional proximity provides establish a medical school, the race was companies with special access, on. Soon after, recruited John closer relationships, better Hopkins and Cleveland Clinic. information, powerful incentives, and other advantages that are In response, Sheikh Mohammed Al difficult to tap from a distance. Makhtoum, then crown prince, set out to The more complex, knowledge- improve the quality of Dubai’s health based, and dynamic the world care services. As everything else in economy becomes, the more this Dubai was “for business”, health care is true. Competitive advantage development was to be no exception. lies increasingly in local things-- The approach was innovative and knowledge, relationships, and unique: clustering health care within a motivation--that distant rivals freezone. This strategy would improve cannot replicate 3 health care quality, increase FDI, and place Dubai as a hub for medical In addition, opportunities to tourism. Dubai, not to be outdone by its invest in health care infrastructure were neighbors, successfully attracted coming at a very opportune time. The Harvard Medical School and Mayo investor profile was changing in Dubai. Clinic as its first strategic partners, A majority of investments had been in placing an Academic Medical Center the real-estate space; however, due to a (AMC) at the city’s core. saturated market, investors were now exploring other opportunities in more

1 By law, all companies need to be at 3 Institute for Strategy and least 51% owned by a United Arab Competitveness, Emirates national http://www.isc.hbs.edu/econ- 2 Interview with Shaher Bashir, Oct. 30, clusters.htm, accessed November 15, 2006 (Dubai, ) 2006 sophisticated sectors such as IT and this ambitious project with a budget in Health Care.4 the billions of dollars was underway, challenges began emerging. The DHCC was an innovative approach to smorgasbord of projects, especially at attract world-class operators in Clinical DHCC’s infancy created an identity Care, Education, Research, Wellness, crisis. What the city’s mission: a real- and Biotech/pharmaceuticals. Twenty estate broker like the other free-zones in million square feet of desert converted Dubai? a quality police for the city’s into a clinical, residential, and operators? a medical tourism community commercial health care community. promoting spas, hotels, and wellness Plots of land were sold to investors both centers? in the and internationally for office buildings, hotels, private Challenges outpatient clinics, wellness centers, Complementary and Alternative (CAM) Dubai Health Care City offered an services, spas, hotels, education and innovative approach towards health care research centers, and commercial outlets delivery in a localized community, (banks, restaurants, pharmacies, etc.). At capitalizing on clustering various its finish, Dubai Health Care City is opportunities along the health care value estimated to include over 17 independent chain. This model is now being hospitals and over 350 independent replicated in emerging economies like clinical operators. Dr. Martin Berlin, India as well as developed countries like one of the architects of DHCC stated Australia. that the city was to provide quality health care in an integrated approach Yet, Dubai is a fairly new player in the from diagnosis to rehabilitation, market with the majority of growth over exploiting the complete value stream.5 the last decade. And while it does function as a company8 and is flush with While DHCC sold most projects to cash, it can often be compared to a start- investors to develop, a portion remained up with associated challenges. in the hands of the Dubai Health Care City as a source of sustainable revenues, Too many parents these included: a 5-star hotel, spa, clinical residences, Al Razi Outpatient Another challenge for DHCC is the office building6, and the Dubai owner(s) of the project, understanding University Hospital7. Yet, soon after this context is critical in understanding the culture that was created. The is in constant flux. 4 Interview with Mohammed Suleiman, Dubai is a semi-autonomous government Nov. 3, 2006 (Dubai, United Arab who controls its own finances and Emirates) economic and social policies, yet under 5 Interview with Dr. Martin Berlin, Nov. 2, 2006 (Dubai, United Arab Emirates) 6 Providing 150 clinical operators 8 “Dubai, Inc.” outpatient office space for lease http://www.forbes.com/logistics/2006/03 7 $3 billion state-of-the-art hospital to /02/dubai-DPWorld- serve as the Harvard Medical School Emmar_cx_daa_0302dubai.html March Dubai Center affiliate teaching hospital 3, 2006 the discretion of the federal government making and sustainable revenues. The based in neighboring Abu Dhabi. Dubai Health Care City had undergone in its first two years three transitions Sheikh Mohammed was not yet ruler with different missions: improving when he envisioned the creation of a health care quality, attracting foreign health care innovation in Dubai and direct investment, and finally sustainable mandated Dr. Martin Berlin, then chief revenue streams into the future. During strategist of The Executive Office, to this time as well, managers were coming develop this vision. This intent was to and going and the leadership of this improve the health care quality of Dubai. fledging organization was in constant transition. However, once Dubai Health Care City’s strategy was developed, Sheikh In addition to this challenge, DHCC was Mohammed put the implementation of now part of Tatweer which had the DHCC under the newly created aggressive revenue targets across all the Dubai Development and Investment daughter companies. In fact, interviews Authority (DDIA) under the directorship indicated that Tatweer was planning go of Mr. Saeed Al-Muntafiq. The mandate public with an IPO targeted in five years. of DDIA was to be a vehicle for FDI Tatweer was announcing new mega- into Dubai, therefore, the goal for DHCC projects frequently. was under the leadership of DDIA was to announced in summer 2006 which attract investors from surrounding would lead to 30 hotels (30,000 hotel countries into the health care city. rooms) in a 2 km strip costing $27 billion. Dubai Health Care City suffered The first goal in Saeed’s strategy was to due to these new macro-projects. First, partner with brand names in the USA in human capital resources were taken order to increase the attractiveness of away from the organization especially investors leading to a sold out Phase I (4 the sales team who was now transferred million ft2) in less than one year. to new projects while not being replaced at the DHCC. In addition, revenue was then created in 2005 targets were increased to compensate for also out of The Executive Office, which the capital expenditure drain from the would serve as the holding company for new projects. The Business Dubai’s many macro-projects putting Development team of DHCC was now in hundred of billions of dollars under one a race for revenue, looking into projects management umbrella. In late 2005, the that were far removed from health care DDIA was dissolved and replaced by (including waste management and Tatweer which would manage Dubai catering) in order to meet unrealistic Holding’s domestic projects including targets. Dubai Health Care City, Dubai Energy, Dubai Mercantile Exchange, , Recommendation: DHCC now seems and others. Saeed Al Muntafiq, nestled in the Tatweer group for the previously of Director-General of DDIA, coming years with no restructuring of was placed as CEO. Dubai Holding in the foreseeable future. With this understood, DHCC Again, DHCC found itself under a new management need to establish a set of strategic imperative, one of profit goals that are of the interest and sustainability for the city. And these volume targets come from? The CPQ goals should be different then the other will not approve medical licenses for any cities of Tatweer and Dubai Holding locally trained physician which has prioritizing governance, high quality caused rifts between the DHCC and health care delivery, attracting local physician communities, the same competent physicians, and training allied community that DHCC will depend on health staff, all of which will not lead to for referrals. high revenues in the near future. Tatweer literally means “development” Recommendation: DHCC should focus in Arabic and the DHCC should on recruiting and human capital. There therefore stand as a symbol of the should be an initiative to recruit ultimate development initiative. management who have medical backgrounds, especially in operations. A Start-up’s Delimma In addition, in order to recruit top talent, DHCC needs to be prepared to create In addition, there was a management attractive employment packages. problem, Dubai itself was a start-up in a way, still in its infancy (decades) in A Different Kind of City development and moving at lightening speed. The human capital had not had Unfortunately, DHCC was appropriate time to catch up to the fundamentally different than the Dubai Dubai’s many ambitious projects. Media City, Dubai Internet City, or the DHCC was no exception. The current Dubai Industrial City in 2 different management often had no previous ways: financial targets and regulations. experience in health care and often came DHCC was part of the newly formed from unrelated industries. How was a holding company of Tatweer which was leader with little experience expected to launching and managing Dubai’s multi- manage such a variety of initiatives: billion USD projects. Tatweer’s from choosing hotel operators, to dealing portfolio included Dubailand9 and most with health care disputes, to recently the Tiger Woods Golf implementing an IT infrastructure for the Development.10 Tatweer was city, to creating an epidemiological developing a strategy which would lead research center, and to ensuring land sale to an IPO in the next five to seven years. and leasing targets? In order to accomplish this feat, Tatweer

In addition, another challenge in any early stage enterprise (but especially for 9 Dubailand is an DHCC) is the human capital freezone that is two times the size of requirements, especially with the Walt Disney World, 3 billion square technological innovations the DHCC feet, and cost $20 billion USD hopes to establish in Dubai. Which 10 Tiger-Woods Dubai is a 25 million nurses or technicians will have the square foot golf community with a golf proper training experience and know- academy, 60,000 sq. ft. club house, how to effectively operate the DHCC residential villas, and a par 72 world- projects including the ambitious, four class golf course, hundred-bed teaching hospital. In http://gulfnews.com/business/Developm addition, where will the ambitious ent/10087077.html Accessed December 7, 2006 would need to establish sustainable clinical planning, medical licensure, revenues. Until now, Tatweer daughter among many others. In essence, DHCC companies including the Dubai Health was creating a health system from the Care City did not concern themselves ground up, which would require a with sources of revenue. Once the different time table than the other Dubai Dubai Holding investment committees clusters. However, senior management approved a particular project, the money at the senior Tatweer and DDIA level was requested from Dubai Holding who placed very aggressive revenue targets would subsequently transfer the money on the DHCC business development to the appropriate company. However, team. with talks of an IPO, the daughter companies were now expected to be self In order to ensure quality improvement, sufficient with ambitious financial the DHCC created the Center for targets which were not only intended to Planning and Quality (CPQ) that served establish financially sustainable entities as the licensing and governing body of but to also provide additional financing the city. Any physician who intended to for new projects. practice within the city would be required to apply for a license (which The DHCC which had been concerned often required US or European trained with establishing a high quality health and boarded physicians). In addition, care center, was now mandated to reach any clinical or non-clinical entity that ambitious revenue targets. Resources wanted to join the city would require that had previously been prioritized in CPQ approval in order to ensure that building the DHCC community there was not a redundancy in services including an advanced state-of-the-art provided or over-representation. teaching hospital, enterprises that were historically cost centers for Academic The CPQ was also responsible for Medical Centers, were now turned implementing two ambitious projects: an towards catering centers, waste IT infrastructure linking the city’s management, and leasing companies. hundreds of clinical operators in order to And the pressure continued from top maintain quality, improve operational Tatweer management. Speed had efficiency, and collect patient always been a strategic advantage for information. This project had its unique Dubai’s economic development;11 challenges including how did DHCC however, unlike the other real estate intend to mandate patient information companies of Tatweer and Dubai via an IT-based system when each Holding, Dubai Health Care City needs clinical operator would operate their time to establish the necessary own unique IT infrastructure? In frameworks to build a health care addition, operators from different community and the necessary countries each come with unique patient regulations. confidentiality rules which may inhibit A great deal of regulations would full participation in CPQ requirements. need to be drafted in terms of quality, Finally, who would finance the necessary equipment that the operators would require to upload the necessary 11 Author’s interview with Saeed Al data to the central database. Muntafiq (CEO, Tatweer), November 1, 2006. The second project included creating an Unwelcome Neighbors epidemiological research center that would analyze the data collected from Another challenge that the Dubai Health the IT system and publish papers on Care City faced was the complicated disease trends and treatment options for relationships with the health care the United Arab Emirates. This would systems of the region. Dubai is part of a serve as a form of revenue for the complex, highly political health care DHCC, selling the reports to system. Currently there are three pharmaceuticals, government, and governing bodies in the UAE and Dubai: research centers. However, DHCC itself the Dubai Department of Health and did not see patients nor did they have Medical Services (DOHMS), the control over the patient data, rather the Ministry of Health (MoH), and the UAE patients belonged to individual General Authority of Health Services. providers. However, the DHCC did not Each governing agency licenses see intend to share revenue streams from physicians independently according to these reports and studies with the their own medical requirements, in patient’s providers. addition, each agency manage their own hospitals. Finally, the contracts that operators were signing to be part of the DHCC did not In Dubai, DOHMS is the most fully layout the expected requirements. significant regulator, managing most of The wording was vague in the contracts the Dubai’s government hospitals and is and only stated that operators would be led by Sheikh Hamdan bin Rashid Al required to follow CPQ guidelines; Maktoum, brother of ruler Sheikh however, no details were provided. Mohammed bin Rashid .12 Sheikh Mohammed was appointed heir Recommendation: Academic Medical apparent despite being younger than Centers (AMC) often do not produce Sheikh Hamdan. During this time, attractive IRRs for investors while most Sheikh Mohammed was in charge of attributes that make a top AMC tend to establishing the various Dubai business be cost centers for the organization. The park clusters including the Dubai DHCC AMC is no exception. In fact, Internet City, , and DHCC’s financials are more strained eventually Dubai Health Care City. The than the other cities because of the high DHCC stood in direct competition to the capital expenditure needed to create a to established DOHMS hospital. In AMC from ground up. For this reason, addition, CPQ were refusing to license the AMC needs to be financially distinct UAE trained physicians, the very same from other DHCC activities (i.e.-Hotel, physicians that were practicing in Sheikh Residences, spas) which are more Hamdan’s hospitals. There were profitable. The AMC should also explore political tensions between the brothers options of UAE national government and thus between each of their respective subsidization as one goal of the AMC is health care projects. As a consequence, to provide quality care for nationals, so to date, no communication has been they will no longer need to be subsidized to travel abroad to Europe or the USA. 12 Sheikh Mohammed is the third oldest son of Sheikh Rashid and became ruler on Jan. 4, 2006. exchanged between DHCC and business and leisure. The DHCC is DOHMS. Michael Porter’s clustering come to life. However, just like many other young Recommendation: The DHCC should enterprises, DHCC faces a number of begin dialogue with DOHMS as soon as challenges. While not an exhaustive list, possible as their buy-in will be critical, this paper addressed a number of especially in terms of referral from strategic points that DHCC should tackle DOHMS physicians and hospitals. in the near future. In addition, for future entrants and operators who intend to be Conclusion part of the DHCC (and the list is The Dubai Health Care City is a growing at an astonishing rate), true innovation for health care delivery, understanding not only the opportunities taking advantage of the entire health care but challenges that DHCC faces will value chain from education, diagnosis, serve useful in strategies to acquire an treatment, and rehabilitation as well as address in the health care city. Regional Healthcare Market

Healthcare spend in the region by segment in 2001 Notes on graph

$97.6bn ¥ Total spend is based on World Health Organization 2001 figures. The breakdown

15.5 is based on EY and GRMC research from October 2003 $68.5bn 5.2 ¥ Relevant spend to DHCC is 70% of total 11.3 spend (based on the breakdown of 3.6 healthcare costs in the US) $19.8bn 76.6 ¥ Accessible spend depends on the distance 9.8 53.6 of travel, the socio-economic indicators and 3.6 availability of healthcare services in the

6.4 country

Total spend Relevant spend Accessible spend

Regional spend (excluding GCC) GCC spend Regional spend (excluding GCC) abroad

Estimated spend in the region & DHCC potential market share in 2008 Potential market share summary

Healthcare ¥ Total regional healthcare spend in 2008 Spend 2008 Adjusted for Adjuste d for Adjuste d for Region $bn Re levance Accessibility Market Share forecasted $137.29bn UAE 3.51 70% 2.46 100% 2.46 20% 0.49 GCC 16.38 70% 11.47 70% 8.03 10% 0.80 ¥ The total potential healthcare market Region, excl GCC 115.24 70% 80.67 8% 6.45 3% 0.17 available for DHCC in 2008 is $2.01bn HC Tourisim 2.17 100% 2.17 100% 2.17 25% 0.54 Total 137.29 96.75 19.10 2.01

Source: WHO report, 2001; internal analysis

Figure 1 (source: DHCC internal presentation)

Overall Concept

QuickTime™ and a decompressor TRADITIONAL ENVIRONMENT OF HEALTH CARE THE PROPOSEDare DHCCneeded to see this picture. CONCEPT COMMERCIAL

QuickTime™ and a ENVIRONMENT decompressor QuickTime™ and a are needed to see this picture. decompressor are needed to see this picture. QuickTime™ and a decompressor are needed to see this picture.

QuickTime™ and a decompressor are needed to see this picture.

QuickTime™ and a decompressor QUALITY ECONOMICS are needed to see this picture. QuickTime™ and a decompressor are needed to see this picture. & QuickTime™ and a decompressor PROVISION OF are needed to see this picture. QuickTime™ and a decompressor PLANNING CLINICAL CARE are needed to see this picture. QuickTime™ and a decompressor are needed to see this picture.

COMMERCIAL CLINICAL CARE; The ENVIRONMENT; ACADEMICS & THERAPEUTIC RESEARCH Environment DEVELOPMENT & COMMERCIALIZATION

EDUCATION

ECONOMICS

LAWS; GOVERNANCE & RESEARCH LAWS; GOVERNANCE STANDARDS & STANDARDS

Figure 2 (source: DHCC internal presentation) Mission

DHCC has five major objectives:

Ensure that quality health care is accessible to the people of the UAE, the Gulf States, and the surrounding region.

Develop leadership in medical education

Develop a system to support research and development in the life sciences and health care.

Create an environment that supports both high-quality health care delivery and the well-being of families.

To establish an economically viable and sustainable integrated health community based on a comprehensive partnership of the private and public sector.

Figure 3 (source: DHCC internal presentation)

Value Proposition Model

Licensing 1 Planning QHSE

Clinical/CPQ Rules & Regulations 3 Wellness Cluster Medical Cluster

Check-up Facilities Pharmaceutical & Equipment

Sports Medicine UniversityUTH Private Hospitals & Clinics Teaching Hospital

Wellness Centre 2 Transplantation Centre UniversityAcademic Nutrition Centre Medical Rehabilitation Centre Nutrition Centre Centre Rehabilitation Centre HarvardHMSDC Medical DubaiDHRF Harvard Resort & Spa School Dubai Center Research FoundationDiagnostic Centre Resort & Spa Diagnostic Centre

Health Farm Day Clinics 5 Healthcare Support Hotels and Bungalows Telemedicine / Telehealth International Healthcare Services Regional Marketing ÒLinkagesÓ 4 Patient Referral Networks Figure 4 (source: DHCC internal presentation) DHCC Overall Structure

CPQ is the Healthcare Regulatory Authority

Dubai Healthcare Center for Healthcare City Administration Planning & (DHCCA) Quality (CPQ)

¥ Sales & Marketing ¥ Quality & Credentialing ¥ Asset & facilities development ¥ Clinical Planning ¥ Customer Relationship ¥ Consulting CME to be moved to Management Harvard Medical ¥ Administration & Operations ¥ Continuous Medical School Dubai Center ¥ Patient Referral & Associations Education (CME) (HMSDC) after opening ¥ Business Development due to its medical ¥ Strategy education role

Figure 5 (source: DHCC internal presentation)

Phase 2 Master Plan

• Phase II complements the healthcare service offerings of Phase 1 • The two phases together aim to create a full healthcare continuum where patients can receive services from birth to death for most of their healthcare needs

Figure 6 (source: DHCC internal presentation) Figure 7 (source: DHCC internal presentation)