Feasibility of Building an American Private Hospital in Jordan

European Journal of Social Sciences ISSN 1450-2267 Vol. 40 No 2 September, 2013, pp.312-329 http://www.europeanjournalofsocialsciences.com Investment Opportunities in Health: Feasibility of Building an American Private Hospital in Jordan Ibrahim Alabbadi Corresponding Author, MBA, PhD Associate Professor Department of Biopharmaceutics and Clinical Pharmacy Faculty of Pharmacy, The University of Jordan, Jordan E-mail: [email protected] Tel: 962-6-5355000-23356; Fax: 962-6-5300250 Azmi Mahafza Professor, Dean, Faculty of Medicine The University of Jordan, Jordan Mousa A. Al-Abbadi Professor, East Tennessee State University & James H. Quillen Veterans Affairs Medical Center, Mountain Home, TN 37684, USA Amir Bakir Associate Professor, Department of Economics Faculty of Business, The University of Jordan, Jordan Abstract Jordan has one of the most modern health care infrastructures in the Middle East with an encouraging investment climate, thus a potential country to offer high quality health services at reasonable prices at a time in which medical care is becoming very costly in North America, Europe and the Middle East.The aim of this study was to investigate the value of health of establishing a high standard American private hospital as an investment opportunity in Jordan. This feasibility study cost estimates that are related to the project for 400 beds hospital consists of four components: market study, technical study,financial study and risk analysis. Investment, running and personnel costs in addition to estimated revenues and cash flows were calculated. The viability of the project was assessed by two indicators, net present value (NPV) at a chosen discount rate which equals the opportunity cost of capital, normally taken as 10%, and the internal rate of return (IRR). Results showed a positive NPV (and huge)indicating that the project is viable. However, the IRR shows the average annual profitability ratio of 172%. It was concluded that his opportunity will add value in health for Jordan as an investment priority country. Depending on the operation ratio,the project may pay back its capital in the first year or in three years maximum. Keywords: Feasibility, private hospital, investment in health, Jordan 312 European Journal of Social Sciences – Volume 40, Number 2 (2013) Introduction Jordan has one of the most modern health care infrastructures in the Middle East. Jordan’s health system is a complex amalgam of three major sectors: Public, private, and Non-governmental organizations (NGOs).The general Health Policy in Jordan is set by the High Health Council that represents all health care providers. The national health strategy is aimed at creating a comprehensive health care system, utilizing both public and private service providers covering all levels of care and improving the quality of health services by implementing a national health services accreditation program. In 2009, total health expenditures –both public and private was estimated at 1610 million JD (US$ 2274 million). The latter is equivalent to 9.52% of Gross Domestic Product (GDP). About 82% of the population in Jordan is covered by formal health insurance[1]. As the provision of medical care is becoming very costly in North America, Europe and the Middle East, many patients prefer to receive medical care in a foreign country provided they are offered services of high quality at reasonable prices. Jordan is a potential country where services can be offered due to[2-4]: • Availability of highly skilled Jordanian and American-Jordanian medical and non medical personnel. • Ability to acquire up to date high standard international medical equipments and any needed devices fairly easily • Jordan’s favorable investment environment including safety. • Moderate weather. • Convenient central location. • Numerous tourist attractions. • Easy international accessibility. • Jordan is the first in the Arabic region and one of the best five internationally in the medical tourism field [5]. The proposed project involves establishing an expandable 400-bed private hospital of high standards in Jordan targeting clients mainly from North America. This feasibility study consists of four components: Market study, Technical study,financial study and risk analysis. A. Market Study The market study consists of determining demand on the services to be offered by the proposed project as well as the degree of competition in the market. Then, the study concludes with an estimate of revenues according to prices and volume of services delivered. The key elements of the market study include consumers, suppliers, prices and market share. 1. Consumers The consumers are clients identified mainly in the USA market as a strategy point: • The consumers are patients who are to be identified by type of service demanded as follows: o General surgery and its subspecialties o Special surgery and its branches including ophthalmology, Ear, Nose and Throat (ENT), urology, orthopedics, and neurosurgery o Internal medicine and its subspecialties o Pediatrics and its subspecialties o Obstetrics and Gynecology (Ob/Gyn) and its subspecialties o Laboratory and pathology services o Dental services o Rehabilitation services o Fertility clinic 313 European Journal of Social Sciences – Volume 40, Number 2 (2013) • Demand projections Based on available data (Table 1)[6], it is assumed that the occupancy will always be between 90-95% of the total beds (90-95% of 400 = 360-380 beds) and the duration of each admission will range from 3-7 days for patients from the target pool. Accordingly, this study assumes that patient-bed occupancy ratio is 70% and 7 days per week for 52 weeks per year. Thus, number of patient-bed weeks will be (70% X 400 X 52=14,560 patients per year). • Revenues According to the above estimate, it is expected that annual revenues will reach (14560 x 7000 (see price analysis below) = 101,920,000 JDs equivalent to US$ 152,880,000) • Future potential expansion plans It is hoped that such a high standard private hospital with up to date American standards, will be the nucleus for establishing a private medical school and allied health colleges. Table 1: Hospitals Occupancy Rates in Jordan Patient/day Occupancy Rate (%) Ministry of Health (MOH) 3.2 69 Royal Medical Services (RMS) 4.1 76 University Hospitals (UH) 5.0 70 Private hospitals 2.2 50 2. Suppliers The project will have no threats from domestic suppliers, since it is the only one that has a high level of standards to meet expectation of USA patients. In addition, the reputation will be built day by day as soon as the Hospital is established. 3. Prices The prices (charges) for each service delivered by the proposed project need to be determined in view of the existing prices in the domestic market as well as the price estimates of what clients are expected to pay i.e. value based pricing. The prices identified at this stage will be used to calculate the expected revenues of the project. • Assuming the following: o Surgery: average bill per patient, though very variable, $ 10-15,000.00. o Medicine: also variable, but assuming an average bill of $ 10-12.000.00 / patient o Pediatrics: average bill of $ 8-10,000.00 / patient o Ob/Gyn: average bill of $ 5-9,000.00 / patient • Average bill across the board is assumed to be $10,000 i.e. approximately = JDs 7,000 per patient. 4. Market Share According to the Jordanian Private Hospitals Association[4]numbers for the year 2008; more than 200,000 patients (Sudanese, Syrians, Yemenis, Saudis and other countries)came and received medical treatment in Jordan including foreign residents in Jordan (embassies, companies, workers, Iraqis, Palestinians). These numbers were increased to 280,000 and to 306,000 in 2009 and 2010 respectively after attracting some patients from other Gulf countries, Russia, Uzbekistan, Chad, Nigeria and USA. There are about 60 private health care institutions in Jordan, by 2010 –in addition to some institutional hospitals including MOH- eight of which have been accredited by a US-based Joint Commission International (JCI), which is considered the gold standard for international accreditation in the healthcare industry[7]. 314 European Journal of Social Sciences – Volume 40, Number 2 (2013) Most of the health cadres in Jordan (85%) are below 50 years of age. Young health workers (30 years of age or less) constitute about 40% of the total health work force in Jordan. Jordan has a strong high education system for physicians, dentists, pharmacists, nurses and allied health sciences. Jordan has three main levels of health workforce formal education: community college/associate degree programs (2 years after secondary school), university/undergraduate (4-6 years after secondary school) and post-graduate (1-4 years after university degree). Formal post-service training programs are confined to physicians and dentists in public and private sectors. These programs are managed and supervised by the Jordan Medical Council[2]. They include programs for: medical residency, medical internship, and dentistry residency & dentistry internship. Formal continuing training programs are not regularly provided by public or private health sector. It is performed on voluntary basis by professional associations, hospitals, teaching institutions and individual practitioners. Most of the training provided is on job training, seminars, workshops and conferences. The majority of hospitals do not have any budgetary allocations for formal training and research. Jordan Health Care Accreditation Council (HCAC), a private non profit organization, is mandated to accredit health training programs which are not under the jurisdiction of the High Education Council or the Jordan Medical Board[2, 7]. Most Jordanian doctors speak English fluently and many have been trained or are affiliated with top North American, Australian and European hospitals. Although Jordan's medical institutions are of high standards, its costs are relatively low compared to the western world. In general, healthcare costs in Jordan typically are just one-tenth of the price of treatments in the USA, and less than third of the cost of medical services in the UK [8].

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