Health-Care Boom

U.S. firms are now playing a preponderant role in what has become a major growth industry: building, managing and supplying, in accordance with American specifications and standards, the ultra-modern hospitals of the Middle East.

New evidence of this trend was the awarding in late August of a $175 million contract to Hospital Corporation of America (HCA) to manage a 500-bed military hospital complex in Riyadh.

According to the contract, the "end users" of the services will be the 30,000 members of the Saudi Arabian National Guard and their families. But the client was the U.S. Defense Department, through a government-to-government agreement between Washington and Riyadh. The hotly contested contract—170 companies collected "request-for-proposal" documents—eventually narrowed down to the four U.S. companies which compete most aggressively for health-care contracts in the Middle East: HCA and three Los Angeles-based firms, Whittaker Corporation, National Medical Enterprises (NME) and American Medical International (AMI).

At one point, HCA, Whittaker and National Medical formed a consortium to bid jointly for the job, while AMI counteredwith what was regarded by some as an unrealistically low bid. So lucrative and competitive are Middle East health-care contracts that companies have grown accustomed to cutting their costs and trimming their margins dramatically in order to secure them: on one recent Saudi contract, $3 million separated the two lowest bids.

HCA has said its Saudi management contracts are the key to its profitability, even though it only operates two hospitals in the Kingdom, compared with 364 in the United States. And Whittaker says 20 per cent of its revenues and half its operating profits come from the Middle East, even though it is a big diversified company making everything from chemicals to oil pipes.

Whittaker recently increased the value of its management contracts in Saudi Arabia to more than $800 million over the next two years, by adding two facilities to the three military hospitals it now operates. The company is also looking for contracts to supply and equip hospitals, a field dominated so far by the Chicago-based American Hospital Supply Corporation.

National Medical has won some $600 million in health-care contracts in Saudi Arabia, the most recent being an $85 million award to commission and operate a Public Security hospital in Riyadh. AMI runs a 355-bed general hospital in a rural area of Saudi Arabia and recently signed with a local firm to co-manage a specialist eye hospital in Riyadh.

Beyond the Arabian peninsula, in Egypt, AMI recently withdrew from its management role, and part of its equity share, in Al- Salam hospital near Cairo. This privately owned facility was one of the major foreign investments to which the Egyptians pointed as a successful result of their "Open Door" economic policy. AMI retreated after alleging overruns and financial irregularities in the hospital's start-up phase; there were also concerns that the private care offered by the hospital was beyond the means of most Egyptians.