Entrepreneurship Zone: 13 March 2023 :: The strategies behind Cleopatra Hospitals’ rise in Egypt’s private healthcare sector

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Entrepreneurship Zone: 13 March 2023 ::  The strategies behind Cleopatra
Hospitals’ rise in Egypt’s private healthcare sector

 

	
 


*          


This article is a slightly edited excerpt of an African Hidden Champions
case study on Cleopatra Hospitals Group. African Hidden Champions is an
initiative by Africa Foresight Group, DEG and the African Development Bank.


In less than a decade, Cleopatra Hospitals Group has become one of Egypt’s
largest private healthcare companies by acquiring existing hospitals and
signing management agreements. In this article, we examine the strategies
and tactics that enabled Cleopatra to establish a significant presence in
the sector.

Cleopatra Hospitals Group was established in 2014 with a strategy of
building an institutionalised and integrated healthcare group by
consolidating legacy facilities and enhancing the efficiencies and
capacities of a very fragmented private sector that was once controlled and
owned by individual doctors, businesspeople and the like.

At that point Egypt did not have a healthcare company of this sort and
Cleopatra drew inspiration from strong institutionalised healthcare players
in countries such as South Africa, Turkey, the United Arab Emirates and
others in the Gulf.

The foundation of the group’s strategy was laid in 2014 with the
acquisition of two highly regarded family-owned businesses, Cleopatra
Hospital and Cairo Specialised Hospital. Over the years that followed, the
group continued to expand its portfolio through a variety of means,
including full ownership, majority stakes, and long-term management or
concession agreements. This included Nile Badrawi Hospital in 2015, Al
Shorouk Hospital in 2016, El Katib and Queens Hospitals in 2019, Bedaya
(Fertility Solutions) Hospital in 2020, and most recently, Sky and Haven
Hospitals in 2022.

Cleopatra has also launched two polyclinics chains, Majarrah Polyclinic and
New Cairo Polyclinics, with a broader range of medical services than
conventional clinics. Majarrah features 11 outlets, while New Cairo offers
18, complemented by Cleopatra branded pharmacies.

At the heart of Cleopatra is a six-pillar operational strategy:

·         Improving and standardising service quality;

·         Integrating its new and existing facilities to achieve higher
efficiencies and extract synergies;

·         Enhancing utilisation as well as optimising and growing existing
capacities and capabilities;

·         Continuing to expand the geographical footprint and referral
channels;

·         Venturing into new high potential service offerings and business
lines by introducing the latest medical and non-medical technologies as well
as leveraging digitalisation throughout the process;

·         Developing the concept of the one-stop shop treatment journey as
well as the centres of excellence model.


Centralisation


Critical to Cleopatra’s strategy is a strong centralised non-medical
management and operational structure at head office level that encompasses
strategy and growth, service delivery, business planning, supply chain,
information technology, commercial, revenue cycle management, and finance
teams.

Prior to listing on the Egyptian stock exchange in 2016, Cleopatra brought
on key skills in critical roles, including, for example, investor relations
and business strategy, digital transformation and human resources, amongst
others. Over the years, the group has managed to develop professionals with
unique and highly specialised skillsets that did not exist within the
healthcare sector previously.

Cleopatra enlisted a group of executives early on who brought a wealth of
experience in their specific fields. The team includes Dr Ahmed Ezz El Din,
the current chief executive officer; Mr Hassan Fikry, the current executive
director of group corporate strategy and business operations (who started as
a business analysis manager within the company); Dr Amr Alashkar, the
current group chief information officer; and Ms Marwa El Abassiry, the group
chief HR officer. All of them have been part of Cleopatra’s journey since
inception. For the initial team, working in the first company that was going
to institutionalise this sector was seen as both a real challenge and a
worthy societal initiative and purpose to be a part of.

This centralisation approach has enabled Cleopatra to onboard medical
facilities onto its network seamlessly, ensuring that the medical component
of the business has the necessary support, vision, and business acumen as
well as systems and processes that are clear, efficient and geared for the
growth of an on-going concern.

This was also facilitated by Clinisys, the first-of-its-kind in Egypt fully
integrated group-wide healthcare hospital information system (HIS) and
enterprise resource planning system (ERP), which allows for accurate
measuring and monitoring of key data across the business in real-time.


Growth through management agreements


Since Cleopatra has already consolidated most of the major legacy private
hospitals in Cairo, the number of sizeable operating facilities available
for purchase has reduced considerably. However, there are still several
opportunities for partnerships with other facilities. Some facilities are
owned or managed by syndicates, government entities, and large corporations
that are not in the healthcare management business but have, for example,
constructed hospitals for their staff. Typically, these facilities’ owners
want to retain ownership of the assets while enhancing their efficiency and
performance levels to meet their staff’s needs and contribute to addressing
the current shortage of hospital beds in Egypt.

These management contracts can take various forms, such as revenue-sharing
agreements, as is the case with the 25-year contract with Sky Hospital, and
pure rental agreements, such as the 18-year usufruct agreement with Haven
Hospital. These contracts enable Cleopatra to assume full management of the
facilities according to its standards and policies and integrate their
financial performance into the group’s consolidated figures. With the Sky
and Haven hospital agreements, Cleopatra has positioned itself as a pioneer
in this form of growth in the industry.


Talent retention and development


One of the main challenges in the healthcare sector, not just for
Cleopatra, has been high staff turnover rates, with people frequently
switching between healthcare groups and hospitals. Cleopatra found that
employees often left due to issues with remuneration, self-development
opportunities, and career progression. To address these concerns, the group
created a clear organisational structure with job profiles and remuneration
that reflected the position, not the person.

Employees also have the opportunity to move between hospitals, with the
possibility of promotion and training. Furthermore, all postings are shared
internally before going outside of the group, prioritising in-house talent
development. Cleopatra has also developed a range of training programmes for
all tiers of the business, including medical and non-medical programmes, to
ensure continuous upskilling.

In terms of external hiring, Cleopatra has developed a recruitment process
that includes a three-interview procedure, one with human resources and two
with technical managers related to the specific post. For managerial and
supervisory positions, the group has assessment centres where candidates
undergo case studies and role-playing exercises that mirror real-life
scenarios, ensuring that they are a good fit for the role and future
progression.

As a result of these efforts, Cleopatra has significantly reduced staff
turnover and has an estimated 80% success rate in talent acquisition.


Challenges and opportunities


There are a number of healthcare groups that have been established or
expanded their offerings into Egypt which serve as competition to Cleopatra.
These include:

·         The Elaj Group, established in 1994, is focused on chronic care
delivery in Saudi Arabia, where it is headquartered, and Egypt. It has built
a presence in the healthcare sector in the MENA region, with a number of
medical centres and hospitals, although these are not integrated and it does
not compare in size nor in reach.

·         Seha Healthcare, formed in 2015, consists of two hospitals and a
number of polyclinics across Cairo.

·         Alameda Group, established in 1999, is a group of four hospitals
that are well renowned in Cairo but are not integrated. They are the next
biggest group of healthcare facilities in Egypt after Cleopatra.

The opportunities in the country are such that there is a space for
everyone, but there is a high barrier of entry, particularly due to limited
sizeable operating facilities available for acquisition. The only way to
really enter the market is through greenfield and brownfield projects. At
the same time, with the current Egyptian macro-economic outlook, the ongoing
devaluation of the Egyptian pound, and the high dependence on dollar
dominated medical equipment, investment costs will be difficult to recover
within a reasonable payback. As a result, management/concession contracts
are the main means of consolidating sizeable facilities under one entity.
Success records and strong sector connections are some of the main criteria
to closing such deals.

In addition to the challenges competitors bring, the comprehensiveness of
Cleopatra as a healthcare group is both a challenge and an opportunity. The
challenge is in continuing to be nimble enough to expand into the
subspecialities, whether it is hospital services, diagnostics,
pharmaceuticals, IVF, etc, without losing its identity, the quality of
service or the effectiveness of the integrated and centralised management
approach.

In his article, Insight into Egypt’s healthcare sector for Omnia Health,
Mansoor Ahmed details a wide range of market opportunities in Egypt,
including:

·         A focus on day care surgery

·         Long term care/rehabilitation

·         Primary care

·         Laboratory and diagnostic centres

·         Medical tourism

·         Beauty and cosmetic

·         Health driven wellness resorts/second home developments

·         Healthcare/medical cities and parks

When examining Cleopatra’s trajectory since its establishment nine years
ago and its strategy of providing healthcare to various market segments
while establishing itself across the entire healthcare value chain, the
group appears to be in a good position to capitalise on current and future
market opportunities. This is particularly true considering the upcoming
launch of Egypt’s Ministry of Health’s public-private partnership model,
which includes a comprehensive insurance system, improving the
pharmaceutical industry, and expanding the reach and accessibility of
general hospitals.



- Howwemadeitinafrica

 

 


 


 


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