Health SMC Healthcare expects swift profitability from new hospitals By Matt Smith January 23, 2025, 12:15 PM Alamy via Reuters SMC Healthcare will continue to focus on hospital expansion in Riyadh, driven by the capital's rapid population growth Three Riyadh hospitals planned All operational by 2029 Servicing population growth SMC Healthcare is building three new hospitals in Riyadh that should break even within three to four years, the Saudi company’s chief executive, Bassam Chahine, has told AGBI. The three hospitals will more than double SMC’s bed count to about 1,200 as it seeks to address healthcare supply shortfalls in the kingdom. Saudi Arabia requires a further 30,000 public and private hospital beds by 2030 to meet government targets, S&P Global wrote in an October report. It noted that the country’s population will increase to at least 40 million by the start of the next decade from 32 million in 2022. Such demographic trends place demands on Saudi Arabia’s healthcare sector, which is also a top priority for the Vision 2030 economic diversification and expansion plan. SMC’s growth Founded in the 1990s by four Saudi Arabian families, SMC Healthcare owns and operates two hospitals in central and eastern Riyadh. SMC 1 spans 140,000 square metres – equivalent to about 20 soccer pitches – and houses 400 beds and 150 specialist clinics. SMC 2 covers 34,000 sq m and offers 150 beds, plus numerous outpatient services. In 2023, SMC Healthcare announced plans to build three more hospitals in the capital. The company has bought the land for its third and fourth hospitals and will acquire the land for its fifth in the next two months, said Chahine. Construction of SMC 3 has already begun, SMC 4 will start in “the coming few weeks” and SMC 5 will commence next year, Chahine said. SMC 3 and SMC 4 will be operational by the fourth quarter of 2027 or first quarter of 2028, while SMC 5 will open early the following year. Combined, the three new hospitals will span about 240,000 sq m. Almoosa Health’s Saudi IPO order book hits $46bn Aster DM Healthcare expects to close Saudi deals in months Health sector next target for Saudi private equity Typically, the annual operating costs of a hospital is half that of the total construction cost, Chahine explains. SMC’s three new hospitals will achieve breakeven within three to four years of launching services, he predicts, stating the global healthcare industry average is six to seven. “We believe we have all what it takes to expedite the breakeven,” said Chahine. His company’s second hospital, which opened in 2020 during the Covid-19 pandemic, achieved this milestone in its second year of operation. As medical treatments, techniques, technologies and medicine improve, fewer patients stay overnight in hospital. Consequently, the ratio of clinics to beds has increased, changing the way new hospitals are designed, Chahine explains. SMC Healthcare’s hospitals provide care up to tertiary level – advanced medical treatment such as chemotherapy, radiotherapy, intensive care and organ transplants. Chahine acknowledged that staffing the new hospitals will be challenging: “We used to recruit nurses from the Philippines, India. They’d work here for two or three years, get experience, then go to Europe or North America. Not any more. Europe and North America are recruiting nurses (from India and the Philippines) directly.” In response, SMC now seeks to hire nurses from countries such as Taiwan, South Korea, China, Vietnam, Egypt and Tunisia. It employs 1,000 nurses currently, of which 15 percent are Saudis. Doctor recruitment is less challenging, Chahine explained, thanks to Saudi Arabia’s extensive training programme for nationals. SMC has 150 full-time doctors, of which 30 are Saudis. All its 300 part-time doctors are nationals. Financial health As a joint stock company, SMC Healthcare possesses the corporate structure necessary to conduct an initial public offering, although it has no intention to do so at present. “We don’t have a plan yet, but we’re sure whenever we take the decision we’re in a good condition to go for that,” said Chahine. The company is funding its hospital construction through its own revenue and bank loans. Riyadh’s rapid expansion – consultant Knight Frank forecasts the city’s population will be 9.6 million in 2030, up from 7 million in 2022 – means it will remain SMC’s focus. The company may expand to other regions in Saudi Arabia or abroad eventually, said Chahine: “We don’t want to take that step unless we finish our expansion in the capital.” He said his company is unlikely to make any acquisitions, instead preferring to fund its own expansion. “It’s a little bit slower, but more sustainable when you have organic growth based on demand and a strong reputation,” he said. “We are open to all opportunities whether in Riyadh or outside, but this is not something (that’s) a priority at this moment.”