Here in the U.S., we will elect a new president today, but I tend to agree with my colleague Philip Betbeze that whoever wins will not be in the position to make dramatic changes to the health system because of the global financial crisis.
Well, the next U.S. president won't be the only one wrestling with the economy. CEOs of international health systems are closely tracking the financial markets, and those I've recently connected with expect that new business development will be challenging. Some are putting new deals on hold. At the same time, many of these health leaders are optimistic that capital access will improve soon and new growth plans will return.
Here are a few recent responses on the issue I received from international hospital CEOs:
Vishal Bali, CEO of the Wockhardt Hospitals Group, India: The access to capital will be an issue in the short run; however, once the liquidity returns to the financial markets and particularly to the banks, I do not really see problems in the long run. As a profitable organization we have internal cash flows which will help in completing some of the ongoing projects and as the situation improves externally capital availability will resume for other large projects. Resumption of [capital expenditures] is going to be extremely critical for industrial activity and GDP growth across the globe, so it is imperative that we will see a reversal of this mayhem in financial markets soon. We are currently pursuing the projects and expansion plan that was on the drawing board as of 2008 and scheduled for completion by 2011. At current time we are not signing any deals beyond this time frame.
Ken Ouriel, MD, CEO of Sheikh Khalifa Medical City in Abu Dhabi: International hospital projects will no doubt be more difficult in this new credit environment—it will be more challenging to access debt financing, equity ratio requirements will be more substantial, and interest rates will be higher. Financing for international capital expenditures will not change—the sources will continue to be lending from international banks, cash from quasi-government entities, and from Western-derived equity. It seems that traditional private equity has fallen off with respect to the latter, while funding from hedge funds had increased. Whether this will continue into Q4 remains to be seen, noting the challenges that hedge funds have experienced of late.
David L. Printy, CEO of Oasis Hospital, Abu Dhabi: I don't see long-term issues about credit in the Middle East market, [but] short term we find UAE banks being very "careful" in granting credit lines—short term and capital funding lines. We will not finance any construction in Middle East without OPIC support as cost could be too high. Dubai is starting to show signs of world credit limitations, and buyers have disappeared for retail housing and condo markets. Pull back of commercial space occupancy absorption has begun. Abu Dhabi continues to be strong with sound financials and demand ahead of build.