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.
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.