The top five healthcare challenges facing the UAE

The UAE is undergoing a period of huge investment in healthcare. Data from the World Bank shows that between 2007 and 2014, spending per capita on healthcare rose by 46% to US $1,610. Compare this with just 25% for the US, 27% for Germany and 0% for the UK.

The move towards mandatory health insurance over the past few years has been one for the better, but such rapid change brings a whole host of new challenges. At the moment, there are many hospitals, insurers and brokers and, at around nine million, not enough potential patients. Of the 60-plus licensed domestic and foreign health insurance providers, some are new to the region, and some are struggling to make a profit. Such is the strain, that in 2015 the health insurance industry posted a loss of 106 million AED (US $29 million).

So how do we achieve a profitable market that works for everyone – the individual, corporations, hospitals and insurers? Let’s take a look at the five biggest challenges facing the industry right now and more importantly, how we can overcome them. 

Challenge 1: Insurance company recovery strategies

So where exactly are the bulk of these losses coming from? From experience, I can say that significant amounts will be lost on large corporate accounts. With so much competition, policy providers often chase top-line growth over profitability. The thought process is simple: secure the business now; recover the profit later.

My experience while running AXA PPP Healthcare in the UK shows this may end up being painful for everyone. Large corporations face climbing premiums, while hospital groups face being challenged and even delisted.

Let’s get some jargon out of the way. In the industry, a profit has been made when the combined operating ratio (COR) is under 100% – if it’s above 100%, it’s a loss. The COR is the total costs divided by the net earned premium (the insurer’s income after expenditure has been deducted). At AXA, we ran at 82% for individual clients, 92% for SMEs and 103% for large corporates. To recover the loss, we targeted the private hospitals because their 50% occupancy rates meant that for every patient, we were paying for an additional empty bed. Using stringent selection criteria, we delisted 100 of the 250 hospitals, placing patients only in the top 150. This strategy saved 15% on the claim funds.

But a 103% COR looks pretty good compared to the situation here in the UAE, where ratios can be as high as 150%. Daman, which provides cover to more than 2.8 million people, has already got tough on those clinics providing inferior treatment. In some cases delisting may seem harsh, but it is one of the few ways insurance providers can maximise quality while keeping costs under control.

Daman, which provides cover to more than 2.8 million people, has already got tough on those clinics providing inferior treatment.

Challenge 2: Large corporations taking control

This challenge knocks on from the first. With CORs as high as 150%, this means some large corporations are paying high premiums, say 100 million AED (US $27.2 million), but with claims 50 million AED (US $13.6) higher. When insurance providers make the necessary premium adjustments, this will quickly become unaffordable. Some brokers will have their head in the sand, hoping that the problem is a blip that adjusts itself, but it won’t without someone taking control. This means moving the focus away from ‘price, price, price’ to ‘price plus value’.

The first step is for the corporations to become better informed. Demanding historical reports from the insurance company going back longer than six months is a start. There are also other ways to improve value, such as:

• Getting tough on hospitals and clinics that are expensive or offer a poor service.
• Combating high monthly claims – If staff visits to hospitals or clinics are high or impacting productivity, implement a strategy to combat this, such as telemedicine.
• Replacing branded medicines with generics – The Health Authority Abu Dhabi itself admits that generic medicines are equally as effective as their branded counterparts. Yet, in one 2011 study of a general hospital in Sharjah, generics accounted for just 19% of prescriptions. Given that the FDA claims generics are 80 to 85% cheaper than branded drugs, their use can create significant savings. One area to keep an eye on is the expensive biologic market. Patents for many of the earlier and most popular biologics used for rheumatoid arthritis, certain bowel diseases and skin conditions are coming off-licence, meaning the market is beginning to flood with ‘generic’ forms known as biosimilars. Should these biosimilars show equivalent efficacy and safety, there is the potential for further savings.
• Promoting prevention – Companies that employ a Health and Wellness programme repeatedly show savings on premiums by helping employees become fitter and healthier. A famous example is Johnson & Johnson’s Live for Life programme. A study from the Journal of Health Affairs, shows that in the six years up to 2008, the programme provided an annual saving of $535 per employee when medical costs were compared to those in similar companies.

Challenge 3: Supplier imbalance

In the UAE, higher demographic patients have a large choice of facilities. This makes the competition tough and with Expo 2020 approaching, things will only become tougher. Expo 2020 is expected to cause a rapid rise in the population fuelled by new industries. However, much of this new population is expected to congregate around the new Al-Maktoum International airport in Jebel Ali and the Expo site, where new medical facilities are already popping up. This causes a problem for existing facilities such as those in Deira and Dubai Healthcare City, which find themselves out of the loop. Currently, some providers plan to build feeder clinics, but should everyone do this, the competition may lead to a loss-making market.

Expo 2020 has already created a growth in construction jobs with over 83,000 workers entering the market. The Essential Basic Plans for this demographic are around 500 to 700 AED (2014 rates), which is well below the average spend of 5,900 AED for the same year.

One solution is for some providers to concentrate on the forgotten lower demographic. Indeed, Expo 2020 has already created a growth in construction jobs with over 83,000 workers entering the market. The Essential Basic Plans for this demographic are around 500 to 700 AED (2014 rates), which is well below the average spend of 5,900 AED for the same year. Building largescale day surgery centres could provide these clients with the safe, high-quality, cost-effective care they need. Indeed, the World Health Organization suggests that 90% of all surgery is performed this way in Canada and the US, and propose it can reduce costs by 25% to 68% over inpatient surgery. Indeed, some providers such as Medstar have already committed to investing in these facilities.

Challenge 4: Using technology wisely

Cutting-edge therapeutic technology is a must for any high-performing healthcare system, but the place of technology with a preventative and communicative role is less well defined. This is particularly important when looking to provide high-quality services to lower demographic patients.

Over 80% of UAE nationals now own a smartphone, according to research by mobile technology experts GSMA, and these can provide a much-needed way to capture patient data. Apps can be used to monitor activity, calorie intake, heart rates, sleeping patterns and even be hooked up to capture blood sugar levels. Such information can be fed to doctors and nurses, and if used wisely can lead to reductions in unnecessary clinic visits.

Even if a consultation is required, telehealth provides a way to limit travel and time. In the US, analysis by Red Quill Consulting in 2014 showed that up to 83% of cases could be resolved during a telehealth call, saving money. The average telehealth call costs US $40-$50 compared with US $136-$176 to see a doctor face-to-face.

In the US, analysis by Red Quill Consulting in 2014 showed that up to 83% of cases could be resolved during a telehealth call and can save money.

Challenge 5: Need for stronger regulators

The UAE has grand plans to become a global destination for health tourism, and expects to attract 500,000 patients a year by the time Expo 2020 comes around. However, miscoding and even insurance fraud – which includes over-prescription, unnecessary tests, encouraged repeat visits – are becoming common, with UAE authorities suggesting 5% of all claims fall in this category.

With these in mind, there is a growing need for hospitals and doctors to be held to account, meaning more regulation, more monitoring and more unannounced hospital inspections. One way this can be made less painful for everyone is with better data capture so regulators can improve how they monitor the system. The introduction of Diagnosis-Related Group (DRG) coding may be a start and mean hospitals treat more efficiently and economically, while also helping to stamp out some abuse of the system.

Up for the challenge

Making a healthcare system profitable is a challenge for every country around the world, no matter what its approach may be. Here in the UAE, we have chosen a mandatory insurance system and we have decided to implement it at great haste. This means the time is now to step up to the challenges this brings. By the time Expo 2020 arrives, let’s hope we’ve chosen to face them.