Soaring healthcare costs for Abu Dhabi employers

There are some 19,000 procedures listed on Abu Dhabi's new price list for basic healthcare services.

They represent the opening salvo of what looks set to be a long war on escalating medical costs in the capital.

At stake is not just the health of the population but that of the economy as companies come under mounting pressure to absorb healthcare costs while insurers are forced to sell policies below their real market value to compete. The trend is pushing the price of policies up by as much as 20 per cent.

Abu Dhabi health chiefs are struggling to cope with such runaway spending as insurance providers complain of fraud, misuse and waste. Caught in the middle are companies that have until now enjoyed artificially low premiums as a result of a race to gain market share as compulsory insurance schemes are introduced.

Now the healthcare honeymoon is over.

"We used to have employee benefit negotiations with HR managers when insurance policies were used to attract and retain high-calibre employees," says Dr Hazem Al Madi, the chief executive of Green Crescent, a top-five UAE insurer.

"Now all of our meetings are with the financial controllers: don't increase the premium, reduce the benefit - that has been the trend."

Adding to mounting healthcare costs are practices such as "upcoding" procedures performed on patients to generate more revenue for hospitals, over-prescribing medications and duplicate billing, where the same procedure is paid out for twice. Claims are running out of control.

"It's why you see pharmacies mushrooming everywhere," adds Dr Al Madi.

Booz & Co estimates the premium for providing health care to someone covered under the national scheme is just a quarter of the actual per capita cost of public healthcare provision. It cannot last and employers are already being forced to choose between paying more for policies or cutting benefits.

"It feels like the industry is navigating without a compass," says Jad Bitar, a principal with Booz & Co.

Setting mandatory tariffs may help to contain future inflation while also protecting smaller players.

From Dh158 (US$43.01) to fix a broken nose to more than Dh13,000 to remove a lung, every type of medical procedure is catalogued with surgical detail on Abu Dhabi's new mandatory tariff that comes into effect next month and determines prices under the most basic insurance. While some prices will rise, overall it is expected to slow inflation in the sector.

"Theoretically, a standard price list should control inflation but in practice it doesn't happen like this," adds Dr Al Madi.

"A real life example: previously, when a patient went for some physiotherapy, the insurance company would receive an invoice for five or six sessions.

"But after the coding system was introduced, healthcare providers started to use all the codes that fell under physiotherapy - so there was one code for warming the muscle, another for shaving hair and another for doing the massage - we started to receive five or six codes under one service, which is legally legitimate but which increased costs by 300 per cent in some cases."

It is an extreme example but it illustrates the challenges faced by regulators and what can be the blurred lines that separate misuse from fraud.

Mahmoud Ramadan AbuRaddaha is at the sharp end of healthcare reform in the capital, heading the Government prices and product benefits section at Health Authority - Abu Dhabi.

He says a number of initiatives have been implemented this year to address what were structural flaws in the healthcare system, such as an overreliance on consultants to do the job of GPs .

In most developed markets, the health system is triangular with consultants at the top, specialists below them and a larger number of GP's to form the base. But in Abu Dhabi the system has looked more like an inverted triangle.

"The old system compensated the physicians based on competency not necessarily on care delivered. So, if you have the flu and you go to see your GP the GP gets Dh45. If you have the same flu and go to a consultant, the consultant gets Dh125," he says, adding that drove hospitals to over-utilise consultants.

Healthcare spending per capita in the Arabian Gulf is growing at more than 5 per cent per year, according to the World Health Organisation - up from US$843 (Dh3,096) per person in 2000 to $1,224 in 2010. A rising proportion of that is going towards the cost of treating chronic diseases. More than 10 per cent of health spending in Abu Dhabi goes towards treating cardiovascular disease and 8.6 per cent to diabetes.

The prevalence of such chronic conditions has proved lucrative for drug makers. Alpen Capital expects pharmaceuticals sales in the GCC to almost double to $ 10.8 billion by 2020.

Yesterday, Gulf Pharmaceuticals opened a Dh500 million facility in Ras Al Khaimah capable of making 45 million vials of insulin every year for the treatment of diabetes.

The over-prescribing of drugs has been identified as a major concern by regulators and insurers.

"Those shopping bags you see full of drugs are an issue," says Mr AbuRaddaha, highlighting the danger posed by medicines, which may be harmless when used on their own but can be deadly in combination with others.

"My worry is that if a drug to drug interaction occurs the outcome is death, disability or loss of productivity days."

The surging cost of health care in the capital coincides with unprecedented investment in the sector with the arrival of the Cleveland Clinic next year and several smaller hospitals and clinics under construction.

But as insurance premiums spiral out of control, their services may be restricted to patients who benefit from a dwindling number of high end policies.

For the rest of the population, the menu of medical services covered by their insurers is unlikely to improve until savings are found elsewhere.

"You can have a good restaurant but what good is it if nobody can afford to eat there?" says Dr Al Madi.

scronin@thenational.ae