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 At least two other healthcare companies operating in Abu Dhabi are
also in talks with authorities, seeking a reversal or amendment to
the reform that reduces state insurance coverage for citizens using
private hospitals, according to two industry sources who declined to
be named due to the sensitivity of the matter.
Abu Dhabi has cut insurance coverage under its Thiqa plan to 80
percent from 100 percent, meaning patients have to pay 20 percent of
bills if they seek treatment at private hospitals.
The rule, which does not apply to government hospitals, was
introduced last July - at the worst possible time for Mediclinic as
it had just bought Abu Dhabi private hospital group Al Noor for
about $1.7 billion.
The London and Johannesburg-listed company's experience illustrates
the business risks in the Gulf's oil-exporting countries as low
crude prices dampen economies and strain state finances.
The firm has begun lobbying the state Health Authority of Abu Dhabi
over the Thiqa change, David Hadley, chief executive of Mediclinic
Middle East, told Reuters in an interview.
"Other providers have done the same," said Hadley, adding that the
reform had channeled patients to government hospitals. "We don't
have a problem with the policy on co-payments as long as it applies
to the entire industry."
One of the industry sources said that although authorities did not
want to be seen as giving in to pressure in any way, the policy
might be adjusted again around the end of this year - partly because
reduced Thiqa coverage had led to higher costs at state hospitals,
hitting the government's budget.
The Health Authority of Abu Dhabi did not respond to requests for
comment about the private sector's discontent with the Thiqa change
or whether it planned to scrap the reform or extend it to all
hospitals.
It has previously said that the rule change would contribute to its
efforts to increase efficiency, standardize operations and increase
the sector's financial viability for the benefit of patients and the
healthcare system as a whole.
'MULTITUDE OF HEADWINDS'
By many measures, the Gulf is an attractive destination for foreign
healthcare providers; incomes are high and growing populations are
burdened with some of the world's highest levels of lifestyle
diseases, such as diabetes.
Encouraged by such trends, Mediclinic, which has 73 hospitals and 43
clinics across South Africa, Namibia, Switzerland and the UAE,
bought Al Noor last year. But since the Thiqa change, Al Noor's
in-patient volumes have dropped 38 percent and out-patient volumes
by 43 percent, Hadley said.
To compound Mediclinic's problems, at around the same time as the
reform, competition intensified in Abu Dhabi with three new players
entering the sector, while thousands of expatriates and their
families left because of job losses in a slowing economy. Also, 147
doctors out of 600 left Al Noor, many to join new hospitals in the
area, and new doctors had to be hired.
"We were hit by a multitude of headwinds. I think it was the timing
- we couldn't have predicted. It is going to be a challenging year,"
said Hadley.
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Mediclinic's London-listed shares have dropped 8 percent since the
company issued a profit warning for its Middle East business last
week.
While timing played its part, other factors might also have
contributed to the company's struggles in the region, however.
"In the long-term it will probably be clear that Mediclinic overpaid
for the Al Noor acquisition," said Neil Brown, analyst at Electus, a
South Africa-based fund manager.
"However, at these Mediclinic share price levels of 120 rand, which
are now around 40 percent lower than mid-2016 when the
above-mentioned rules changed in Abu Dhabi, we believe that
Mediclinic is attractively priced for longer-term investors."
'NEED FOR A CORRECTION'
Mediclinic has not diversified across the region as broadly as some
rivals to share out its risk.
Its stock performance stands in stark contrast to rival NMC Health,
which has seen its shares rise almost 13 percent year-to-date,
according to Thomson Reuters data.
NMC, one of the oldest healthcare players in Abu Dhabi, has
operations in seven emirates of the UAE as well as Saudi Arabia and
Qatar, while Mediclinic has operations in just Abu Dhabi and Dubai.
Also, some rival companies say they disagree that the Thiqa change
is negative for the private sector.
"It is a measure to manage over-utilisation and over-diagnosis. When
coverage is free, no one cares," said Prasanth Manghat, deputy CEO
of NMC Health.
Shamsheer Vayalil, managing director of VPS Healthcare, said:
"Unnecessary medical visits have stopped since the new policy took
effect. There was a need for a correction."
Mediclinic aims to complete the Al Noor integration and rebranding
by the end of this year. A total of 432 jobs at Al Noor were cut in
2016 with another 511 to go in the next few months, said Hadley. Of
the planned lay-offs, 183 jobs relate to the closure of small
facilities and clinics, including one in Oman which was uneconomic,
he said.
(Additional Reporting by Hadeel al Sayegh; Editing by Pravin Char)
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