Cover Story

ROBBING THE SICK

A cartel of big board hospitals and super specialist doctors thrive on patients ability to pay and arm twist the dying By Aamera Jiwaji

s the NHIF scandal unfolded last month, an interesting twist took place that went beyond the disappointment and frustration that the country felt at having been duped once again by a government body entrusted with peoples health. Kenyans began to ask hard questions about why the private sector had failed in providing healthcare. Why, in a country of 40 million people, only one million people have medical insurance? The cost of medical care is the main issue, says Mr Sammy Muthui, the chairman of the Medical Insurance Providers of Kenya (MIPAK).
| Nairobi Business Monthly June

There was a time when Kenya wanted to position itself as a tourist destination for medical care but now we are the tourists. So expensive and inecient is local healthcare that it is cheaper for Kenyans to travel to India for treatment. According to data from the Indian High Commission, the number of Kenyans who were issued with medical visas increased from 458 in 2009 to 784 in 2010 and 810 in 2011. The Business Daily recently reported that a cancer survivor had opted for treatment in India at a cost of Sh700,000. Local treatment would have cost Sh4.6 million. Various arguments have been put forward to explain the excessively high cost of medical care

in Kenya, such as the lack of adequate legislation to regulate medical insurance and insucient forex controls which adversely impact the cost of imported medical equipment and drugs. The unhealthiest argument is that major hospitals and key doctors in the country are exercising their power to prot from the sick and, often times, the dying. Industry professionals have described medical providers as an oligopoly, a politically-correct name for cartel. Regardless, both denitions describe a small number of sellers (hospitals and doctors) engaged in unfair business practices to the detriment of the interests of the consumer in this case the patient.

Cover Story

Isaac Nzyoka, Head of Health Insurance at UAP

Sammy Muthui, Chairman of MIPAK

Mark Obuya, Chairman of AKI

Seen in the context of the nearly Sh1 billion saga engulng the National Hospital Insurance Fund, health is a big business for hospitals, doctors and top-line whose conspiracy can make a soldier sick. In just a short time of managing public healthcare, the vultures zeroed in and Meridian and Clinix, the two hospitals accused of being used to rob patients, were left with fat accounts. Private health providers are grappling with a crazier monster of big ve hospitals that are less interested in treatment than the cash, especially if the patient is insured. Eighty percent of our customers visit Aga Khan Hospital, Nairobi Hospital, Gertrudes and Mater, says Mr Isaac Nzyoka, head of health division at UAP Insurance. Including Karen Hospital, these are the top ve hospitals in the country although Karen is smaller and caters to a more niched clientele. The popularity of the Big Five has been attributed to the growing middle class in Kenya, and the social desire to seek medical care from branded providers. However, because all of us want to use them, the price has become inelastic. It can increase two or three times a year but we will still go there, says Mr Muthui. The average cost of inpatient visit, according to UAP Insurance gures, is Sh140,000 while outpatient is Sh4,000. Further, in the average cost of a hospital stay the hotel charges are more than the medical. Fifty to 60% of the hospital bill is lodging, Mr Muthui says. Aga Khan Hospital declined to comment
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How medicare is inated

Fraud A member, service provider, or intermediary engages in fraudulent behaviour individually or together. For example, a relative of the insured passes themselves o as the insured or a hospital overcharges you, charges you for someone elses bill or for services that have not been rendered. Misuse A member goes for unnecessary consultations or towards the end of the year tries to nish the unused surplus on the account. Overuse A service provider charges a dierent rate if the patient is insured, or submits the patient to a battery of unnecessary tests or issues him with excessive drugs.

In the mature markets hospitals sell new technology to insurers, which provides certainty regarding the costs.

on research ndings that it is among the most expensive places to seek treatment and always quick to recommend costly procedures when a cheaper alternative would have worked. High quality professional consultation may cost a bit more, the hospital said in response, but results in more cost-eective tests and treatment giving a net saving from the service and more positive health outcomes! (underlining theirs). It is the same story with the doctors. Kenyans go to big brand names and whatever they charge they pay. There are a few specialists and super specialists who have a lot of power, says Nzyoka of UAP. The distinction between non-profit and strictly for-prot medical providers is not quite clear. All of them hide under the non-prot umbrella, says Mr Mark Obuya, chairman of the Association of Kenya Insurers (AKI). They get tax incentives and promote the image that they are serving society but theres really no dierence. Theyre in it for the money. The top medical providers in the country are not-for-prot, but they are no dierent from the proteers. Hospitals reward the doctor who brings in high revenue from patients, medicine prescribed and hospitalisation, according to people familiar with their operations. Steep revenue targets are being set for medical practitioners by hospital management and that explains the rise in unnecessary but expensive medical procedures and drugs. Those who

HEALTHCARE
exceed their targets are rewarded. And the ones who practise medicine as it is supposed to be are not rewarded, says Mr Obuya. Thats why we have unnecessary caesarean deliveries? He wondered why in private health insurance the biggest cost is maternity when it is not a sickness. The same greed leads to unnecessary admissions. The prot motive tells them to keep you in when you have insurance, Mr Obuya says. Further, physicians who could act as one-stop shop service providers end up making multiple referrals to specialists for additional tests. The growth of medical centres across the city has been attributed to proteering by a clique of doctors as any referral to a medical centres laboratory or pharmacy directly earns them commissions. The Association of Kenya Insurers, concerned at the high cost of treatments, has initiated a forum to benchmark the cost of healthcare. The initiative will impose an audit mechanism on clinicians and hospitals, and allow evaluation by a regulatory authority. This will ultimately help to control the escalating costs of health care through a peer-review mechanism. Its ndings will supplement the 2011 study by Dr George Kosimbei, a Kenyan health economist. He investigated the extent to which medical costs change in response to the introduction of guidelines that limit professionals discretion to recommend drugs, tests, medical investigations and determine outpatient visits and inpatient stays. Of the 12 interventions he conducted in his research, 11 were successful, showing that the introduction of guidelines generated substantial nancial savings, which could ideally be passed to the insurer. As a member of the industry that foots these inated bills, a key issue for UAP and other insurers is addressing the amount of power that dominant medical providers wield. They have power because they appeal to the patients, says Mr Nzyoka. Insurers sell an annual medical cover, which means that at the start of a year the insurer has an expectation of what the costs will be at the end of 12 months. If something changes in the medical eld during that time, then their math wont add up. While in the mature markets hospitals approach insurance companies to sell new technology to them, a practice that provides certainty to the insurer regarding the costs, that doesnt happen in Kenya, says Mr Nzyoka. Medical care providers make decisions

GETTING BEST TREATMENT

1 Shop around. The same way that you
take time to gure out where to buy goods like shoes, clothes and milk at a cheaper price, be conscious of price and quality when you look for health care. Get the best care at the best cost not the highest cost. Go with people of integrity and faith based organisations. Understand the primary and tertiary care concept, and dont overdo it by going to a specialist for small things. 90% of all illnesses can be taken care of by a general practitioner.

4 Remove the branding mindset. Stop

boasting about the big names that are treating you. A consultant has a premium. It is your right to demand choices in terms of the treatment you are receiving, and your consent is always required. Dont let the doctors make the decision for you. Doctors are required to tell you about your ailment and give you treatment choices. Appreciate that you are responsible for your own health, not your doctor. The fewer doctors you see, the healthier you are.

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unilaterally and claim the best interest of the patient. The result is that a provider can raise prices even twice a year without engaging the insurer. To arrest the abuse of medical insurance schemes, insurance companies have started hiring in-house doctors and nurses to vet bills from hospitals. But they still record big losses in medical insurance business. According to AKIs 2011 report, medical insurance companies made a consolidated loss of Sh500 million last year. UAPs medical portfolio had a loss ratio of 81%, which means that for every Sh100 they receive, Sh81 is paid out to providers. Premiums have doubled but it is still loss-making and it is not because medicine is expensive but because of these excesses

and malpractices, says Mr Obuya. Health insurance is making losses in the face of well controlled administration costs and management expenses. So it is not about how we are running the business. Apart from the high costs of medicare, insurance companies also attribute their losses to fraud, misuse and overuse, which account for 30% of the payments, according to MIPAK, and push the cost of insurance higher. As the cost of insurance increases, so does the cost of reinsurance, which is passed onto patients through higher premiums. Commissions paid to intermediaries have doubled from 10% in 2010 to 20% in 2011, a return that is considered extremely high by AKI given that medical insurance is loss making.
June Nairobi Business Monthly |