Operating a high-end diagnostic center in Lebanon may be  life saving, commendable and personally rewarding, but the financial returns are unlikely to match those from a plastic surgery outfit. 

Imbalances in the public and private sector reimbursement systems for diagnostic exams have distorted yields, conclude the partners of Doctors Center Radiology (DCR), a $10 million dollar facility established in 2000 in Beirut’s Hamra district.

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“Some months we are in the negative, and some months we are in the positive,” says Dr. Anis Nasser, the center’s co-chief radiologist and founding medical strategist. “We are overall positive [in the financial results] but not as greatly positive as everyone imagines, due to the policy of the Lebanese government and the insurance companies.”

He tells Executive that inflation, expanding overhead costs and capital expenditures have weighed down the center’s bottom line. Meanwhile, compensation rates from the National Social Security Fund (NSSF) and commercial insurers have remained the same over many years, or have even decreased.

The financial compensation of diagnostic centers is not necessarily correlated to the quality of their physicians and equipment, adds Dr. Sami Faddoul, medical partner with Dr. Nasser in the venture and an assistant professor of radiology at Columbia University in New York. 

“Unfortunately, in Lebanon nothing is standardized. You could have a [magnetic resonance imaging] machine that costs $50,000 and a machine like ours that costs $1.5 million. You can imagine the difference. But both [scans] are called an MRI and both are paid at the same rate by insurance companies and the NSSF; the reimbursement is the same.” 

Nasser and Faddoul say that Lebanon is home to “hundreds” of diagnostic centers. 

By their self-assessment, Doctors Center Radiology is the busiest center in the country and one of very few that have a full range of advanced radiology machines. They did not disclose to Executive the average daily number of patients at the facility, which employs four specialists and 45 staff members.

Healthy competition

The business model of Doctors Center Radiology is built on two pillars: quality diagnostic machinery and physicians, and strong customer service. 

DCR also benefits from a favorable address. Since its inception, the center banked on locating its premises near to the American University of Beirut Medical Center (AUBMC). Nasser says he is well known to the doctors at AUBMC and has drawn referrals from them since he opened the center. 

The relationship between the center and AUBMC is more one of collaboration than competition, Faddoul adds. Patients who would have to wait days for a radiology exam at AUBMC can expect a faster treatment at DCR because its customer service is more flexible than the bureaucracy of the quasi-public university hospital.  

Competition for business among radiology centers nonetheless appears intense and the impending creation of a rival center in a new building next door on Bliss Street is not a cherished arrival, judging from subdued comments by the two doctors. 

Still, the doctors describe the interplay of clustering and constructive competition among diagnostic centers  as beneficial overall because it pushes the providers to continually improve. 

When the center invests into a new state-of-the-art MRI or positron emission tomography (PET) scanner, other centers and hospitals are provoked to upgrade to the same level, according to examples cited by Nasser.   

Top dollar diagnosis…

Radiology is a “cornerstone in making an early and proper diagnosis”, says Faddoul. The discipline  employs traditional X-rays, positron emission tomography (PET), and everything in between. Faddoul adds that because radiology is dependent on technology, it is the fastest growing specialty. “Every year there is a new modality and a new way of medical diagnosis.” 

Because of this, it is imperative for radiologists to install the highest quality — and therefore highest cost — machinery to achieve the best results. 

The machines of the highest diagnostic capabilities, however, are sometimes operated at a revenue loss because the center is reimbursed at sub-par rates from commercial insurers or the NSSF, both of which are indifferent to the higher complexity of the advanced scans. 

DCR’s investments in the top machines pay off, though, because they attract patients to the center and increase the facility’s market share. The resultant higher usage rate of the entire set of radiology equipment translates into higher profitability on the balance sheet.

“We believe that quality pays, and we are not stupid,” says Faddoul. “We did not buy a $2.5 million MRI machine just because we have a lot of money and want to spend it on machines. Our philosophy is quality; so we invested in quality and are cashing in on quality. “ 

Patients are the main beneficiaries where competition on quality induces operators to invest in having top machines and top physicians. 

…pays its way

The biggest remaining problem then, is the inadequacy of fees that the NSSF and insurers are willing to pay. In being agnostic on the quality of the diagnosis, commercial insurers push their policy holders to rely on cheap diagnostic centers, both Nasser and Faddoul lament.   

According to Faddoul, the insurers are ill-advised and they risk losing large amounts by the way in which they direct their policy holders to radiology centers. “The majority of insurers push their policy holders to go to the cheapest places, and cheapest means bad quality,” he says. “If you give patients a bad diagnosis, it means bad surgery, and whatever you save on the MRI makes you end up paying big money in extra hospital costs.”

He recommends that insurers commission studies comparing hospital admission rates from cheap, mid-range, and high-end radiology centers. Variances in admission rates and hospitalization costs will highlight the long term cost-savings inherent to higher-quality radiology.

Diagnostic centers can compensate for price pressures from low reimbursement rates only to a point without jeopardizing the quality of their exams, says Nasser. He adds that investments in latest generation machines can be delayed if amortization of the equipment takes extra years.

The NSSF recently announced upward compensation adjustments for radiology scans, but raising the payment for an ultrasound scan of the kidneys from $40 to $48 was not enough to compensate the cost increases that operators have faced in the past few years, Nasser notes. 

This all notwithstanding, the business skill set of operating a diagnostic facility is in substantial demand and Nasser sees regional and domestic growth potentials for Lebanese radiology centers, despite the issues they face. He admonishes, “Things are not as bad as they may appear but what is bad is that there is no control over quality, no control over qualification of doctors and no control over prices.”

The venture was conceived to solve a problem of medical claims management for several Lebanese insurers in 1991, right after the country’s civil war ended. Today, GlobeMed Group has 800 employees, is active in 12 markets and is hungry for more. 

The Beirut-based third-party administrator (TPA), known until last year as MedNet Liban in its home market, claims to be the region’s leading company in its field by a size margin of at least 30 or 40 percent over its nearest competitor. 

“The GlobeMed Group manages around 2.2 million lives and we have grown 10 times in six years. Lebanon, Syria and Saudi Arabia are the three biggest markets of the group,” says Walid Hallassou, general manager of GlobeMed Lebanon. 

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The TPA business model is a cross between healthcare and insurance. When Hallassou talks about “managing lives”, he refers to the insured who access medical services via a membership card. While it is not an insurance company, GlobeMed facilitates medical payments and patient benefits for these cardholders on behalf of its clients, which include private sector insurers, public sector entities and mutual associations or similar organizations that provide healthcare coverage.

An essential challenge for TPAs is to maximize cost efficiency of healthcare services for the insurers and the insured in a holistic way; that is, by doing more than just being an outsourcing and cost containment center for insurance companies that already employ bargaining power to control prices of medical services. 

What’s in a name?

According to numbers that GlobeMed disclosed to Executive, the group provides its services to more than 80 client organizations and generated a turnover of $70-plus million in 2012. It manages more than $500 million in health insurance premiums across its operations, which include 10 countries in the Middle East and North Africa, plus Nigeria and the Ivory Coast. 

GlobeMed rebranded itself on two levels in 2012. On the group level, it adopted a new logo and corporate motto to express the “spirit of the organization”, which Hallassou describes as oriented toward transparency, innovation, determination, openness and leadership in healthcare management services across the MENA region. 

In parallel, the Lebanese brand was aligned to the group identity by changing the local name to GlobeMed Lebanon from MedNet Liban.

Underlying the rebranding was a corporate ambition to be understood as more than just paper pushers, Hallassou says. “We want to be perceived as an organization that is not only managing claims on behalf of insurance companies, but we want to make sure that the whole healthcare industry in the region becomes better in terms of standards and the balance between the cost of healthcare and the quality of healthcare.”

While the idea to go regional was born with the establishment of GlobeMed Ltd in 2001, Lebanon remained the group’s largest market for several more years and accounted for at least three quarters of the firm’s 200,000 cardholders in 2006. 

Then, however, the invigoration of the Saudi market under a new insurance law in the middle of the past decade meant that some 30 new insurance providers were legally incorporated in the country. Many of the new insurers look to outsource their healthcare management to a TPA, and GlobeMed found a fertile field to the point that Saudi Arabia today is its largest market.    

Home is where the hospital is

Another motor of the company’s business was the propensity of the Lebanese diaspora to seek medical treatment at home. GlobeMed saw the demand for cross-border services early on, Hallassou says, and equipped its products with the functionality of allowing cardholders to come back to Lebanon and have medical procedures done here within their regular medical insurance coverage, or at least benefit from not having to pay extra costs out-of-pocket.

According to Hallassou, GlobeMed’s cross-border capability also made the TPA attractive to regional insurance companies due to demand from Gulf-based employers to have region-wide medical coverage for their employees. “We therefore wanted to create this ‘borderless’ TPA to ensure that all countries from Morocco to Oman are covered by a service that is recognized everywhere,” he says. Hallassou cites Kuwait-based Gulf Insurance Co and Lebanon-headquartered Arabia and MetLife Alico, a unit of New York-based MetLife, as examples for multi-country insurance providers in MENA that use GlobeMed. On the other hand, insurers with large medical portfolios, such as Tawuniya, Bupa and MedGulf in Saudi Arabia, are not on the GlobeMed client roster. 

Valuable relations

The third important component of GlobeMed’s success is its ability and preparedness to contract with state-owned provider organizations and insurance companies. This business model also sprang from the company’s dealings in Lebanon, where it has had to work with the mess that is the national healthcare system. 

Having to manage under overlapping competencies, competing and inconsistent admission requirements, and fill holes in the service capabilities of private insurers and public providers alike, meant that this TPA service had to evolve into a versatile and flexible tool. It equipped the company so that it can assume responsibilities for a wide range of insurance-typical aspects of medical coverage, or step back from things like underwriting and relinquish these aspects of provision to the private or public entity that contracts GlobeMed.

In utilizing its versatility in service of public sector entities, the company has recently signed an agreement with the Dubai Health Authority in the United Arab Emirates by which it assists public hospitals in billing insurance companies; it also is a bidder for a state-aligned TPA contract in Qatar under the Supreme Council of Health. 

But the most outstanding example of a successful implementation of a public sector partnership is found in Syria. GlobeMed has scored contracts with government entities that continue to perform to date even as the country is mired in crisis.  

“We are still getting new clients and our claims are still coming in and we are paying the providers. Things are still working on a minimum basic level of normalcy,” Hallassou says of the Syrian operations. He explains this continuity as a result of the Damascus regime’s keenness to provide healthcare to its public sector employees in order to retain their loyalty.  

Part of the group’s versatility is that GlobeMed offers its clients the settlement of claims in conjunction with specialized auxiliary services that range from cross-border settlement to calculating the premiums by its insurance mathematicians, or actuaries.  

Optimistic about growth

In managing its expansion, the company used to move in what appeared to be mix of adapting to the needs of its shareholders and the strategy to cover the MENA region. In the initial thrust into the Saudi market and also in the out-of-area migration into Ivory Coast, GlobeMed followed its stakeholder Pharaon Group, the Lebanese conglomerate headed by Michel Pharaon that owns Libano-Suisse Insurance, along with stakes in Saudi and Ivorian insurers.   

According to Hallassou, the current expansion priority is for weaving the still missing strands into the MENA blanket, where Iraq and Oman are the last two important markets in the Middle East and Morocco, Algeria, Tunisia and Libya are on the markets list for North Africa. 

A second perspective for consideration is opportunistic expansion, into markets where senior management sees an opportunity and may pursue it on the basis of a feasibility study and an expected minimum addressable number of insured that GlobeMed could aim to manage in a country. These windows and areas of opportunity are far flung, with the company casting its eyes on central Europe and southeast Asia, but as yet are not developed into a specific expansion plan. 

“We are also contemplating going to Turkey. All of these are not finalized. We have interlocutors with whom we are trying to understand the markets and determine if we will go there,” Hallassou says. 

While the locations of GlobeMed’s future launches may not be certain yet, the ambitions for the number of managed lives are certain, Hallassou confides. “We should be able to double another time in the next couple of years. We should be around 4 to 4.5 million in the next two years.”

Previous expansion moves were implemented almost entirely by starting a new unit from scratch and acquiring the necessary licenses, but the company is also ready to move into markets by merger or acquisition. Wherever the company takes its expansion, it will reflect positively on its Lebanon operations. Here, GlobeMed has its most sophisticated operation, a strong human capital source, training resources and a market for implementing new products. 

Headhunting headache

Lebanese talents with a knack for insurance and knowledge of healthcare, then, should have no worries about finding employment. Depending on the locations where GlobeMed will go, it will increase its headcount from the current 800 to 1,000 or 1,200 in the next few years, Hallassou estimates. Staffing this expansion will be the biggest mission for the company; in Hallassou’s perception, potential employees find working in insurance more enticing than third-party administration. 

This is a bit of a menace, then, given that most insurance managers say they cannot find enough talent as graduates are chasing jobs of greater allure, such as banking and finance careers. GlobeMed, which has already some experience with providing qualification through a training program in medical coding, has plans for an “academy” to offer exploratory experiences with the company and qualification options toward a future career in TPA for the graduates it seeks. Finding human capital is the company’s paramount challenge and a supreme headache, Hallassou admits. “IT [information technology] is not, financial is not; the only challenge is human resources.”