Hospitality & TourismQ&A

7 Management’s journey to success

by Nabila Rahhal
written by Nabila Rahhal

The road to success is not easy. It is even harder when working in the nightlife industry in a country like Lebanon, where the bad years of political instability—which typically lead to economic downturn and low purchasing power—far outweigh the good years of thriving tourism. But this is exactly the road that Rabih Fakhreddine chose, opening his first bar, Faces, in Hamra in 2011, a year before war began in neighboring Syria.

Although the road remains difficult, Fakhreddine today, at the age of 31, has found success in the food and beverage (F&B) business, as the CEO of hospitality management company 7 Management, which he founded in 2014. 7 Management, which employs 270 people and has an annual turnover of $13 million, owns and operates three nightlife venues—Antika Bar, Seven Sisters, and February 30—and one café, Kahwet Beirut. The company has already expanded into Dubai with Seven Sisters, and has its eyes on further regional and international growth, not to mention introducing new concepts to the local market.

The early days

Fakhreddine says he was always passionate about the hospitality and food industry, having experimented with cooking since he was five years old. After high school, Fakhreddine even thought of majoring in hospitality management, but at that time no universities in Lebanon offered the program, so he chose to study business marketing at the American University of Beirut (AUB). Fakhreddine’s interest in hospitality continued; during his university days, he was active in student societies and clubs, organizing events such as Ramadan suhoors or World Cup and European Championship viewings.

Upon his graduation in 2006, Fakhreddine worked for a few months at advertising agency Leo Burnett Dubai until the July War stirred his nationalistic sentiments, and he decided to come back to work and invest in his country. He started at British American Tobacco (BAT), handling the HORECA accounts for Lebanon and the Levant, before getting promoted to marketing manager of Lebanon. “Through my position with BAT, I familiarized myself more with the F&B industry and developed a strong network of hospitality stakeholders, since I had a big budget to spend on all the nightclubs and bars in Lebanon and the Levant,” Fakhreddine says, adding that in parallel to his job with BAT he was also a silent investor in several bars in Lebanon. Both his position with BAT and his silent investments led him to realize that he had solid potential to operate his own nightlife outlets.

In late 2010, Fakhreddine and two of his BAT colleagues created Concepts in Motion, a hospitality management company, and, in early 2011, launched Faces in Hamra, which was then at its nightlife peak. This was followed almost immediately with the launch of two more Hamra venues: Big Shot, a bar known for its R&B music, and then February 30, in 2012. In 2013, the group ventured into Uruguay Street with the opening of Checkpoint Charlie, while further investing in Hamra with the opening of Walkman.

[/media-credit] Kahwet Beirut in Downtown Waterfront

Lucky number 7

In 2014, Fakhreddine left BAT to focus on his hospitality and nightlife ventures. Along with three partners, he developed 7 Management and merged all of Concepts in Motion’s venues into the new venture (with the exception of Big Shot, which had closed before the merger). Other than February 30—which was reopened early this year in Downtown’s waterfront area—all of Concept in Motion’s venues have since shut down thanks to the decrease in activity in both Hamra and Uruguay Streeet, which is due largely to the transient nature of Lebanon’s nightlife hotspots.

There are four shareholders behind 7 Management: General Manager Hani Hachem, and managing partners Karim Mohamadieh and Ralph Boustany, in addition to Fakhreddine as CEO and majority shareholder, with 52 percent of the company shares. Speaking of his partners, Fakhreddine says: “We are one team, with each bringing his own unique talents to reach this great result.”

7 Management is a holding company and owns majority shares in—and all of the trademarks of—the venues it creates and manages. It has managerial contracts with the venues, which exist as separate legal entities, and takes a standard 7 percent management fee from each one.

In addition to 7 Management, each venue has some silent investors, with a total of 20 partners across the group. “We decided to have this structure where we have many shareholders per venue because we wanted to have a higher outreach with more PR coming from each partner—so we have five to ten partners with small shares for each outlet,” Fakhreddine explains. “We choose them for their strong PR and not for their financial capabilities, because in the end we can take a loan from the bank if we are only after the money.”

[/media-credit] Sayf Feb30, 7 Management’s pop-up venue

Investing in success

Since its development, 7 Management has been expanding aggressively, with a new venue every year. In 2015, 7 Management’s first outlet, Seven Sisters, was launched, followed by Antika Bar in Blueberry Square Dbayeh in 2016. In 2017, the company opened a café concept called Kahwet Beirut and a summer only venue called Sayf Feb30, in Mar Mikhael’s old train station. In 2018, they relaunched February 30 in its new Downtown location, and still in the pipelines is the opening of a snack concept called El-Kbeer, set for late September, as well as an oriental-nightlife-with-a-twist concept in collaboration with Grand Factory Group set to open at the end of the year. In 2019, 7 Management plans to open a Japanese restaurant in Lebanon.

Investment in these venues comes from silent partners and 7 Management, which secures funds mainly from the central bank’s subsidized loans and Kafalat. “It is better to take loans because of the interest rate and the grace period you get the first year through Kafalat,” Fakhreddine says.

Average investment for 7 Management’s outlets in Lebanon ranges from $500,000 to $1 million. Fakhreddine says they have learned to think of their venues as pop-ups, minimizing their initial investment and then adding to it the following year in order to guarantee a fast return on investment and minimize risk. “That’s what we did in Sayf Feb30: We put in a $400,000 investment, and we made $600,000 the first season. We also moved Antika Bar from Dbayeh to the waterfront this summer with a minimal investment. You have to think smart in a country like Lebanon,” he says.

Nightlife versus food

So far, the majority of 7 Management’s concepts have been in nightlife, which Fakhreddine says served them better at first. “Since we were still at the beginning of our careers, we wanted something that would generate money fast. F&B is a long-term and consistent investment that generates money but is definitely not like nightlife in terms of the speed of making money. We were at a time in our business where we wanted to make profits and be able to reinvest in the market and in new concepts and brands,” he explains.

Another reason the group chose to invest in nightlife is that, back then, it was the booming business in Lebanon, attracting both foreigners and locals. “In my opinion, the key advantage that Lebanon has when it comes to nightlife is that you can’t imitate the vibe, the people, or the positive energy that exists only in Lebanon, no matter how big your investment is or how lovely your design is. It’s the people that make the difference at the end,” Fakhreddine says.

But he acknowledges that nightlife is not what it used to be in Lebanon, due to the lack of tourists and the dwindling purchasing power of locals. He also says that while nightlife does generate more money than F&B, its lifespan is short, while a successful F&B concept could last for many years, thereby generating a steady profit. As such, 7 Management took the strategic decision to expand their business into F&B with the opening of Kahwet Beirut, and with the future opening of El-Kbeer and the Japanese restaurant. With only Kahwet Beirut operational to date, Fakhreddine says F&B constitutes 20 percent of their total revenues, but he hopes to reach a 50-50 split in a few years.

Another reason that 7 Management is diversifying into F&B is that the move will give them access to a much larger regional franchise market than nightlife does. “For franchising opportunities, nightlife is restricted to Dubai and Egypt in the region, because of the restriction on alcohol in most of the other countries. So, from a strategic perspective, expanding in the region requires F&B concepts that could work in KSA or Kuwait,” Fakhreddine says.

[/media-credit] The new February 30 at the waterfront

Going beyond Lebanon

Lebanon being an unstable market, it is no wonder that most hospitality operators look outwards for diversification opportunities, and 7 Management is no exception. The company began by scoping out the market in Dubai through the Antika Night events they held frequently in various hotels in the city over a period of two years. This helped them to understand the market and gather a huge database of mainly Arab clientele, Fakhreddine says, which they utilized when launching Seven Sisters earlier this year in Dubai’s JW Marriott. In Dubai, 7 Management has developed a partnership with Bulldozer Group, a hospitality management company founded by Russians with an arm in Dubai, which owns and operates dining brands such as Novikov, Cipriani, Downtown Toko, and Sass’ Café. Together, the two companies will be launching Antika Bar Dubai in early 2019, having already launched Seven Sisters Dubai. This strategic partnership allows 7 Management to tap into international—mainly European—clientele, which is a demographic that may have been difficult to access otherwise.

Speaking of operating in Dubai, Fakhreddine says that although their profit margin is higher there than in Lebanon, the cost of operation is also a lot higher. “Our margins in Lebanon are much higher if we were under normal circumstances. We do make more money in Dubai, but we also spend more, as cost of alcohol is high and so is the salary of employees, rent, and taxes,” he says. “But Dubai is strategic in terms of the exposure you get, and in terms of diversification, because we know that Beirut is not a stable market.”

7 Management plans to take the Lebanese snack brand El-Kbeer not only to the region—starting with Saudi Arabia, a year after its launch in Beirut—but also internationally, to London and New York. Fakhreddine says it has the potential to do well in these further flung markets since Lebanese snack food is a growing trend.

Fakhreddine has achieved a lot in just seven years. Starting with one small bar in Hamra, the company he founded today runs four successful brands, one of which already has a regional presence. 7 Management does not plan to stop here, and with its major partners boasting an average age of 32, it seems we will be hearing about the company for some time to come. 

0 comments
0 FacebookTwitterPinterestEmail
HealthcareQ&ASpecial Report

Acting head of the ICC discusses the state of health insurance in Lebanon

by Thomas Schellen
written by Thomas Schellen

At the end of April, the imposition of rules on guaranteed renewability (GR) in health insurance was introduced to the public under ministerial decree 186, issued by the Ministry of Economy and Trade (MoET). Executive sat down with Nadine Habbal, who heads the MoET’s Insurance Control Commission (ICC), to explore the implications of GR for the insured and insurers of Lebanon.

E  What is your perception of the health insurance sector in Lebanon from a regulatory perspective and what is the rationale behind the decree that mandates insurance companies to adhere to guaranteed renewability, or GR, in underwriting health insurance contracts?

The decision behind the GR was to influence the appetite of the economic agents to take a decision on how to manage personal risk and be in a win-win situation. As long as there is an absence of compulsory universal health coverage, Lebanese individuals will always have to choose between medical insurance contracts underwritten by an authorized insurance company or expose themselves to financial losses from out-of-pocket expenditures in case their health deteriorates. Thus, it is up to the individual to take the decision whether to put money into a savings account in a bank to finance medical expenditure or to opt for risk management and buy an insurance contract.

E  What does GR mean for the Lebanese citizen?

As an insured person, you will be insured for your lifetime if you don’t make fraudulent claims or [provide] false information during the underwriting stage [of your health insurance contract]. It also means that the insurance company cannot amend the conditions of the policy after the policy agreement is in place following the underwriting stage, even if the health condition of the individual deteriorates. 

E  Is it correct that the underwriting stage, or period during which the insurance company can monitor the agreement, is fixed at six months?

In the underwriting stage it is the right of the insurance company to do the appropriate [medical] examinations and undertake procedures to make sure that the applicant provides true information. The insurance company has the right to set the conditions under which the client is accepted and provided with a policy. We also allowed the company to take six months as [an] observation period, because [insurers] told me that it is so expensive to do a whole battery of tests and that there is a possibility of facing fraudulent information. We wanted to provide the six-month observation period to make sure that the agreement would not be abused by either side, insurers or insured. We are controlling this process.

E  When was the decision made? Did it come suddenly?

The GR decision is not a new decision. It is something that we have been telling the sector for a long time: apply basic insurance core principles. We had also been telling the sector that the current practice in the [health insurance] market is not in line with insurance core principles. This is the first rationale behind the GR decree. The second rationale is to motivate people to practice better risk management. If we want to speak economics, we are talking [mathematician] John Nash versus [economic philosopher] Adam Smith. Adam Smith, in the absence of GR, [stands for] individual optimization. What you want to achieve from a regulatory and an economic perspective, is social optimization, which means that—in applying the theory of John Nash—everybody would be in a win-win situation. 

E  Is there a maximum age by which people must enroll?

Why would there be a maximum enrollment age? If at time of enrollment you are in a clean bill of health and do not have chronic diseases, you are fine. If you are in a group policy, which is the case of many Lebanese and foreigners living in Lebanon, and reach the retirement age, the insurance company is obliged to offer you an individual contract with the prevailing conditions for the segment that you belong to. It is not fair to lose your medical insurance when you retire or if you lose your employment for one reason or another. The insurer is in this case obliged to offer an individual contract with the conditions that apply to your age segment, but taking into consideration that there is no new underwriting stage because you are a policyholder. This is fair to the consumer and in line with insurance core principles. After all, we want to apply fair rules and the insurance core principles, not impose something that is harmful [to either side], taking into account our economic situation.

E  How is the state of the implementation process for companies in the sector to comply with the GR degree and present contract wordings to the ICC?

We gave the companies 20 days to send their policy wordings to us and we have received most of the policies. Some companies have pre-approval and can sell these policies that they have submitted. Others are still in the submission process. Companies who fail to comply with the [GR decree] will be prohibited from selling health insurance.

E  Is there an expectation that some companies will be prohibited from selling medical insurance in future?

We are not just checking if the companies comply with GR in one paragraph of their policy contract because we know that it is possible to have another sentence somewhere in a policy that will change the whole meaning of the contract. We want the companies to send us their policies and we do a comprehensive review. Some companies had to change their policies and did so, and some are still in the process. Those who fail to comply will not be allowed to sell.

E  Will the ICC at some point publish a list or white book of companies that are in compliance?

We can achieve transparency, [but] not through a public note because our current laws and regulations do not allow us to issue a public note of this type. However, in our annual report, which is accessible on our ICC website, you can see how the medical portfolios of insurance companies are developing and how the portfolio of one company or another changes.

E  If we cannot have a white book saying which companyies are good and performing according to core insurance principles, how can we evaluate companies in a sector where migrations of large medical portfolios are occurring for reasons such as corporate takeover or intense price competition to attract large group portfolios?

This is an interesting question that posits the challenge of how we can inform the public. This question is answered through our unit called ICC Care. Upon the launch of Circular 186, a new infographic has been created. It is “Amin min al-ta’mi”—which means security of the insured, or trustworthy insurance.

E  You are telling us that there will be a stronger public interface and public awareness campaign. How is this campaign designed and how long will it be running?

It will resume shortly and focus on a number of awareness pieces to introduce ICC Care and its role as consumer interlocutor. ICC Care receives the calls from the policy holders, their concerns and complaints, and exists to address issues that arise between policyholders and insurers. The main idea [of the awareness campaign] will be to convey what the policy holder will have to look for in dealing with insurance companies, and how people should read the sales brochures and policy contracts [of the insurers]. As to your question of the length of the media campaign, the campaign will be long term. We will be very aggressive in [conventional and social] media in presenting our infographics and conveying the message to the people that there is a regulator who will not take sides with any party, but is there in case of any concerns and to apply the conditions of the policy.

E  Insurance is all about management of risk, but risk transfers can be a thorny issue re-allocating risk from one party to another party. Under the stipulation of GR, is there risk transfer from the Ministry of Public Health (MoPH) to the insurance sector?

From a technical perspective, the ICC and the MoPH complement each other in medical insurance. The MoPH’s role is to establish protocols for diagnosis and treatment, and to manage chronic diseases. If we want to have a national insurance card, like in advanced economies, the MoPH should as soon as possible establish a protocol to determine for every disease whether I should have an x-ray, have an MRI, take a drug, or undergo surgery. If surgery is performed without a medical need for this procedure, this is abuse on both sides: the medical side and the insurance sector side. In Lebanon, one might undergo surgery where a simple medicine could be effective for treatment. The MoPH should establish protocols, and we should follow [them]. For each sickness there should be a protocol and there should be a network between insurers and the MoPH and the people.

E  This sounds like you are advocating for more collaboration between public and private actors in the field of health. Does this mean that you advocate also moving toward more centralization, in the sense of national compulsory health insurance for all Lebanese?

It is very important that we think of universal health coverage. Then we will all be in a win-win situation through a cooperation between public and private. A national insurance card cannot be implemented without cooperation between the public and the private sector. There should be many layers. There should be a layer [in universal coverage] that is financed by the public sector but as you know, the public sector cannot finance $1 billion [spent out of pocket annually by the people]. We need to have more people in the system and we need to have economies of scale and manage the risk of a big number [of policy holders]; this is insurance. I need to get everybody into the system, and in this way I can secure good medical benefits for [older] people [via contributions from] young people and where I have collaboration of public and private sector. This is my vision for the health insurance, [following what exists in many advanced countries]. We did a lot of research and meetings [with international experts] and concluded that this is very important for our people and our economy. Better health, better economy.

E  In your perception, how could our economy benefit from a universal healthcare system? 

In medical insurance, we had a total premiums portfolio in 2017 of $470 million. If we compare that to out of pocket, there was almost $700 or $750 million. People are telling us that they are financing their medical expenditure on an out-of-pocket basis. [For me, the answer is to] attract these people and have them [integrated] into the system. The entire insurance sector represents 3 percent of GDP [as insurance penetration] and this compares to 6-7 percent in OECD countries. How can we get there? Very simple. We need to create compulsory insurance and pension insurance; if we take the pension product under consideration, we can accumulate $10 billion in savings, with $1 billion per year with accumulated assets over 20 years. We can all [benefit] if we design the right products, and what we need are all basic insurance products, medical and pension.

But despite numerous proposals for the implementation of pensions, we are still operating the NSSF with a scheme of end-of-service indemnities, not pensions.

It is one of our projects [to introduce pensions instead of indemnities as well as compulsory health insurance] and we already have the analyses. We are waiting for the right time. These projects will be very good for the insurance sector, for the economy, and for the people. Everybody should be in a win-win situation. Social optimization for everybody is the spirit of our work.

E  In this context of social optimization, how do you plan to balance risk between the two existing subsectors of insurance, the mutual schemes and the commercial insurance schemes? How to supervise the compliance of mutual schemes with core insurance principles? There has been fear that mutual schemes, which offer lower benefits, have an unfair competitive advantage over commercial insurers and that this advantage might increase since mutual schemes are not supervised by the ICC and therefore are not obliged to apply the new GR.

Honestly, I do not see a correlation. It was a statement of many insurers that there would be an unfair competitive advantage for mutual schemes. From a regulatory perspective and from a policy holder perspective, I see no correlation. The activity of the cooperative funds is strictly regulated by Decree 35 from 1977: The cooperative fund can offer benefits of insurance only to its own members and cannot approach the public. Also, they need to offer the same benefits [to all members]; they cannot offer class A, B, or C benefits. This is not insurance. Because they don’t offer products and don’t approach the public, they are not under our supervision. If there is non-compliant behavior [by a mutual scheme], it should be monitored through the appropriate legal channels. My advice to insurers is that mutual schemes are not competitors.

E  As a last question relating to potential risk transfer problems, could an insurance contract provided with GR from an authorized insurer pose such problems, given that it establishes a certain range of premiums for certain ages and risk groups and so forth? Would this not reward risky behavior in insurance customers, under a form of moral hazard where people that conform to high standards in healthy behavior will get the same coverage for the same price as people who engage in high-risk behaviors? How do you want to counteract this moral hazard?

With this question, we move into the area of advanced analytics and predictive modeling. This is part of our agenda for the coming years. Let me share our general perspective on this agenda with you. Our aim is to enhance the insurance sector and for it to be a platform for regional and foreign investments. In order to do that, we need to create the right infrastructure. How can we establish this infrastructure? The first chapter we are starting with is risk-based capital, [which is the appropriate method] to measure and quantify the risk. Then, the second chapter is [imposition of better] governance. The third chapter is digitization and the fourth [in building this infrastructure] is what? It is your predictive modeling and advanced analytics.

From the behavior of consumers [we can learn with these tools of advanced analysis and reach] predictive analytics. For example, in the area of car insurance, what will be the pricing for insurance of a Toyota or a Kia? This is now our new way to monitor pricing which is fair to the consumer and the insurance company at the same time. And to understand the motor and the medical books: analyze detailed consumer behavior through big data.

E  Does this mean that you want to reimagine or restructure the whole soft infrastructure of insurance conduct in Lebanon?

Exactly.

E  Will actuaries and managers of the existing insurance system be able to cope with this type of revolution in insurance?

I can already sense that there is now more involvement by actuaries in insurance planning and I also felt that there has been more creativity and major changes in the thought processes of some major insurers. Some insurers have started to use technology and adhere to the right practices [to deregulate the markets] and have insurers achieve reasonable profits. But some other insurance companies need to work hard on this so that they can get the right experts on board. We will share with the companies in the insurance sector our initial analyses and how we see their business moving forward and what they need to change to achieve first to protect the interests of their policyholders and, [second], to achieve reasonable profits.

E You have been quoted as giving optimistic estimates on the growth of the insurance sector in the coming years. Medical insurance is at the top of insurance lines in terms of market share today, at about 34 percent, and has been increasing its market share in recent years. In this context of an overall expectation for expansion of insurance in Lebanon, do you see the medical insurance as stable, regressive, or as slated to go up as a share of the total insurance premiums?

In 2019, this share should grow, because we are building more confidence in the sector. We are telling the people who are financing their medical expenditure from their out-of-pocket money: ‘Come to the insurance sector for better management of your risk.’ We are expecting better growth [in medical insurance] and are expecting more products to come to the market, perhaps a compulsory product for medical insurance and pension plans. This is the way we can grow the sector, through creative products and as well through digitization. Companies [will have a greater] ability to invest in their IT as they [will] have the infrastructure prepared by the ICC, and thus more power and consolidation will be taking place in the coming period. 

0 comments
0 FacebookTwitterPinterestEmail
HealthcareSpecial ReportStartups

Health entrepreneurship in Lebanon

by Charlie Darwich-Houssami, Samir Sleem & Laya Jawad
written by Charlie Darwich-Houssami, Samir Sleem & Laya Jawad

When it comes to health, Lebanon is one of the leading countries in the Arab world in terms of the quality of healthcare provided and in testing new medical technologies. The country now has the opportunity to lead the way in entrepreneurship via healthcare startups. Executive spoke with entrepreneurs in this field to see what challenges they faced and what obstacles still need to be overcome to find success as a healthcare startup.

According to a 2016 Wamda Capital’s report on health startups, MENA is growing its first generation of health entrepreneurs, which means that the region is witnessing the first business and economic wave of an industry that is likely to expand and unveil a vast range of entrepreneurial opportunities.

Meanwhile, worldwide information technology solutions for healthcare are entering their third wave. As consulting firm McKinsey & Company pointed out in a 2014 paper on the digital future of healthcare, the first two waves of IT brought computation of data and statistics to healthcare institutions in the 1950s and helped with integrating processes among healthcare organizations in the 1970s. Compared with these advancements, the third wave of digitization is seen as having incomparably greater implications, from robotic surgery and remote diagnosis to mobile healthcare via digital apps.

Given the huge social and economic implications of the full digitization of healthcare and wellness, any entrepreneurial ecosystem should be priming itself to nurture startups related to healthcare. This applies in Lebanon as much as anywhere, but local healthcare startups who spoke to Executive report experiencing the same frustrations felt by other startups in the Lebanese ecosystem, such as the difficulty of attracting funding and the lack of local talent.   

Among local startups, diabetes digital monitor Weglo is still in its first development stage. Spike, a software application that helps and guides diabetes patients with their everyday treatments, and TrakMd, an online platform that helps patients find, book, and review doctors around Lebanon, have already progressed beyond the launch phase and are currently operating in a full commercial form.

While the entrepreneurs that spoke to Executive cite similar difficulties to those encountered by emerging healthcare startups worldwide, they also raised issues unique to the Lebanese market, and opined that the economic situation in Lebanon negatively affects startups due to the dearth of appropriate resources and professionals within the field.

barriers to the big-time

Lack of public reach—becoming recognized and showcasing services to the general public—can be a challenging initial hurdle for startups to conquer. Typically, online outreach has proven to be the most effective method for startup brand advertising. Search Engine Optimization (SEO)—the process of maximizing visitors to a website by ensuring it appears high in the list of search engine results—has reportedly been very effective for some startups, such as Spike, which is now in the process of planning a global app launch. Although SEO has proven effective at increasing a brand’s exposure, others in Lebanon still struggle to make themselves known, which in the long run could affect the profitability and net worth of the organization.

Healthcare startups in Lebanon report facing several obstacles in their early stage development, ranging from the scarcity and high cost of raw materials, and the lack of talent in the Lebanese market, to issues with funding. Given that the healthcare industry requires in-depth research by professionals in an area where the cost of mistakes is high, finding the appropriate staff and tools can be a very difficult challenge. According to Spike founder Ziad Alame, the lack of motivation in the workforce is holding back the healthcare startup industry in Lebanon. “There’s a mentality in Lebanon where people don’t really want to work, they just want to have a job where they go sit behind the desk and wait for the day to end,” Alame says. “[Employees] are selling their time without putting in the effort, which is one of the reasons why we are not seeing startups coming out of Lebanon that are really good.”

Another major issue is that of funding. While this barrier is faced by startups in all sectors, healthcare startups require relatively large amounts of funding in order to succeed. All the entrepreneurs interviewed by Executive agreed that obtaining funds in Lebanon is one of the most difficult tasks, due mainly to the low risk mentality of investors.

Spike reports obtaining an estimated $150,000 from different venture capital (VC) funds such as ZOUK, Kafalat, SeatBoost, and MIT, while Weglo and TrakMD say that the VC road was more difficult for them and instead they had to self-fund their ventures. “I started self-funding, first using my money to pay for people and acquiring parts for prototyping,” says Abed  el-Rahman el-Kaderi, co-founder of Weglo. Both Welgo and TrakMD say that the lack of local CV funding resulted in delays in developing their concepts and presenting their services.

In their 2016 report, Wamda Capital notes that health startups in MENA region often rely on more informal sources of financing—personal funds, family money, friends’ money, and grants—over any other funding sources, especially for early-stage capital.

After clearing development and funding hurdles, healthcare startups still face challenges related to their legal status within the wider healthcare sector, its potential client pool, and ensuring user privacy. “Legal credibility is a big challenge for startups since formal institutions are set within the traditional healthcare infrastructure,” according to Kevin Shoucair, business support manager at local accelerator Speed. Having a large portion of the population in poverty also makes it more difficult for startups to target clients with the means to use their products and realize their full potential. “Health startups also have a great cost coming from establishing security systems, which will ensure the user’s privacy and access,” Shoucair adds.

Local entrepreneurs also cite positive aspects of the current healthcare startup ecosystem, including low competition and non-saturation of the market. According to Alameh and Kaderi, since the healthcare startup market in Lebanon is still in its early stages, this makes it easier for new companies to break out and become noticed. “The only advantage we have in Lebanon is that it is easier for us to get recognized in the sector, as there are not a lot of competitors,” Kaderi argues.

While the future is unpredictable in a country as volatile as Lebanon, each of the healthcare startups Executive interviewed agreed that much depends on the approach adopted by the startup. Funding and marketing are not enough to guarantee the success of a healthcare startup: Ethics also play a major role. In this regard, mistakes cannot be made, as their effects will impact directly on the wellbeing of consumers. As a result, the research done into emerging healthcare startups needs to be extremely accurate and undertaken by experts in the field to avoid harmful consequences for the health of citizens.

To better understand how investors and funds make their decisions, Executive also spoke with funds and accelerators that previously invested in the healthcare ecosystem.

Helping hand

There is clear growth in the Lebanese startup market, with the sector thriving ever since Banque Du Liban launched Circular 331 in 2014, which provides support for emerging startups, private equity firms, and accelerators. To further expand the viability of the startup ecosystem, the Lebanese Venture Capital and Private Equity Association (LVCPEA) was launched at the start of 2018 with around $360 million in funding to dole out. Including major players like Berytech, Leap Ventures, and Middle East Venture Partners (MEVP), the core mission of the association is to help investors effectively engage in the creation of information and communication technology in Lebanon.

Based on the portfolio descriptions of Lebanese VC firms, on average, two health startups are invested in per fund, with most being software-based startups such as Spike, the application for diabetes assistance, and AlTibbi, a platform for healthcare-related knowledge. There is not a specific budget set for healthcare startups, which are sometimes included as a tech investment or software investment.

With most VCs prefering to invest in software-based startups, it is a real challenge for hardware-based startups to grow in Lebanon, especially if they require R&D investment. “There is a low to zero R&D environment, so there’s little homegrown innovation taking place which can be spun off into startups,” says Fadi Bizri, partner at B&Y venture partners, a VC fund for technology startups in the MENA region.

Given the great human capital residing in Lebanon, the potential for the healthcare sector is promising. According to research carried out by MEVP, an estimated $450 million per year is spent on general doctor consultations in the MENA region. Currently, the private healthcare market size in the GCC is around $62 billion, and is estimated to grow 8.7 percent per year to reach $94 billion in 2021, according to MENA Research Partners (MRP), a leading research company in the region. There are indeed, big investment opportunities in the entrepreneurial health sector, given the mentality shift from curative to preventive healthcare among an increasingly health conscious and tech savvy population.

“With current infrastructure adopting new innovative technological trends, healthcare startups will see greater adoption in Lebanon. [These technologies] will also be more accepted by the government, regulatory bodies, and eventually the country’s biggest hospitals,” says Walid Mansour, a managing partner at MEVP.

The challenges and drawbacks facing healthcare startups are severe, with the most common and recurrent challenge being funding, especially for non-software based startups that require heavy capital in order to build their prototypes. However, low competition works in the sector’s favor, allowing emerging startups to grow and be noticed in the Lebanese market. The future of the sector depends on how entrepreneurs, funds, the government, and the market act and react—in particular to address the challenges detailed above. In the meantime, Lebanon should support and embrace the development of a healthcare entrepreneurial ecosystem and work toward improving it for the sake of a healthy economy and a healthy populace.

0 comments
0 FacebookTwitterPinterestEmail
HealthcareSpecial ReportWellness

Wellness and health in Lebanon: current status and potential for growth

by Nabila Rahhal
written by Nabila Rahhal

Health and wellness have long been an integral part of Middle Eastern culture. The most common Arabic phrase used for greeting someone—keef el-sohat?—asks after a person’s health. Another common phrase used in Lebanon specifically is yatik el-afyeh (may God grant you wellness), used as a greeting but also for when someone is engaged in physical labor or has had a busy day.

While our language may emphasize the value we Lebanese place on health and wellness, our habits and activities have gradually shifted away over the years as a result of exposure to unhealthy trends in food and lifestyle. “The Lebanese basically have a very healthy diet, but it has been unfortunately transformed by imported American trends,” says Alice Edde, co-owner of Eddésands Hotel & Wellness Resort. “But the Lebanese are very beauty conscious, so anything that had to do with weight loss was always a big success. Although for us wellness is more than just weight loss, it is the trick to get people into it.”

The tendency towards unhealthy habits may be beginning to change, however, as part of a global movement toward encouraging a good quality of life. In Lebanon, interest in health and wellness practices is slowly increasing as more stakeholders realize the benefits of a healthy lifestyle—which can include activities such as yoga and meditation—in preventing illnesses and in achieving balance.

Wellness around the world

Wellness as a concept has existed since ancient times: the Indian Ayurveda system of medicine, based on the belief that good health depends on a delicate balance of mind, body, and spirit, has, for example, been around since 1500 BC. Worldwide, wellness as we now know it in the modern world began to gain ground on Western medicine  relatively recently, starting in the 1790s with the introduction of homeopathy by the German physician Christian Hahnemann.

It was not until the 1980s, however, that the wellness movement began to be taken more seriously in the medical, academic, and corporate worlds, with the introduction of more workplace wellness programs and with the boom of the fitness and spa industries, according to the Global Wellness Institute (GWI).

In 2015, wellness was a $3.7 trillion industry globally  according to the GWI, an admittedly partisan source,  and it is only growing further as more people become aware of the role that leading a healthy lifestyle plays in their general wellbeing and in the prevention of illnesses.

A healthy new Lebanon

Lebanon is just awakening to the wellness industry and while it still has a long way to go to reach global levels of economic output and prevalence, the seeds are surely being planted and the potential is there.

Maya Romani, assistant professor of clinical family medicine at the American University of Beirut Medical Center (AUBMC), says that when the American University of Beirut (AUB) first introduced its wellness program in 2006, “the idea of wellness was not very common among healthcare professionals in Lebanon, who mainly worked on treating diseases.”

Interest in wellness from the  AUB community and the public has been increasing, says Romani, noting that their first annual wellness fair in 2015 gathered only 200 attendees, while last year’s drew in 600.

In 2015, AUBMC established its Health and Wellness Center that includes integrative health services, the first of its kind in Lebanon and the Middle East. “There is a huge worldwide demand, with everyone talking about evidence-based complementary and alternative medicine. So we thought that AUB, being a leader in the fields of education and medicine in Lebanon, and taking in consideration the high demand for such non-conventional medical services, should have its own services that target those people that are seeking non-conventional medicine pathways, especially those [practices] that have a very strong evidence of success,” explains Romani.

Photo by: Greg Demarque/Executive

When Edde first arrived in Lebanon in 2003, she recalls that wellness was a brand new concept. Today, wellness has become more established, she says, although the focus is still mainly on its nutrition and diet aspects. “There is more of a desire among Lebanese to go into the global wellness approach: There is a lot more interest in yoga with yoga studios opening everywhere, you have a lot of ‘do it yourself’ healthy cooking classes or things to do with aromatherapy. So, there is definitely an interest, although so far they have their niche clientele,” explains Edde.

She has been organizing bi-annual wellness weeks since 2012, but says that Eddésands has found it easier to sell tailor-made packages or individual treatments for a short duration of time, as opposed to tickets to the wellness week in its entirety. “Wellness as a holistic package is still hard to sell because there is still a lack of awareness about it and because the term has been somehow misused in Lebanon. So when people call for our wellness services, they sometimes mean just a spa beauty treatment. When you explain that wellness is mind, body, and that our wellness week is a journey and a holistic experience where you eat well and participate in all physical activities with us and do the meditation, etc., it becomes more difficult to sell as a package,” Edde says.

 

Why invest in wellness?

A lot of the interest in wellness and health is caused by its direct relation to the prevention of illnesses and injury. Romani says that the main benefit of incorporating wellness into one’s life is its proven ability to decrease healthcare costs. She cites a 2010 Johnson and Johnson study that shows that for every $1 spent on the wellness of an employee, $5 are saved on the employee’s healthcare costs. “Most of the studies [on wellness] concentrate on the [reduction of] healthcare costs and there is good evidence that it works,” Romani says.  As such, the wellness center at AUBMC works with the employee unit and human resources at AUB to design obligatory wellness programs (such as anti-stress activities for high demands units, or how to properly carry heavy loads for housekeeping staff), which aim to target key reasons that employees might take sick leave from work.

Insurance companies have also realized that investing in wellness can reduce healthcare costs. Romani notes that some companies in Lebanon now cover acupuncture in certain cases. Meanwhile, Libano Suisse Insurance offers a wellness program with services that include wellness coach consultations, dietitian questionnaires, and physician consultations. The program also incentivizes clients to work on their health and wellness by offering them rewards such as discounts on its services and vouchers for healthy foods.

Christelle Bachi Gedeon, president of the Syndicate of Dietitians in Lebanon, says that the syndicate has been trying to work with the National Social Security Fund (NSSF) to promote healthy diets, by focusing on the reduced cost of healthcare to motivate the NSSF. “Countless studies have proven that a good diet can prevent diseases. The NSSF pays for people’s medications, so if they improve people’s wellness through a healthy diet, they will reduce the cost of medication on themselves,” Gedeon says.

Being healthy is also a means of increasing productivity in the workplace. “Stress is one of the biggest diseases of the century, so when we combat stress, we are actually preventing many of the illnesses that could develop from it,” Edde says. “Think about the productivity level increase that happens when you have such treatments: If you have one day a week for yourself, you can achieve more the rest of the week.”

 

Doctor’s orders

Despite the evidence that wellness has a direct effect in lowering the risk of injuries and illnesses, it is yet to be embraced fully by conventional medical practitioners. While worldwide wellness centers are integrated into healthcare centers and hospitals, this is still rare in Lebanon—with the exception of AUBMC’s Health and Wellness Center.

Doctors are also often reluctant to prescribe non-conventional treatments (such as yoga or acupuncture) alongside medications, although this is starting to change. “We are getting more people who say we are here because their doctor recommended [it],” says Hala Okeili, founder of Sarvam Yoga center in Gemmayzeh.  “This is usually in cases of high blood pressure, back pain, or osteoporosis. I don’t think this collaboration is very explicit in Lebanon yet, although it is very present outside of the country. I think there is a growing awareness of the relation between traditional medicine and wellness in Lebanon, and doctors who are open minded are currently recommending wellness practices, but it’s not an explicit and direct relation yet.” (For more on yoga in Lebanon, see box above.)

When it comes to nutrition, not all doctors feel that a dietitian is needed to prescribe a healthy regime for their patients. “The newly trained doctors are increasingly referring their patients to dietitians but previously it was a struggle as many old school doctors believed their education qualified them to prescribe diets if needed, when it doesn’t—just like my degree does not qualify me to give medical advice,” Gedeon says. “But thankfully, new doctors know the value of a good diet, so the change is happening and as long we are fighting, we will get there.”  She adds that the syndicate was invited to speak at the 21st Lebanese Congress of Surgery in June, indicating that nutrition is being taken more seriously in Lebanon.

Part of the work done by the Health and Wellness Center at AUBMC is academic, in that they provide a space for medical students to train in wellness and integrative health services, explains Romani. “Most of the time, students studying medicine are not exposed to wellness as part of their curriculum. At AUBMC we are planning an elective rotation on wellness and integrative health which will commence next academic year. Also, as part of the family medicine rotation, students are exposed to integrative health through two sessions. This is because medical students have an important role in referring their patients to the appropriate wellness specialty,” says Romani.

Health is wealth

One of the reasons why wellness activities are not very prevalent in Lebanon could be the perception among Lebanese consumers that these activities come with a high price tag. Edde does not believe wellness needs to be costly. “I think there is a misconception about wellness being expensive. There’s no need for it to be expensive. Wellness is a natural healthy way of living; it is a mindset. For example, instead of taking the car, you walk, or you have a homegrown garden on your balcony instead of buying expensive organic food. There are many healthy habits that you can introduce into your life which are free.”

Some wellness activities are priced so highly that they could hinder the industry’s growth. When it comes to life coaching, where a single session averages $100 and multiple sessions are often needed, money is certainly a hinderance, according to Grace Khleif, a certified life coach. “It is not for everybody, and this is the sad part because a lot of young women who are starting their career and come to me don’t earn much, so it is always a struggle to pay the fees,” says Khleif, explaining that this is one of the reasons why she introduced group life coaching sessions, for which the fees are lower, although the experience is not as personalized.

Photo by: Greg Demarque/Executive

Khleif says that those who have make the hefty investment into life coaching find that it is extremely valuable in terms of their personal growth and development. Indeed, all of those interviewed for this article agree that investing in wellness—despite the cost—is worthwhile, because investing in your health and wellbeing is ultimately more rewarding than spending money on temporary experiences or products. “I wouldn’t say yoga is expensive. At the end of the day, if you are doing something that would help you avoid taking pills and going to doctors, then I would say it’s a cheap investment for your health,” says yoga instructor Okeily.

To Edde, it’s all about priorities. “You have to take into account that the more you spend on your wellbeing, the less you spend on your illness or treatment later, so there is a balance there. To me, it is about priorities: Instead of spending money on going out, you can spend it on a spa treatment or yoga class. It is about knowing where and how to spend your money,” she says.

Consult a professional

In a country like Lebanon, where there are no regulations regarding non-conventional healthcare, it can be difficult for consumers to discern between qualified wellness instructors and snake oil salesmen. As such, many wellness instructors get certified from international bodies in their field (the American Yoga Alliance, for example, or the International Coach Federation [ICF] for life coaches) and urge potential clients to ask about credentials. “A lot of people here think coaching is sprouting anywhere and anyone can do it, but in ICF Lebanon we are trying to raise awareness on the need for clients to ask their coaches about their level of accreditation, certifications, and hours of experience before they hire them,” says Khleif.

Gedeon says that the dietitians’ syndicate urges customers to ask their dietitians not only about their medical degree but also about their work license, which is granted to them by the health ministry after they complete their training and pass the colloquium exam, an official test given by the Ministry of Public Health that grants healthcare providers a license to practice in Lebanon. “The good thing about Lebanese is that they are talkers: If a certain dietitian does not have a degree, they will be quick to let everyone know. Once they are aware of what to look for, they are very important agents of change. Therefore, we encourage all clients to ask for the dietitians’ university degree and work license. Some graduate from universities but fail the colloquium or don’t do their training and so can’t sit for a colloquium. Hence, asking a dietitian about her work permit is very important,” explains Gedeon.

When it comes to physical exercise activities such as yoga, credentials do not a good teacher make, and this is where word of mouth and customer experience comes into play. “You can have certificates but not be a good teacher, so it depends on many factors,” Sharon Ghanime, a local yoga instructor, says. “Lebanon is small, and the yoga community is smaller, so you can easily know who a good teacher is, or not. So, word of mouth is key until the market becomes really saturated and people have to bring their credentials into play.”

 

Wellness tourism

As wellness starts to take root in Lebanon, one cannot help but wonder if the country has the potential to develop a wellness tourism industry. Some, such as Edde, believe that Lebanon has great potential for such tourism. “If we can attract foreigners for medical tourism, it would contribute to the economy positively. We have so many sunny days a year that we can shift the trend toward this kind of tourism,” she says. “For example, if somebody has surgery in Lebanon, they can have a wellness treatment afterwards to recover from their surgery. There are small hotels or resorts and spas all over the country, or you could stay in a guesthouse and come for your treatments at a nearby spa. Once you get out of Beirut there are a lot of possibilities.”

But others, such as Sarvam Yoga’s Okeili, argue that if the current destruction of Lebanon’s natural resources continues, other parts of the world will provide a more serene backdrop for wellness.

Although Lebanon may not yet be ready for wellness tourism, there is still a lot of potential for the health and wellness industry to enhance the quality of life of the local population. The seeds are already planted, and the interest is there, but what is needed, as always, is a solid strategy and development plan. The Ministry of Public Health first needs to be convinced of the value of investing in wellness and health in order to ultimately reduce the curative healthcare cost on themselves. Once this happens, they can start working with various stakeholders, from syndicates to insurance companies, on awareness campaigns, activities, and actions that would make the notions of wellness and health more recognizable among the Lebanese. Until this happens, all we can do is to try and keep healthy as we wait.

0 comments
0 FacebookTwitterPinterestEmail
HealthcareRefugee healthSpecial Report

The impact of the refugee crisis on the Lebanese healthcare system

by Thomas Schellen
written by Thomas Schellen

Many column inches have been dedicated to the Syrian conflict and the resultant refugee crisis, the  impact of which has been particularly felt in neighboring countries like Lebanon. Less acknowledged but deserving of recognition is the shocking reality that Lebanon’s healthcare system has performed with surprising efficacy in coping with this crisis. The much-maligned and historically weak system, in the course of the last seven years, has proven its resilience, and has even expanded previously underpowered capacities.      

The resilience of the Lebanese healthcare system has been highlighted in recent research. A paper on The Collaborative Governance of Lebanon’s Health Sector was released in May 2018, the product of a partnership between the World Health Organization, the American University of Beirut (AUB), and the Ministry of Public Health (MoPH). It found that “Lebanon’s health sector has shown remarkable progress over the past twenty years,” and that Lebanese achievements in the mobilization of health resources “went well beyond what could have been expected given the country’s recent history and geopolitical environment.”

Two years earlier, an academic study examined the performance of the Lebanese healthcare system during two peak crisis years after Syrian refugee inflows in mid-2012 intensified to previously unimaginable levels. Reviewing the responses of the healthcare system in the years 2013 and 2014, the study concluded “that the Lebanese health system was resilient, as its institutions sustained their performance during the crisis and even improved.” The authors of this study, both Lebanese and international experts, took as their definition of resilience in healthcare the “capacity of a health system to absorb internal and external shocks, and maintain functional health institutions while sustaining achievements.”

Walid Ammar, the director general at the MoPH and an AUB professor, was a co-author of this study. He confirmed to Executive in July that since the publication of this research at the end of 2016, things have kept moving in the same direction: “From the publication of this paper until now, all [health] institutions, private and public, are still functioning, and our indicators in Lebanon are still improving.”

He points out that the last years had functioned as a genuine stress test of the national health system, and thus were all the more indicative of its resilience. “If you can predict something and make a plan to deal with it, this is part of your planning capacity to meet challenges that you expected. Resilience is when something occurs that is not predictable, and this is what happened with the Syrian refugees,” Ammar says.

In seeking to assess the Lebanese health system for its overall quality and for its resilience in the face of the refugee crisis, it should be noted that all of the academic evaluations of the system mentioned thus far have relied on collaboration or co-authorship with interested stakeholders, the MoPH’s Ammar above all. But despite the skepticism that will likely be triggered by this rare national success story, the proof is in the pudding.

The success narrative becomes more convincing when one is presented with the evidence and testimonies of the institutions and people who are in the thick of managing healthcare for refugees, such as the United Nations High Commission for Refugees (UNHCR) and non-governmental organizations (NGOs) focused on health.

Accessible care

According to UNHCR Public Health Officer Jakob Anhem, the organization’s record of the medical health needs of Syrian refugees is based on UNHCR surveys that are presented in the Vulnerability Assessment of Syrian Refugees in Lebanon (VASyR) annual report. “The trend on the numbers of refugees who need medical services and the number who are able to obtain them is relative stable,” Anhem tells Executive.

He explains that in 2017 the number of refugees in Lebanon who said that they needed and were able to receive medical help in terms of primary health care (PHC) improved to 89 percent, from 84 percent in 2016. Numbers were “slightly lower” for secondary healthcare, he adds, but four out of five refugees said they had access to hospital care when they needed it.

The improvements in the Lebanese health system are corroborated by Fondation Merieux, a French, healthcare-focused NGO. “The evolution of the crisis and response in Lebanon is not comparable to other countries because of its length and specificities. The healthcare system here is in [an] adaptation process. Relative to where it was, it sought to address issues as they emerged, with the funding they had. There is international coordination and also a very good push to strengthen the national NGO network. It is a good thing to see this evolution,” says Josette Najjar-Pellet, the foundation’s Lebanon representative.

According to Najjar-Pellet, Fondation Merieux is mainly active on the side of capacity building. Its missions include researching and fighting infectious diseases, building systemic access to diagnostics, and knowledge and information sharing.

Highlighting that the Lebanese healthcare system has thus far been able to avoid epidemics in the refugee and vulnerable Lebanese population, Najjar-Pellet confirms the important role that strengthening the PHC network played after the onset of the Syrian refugee crisis. She tells Executive that analyzing the factors behind this control of serious outbreaks and avoidance of epidemics is a complex undertaking; she also cites the resilience of the system and the resilience of healthcare workers in Lebanon. “When observing this crisis from the perspective of someone coming from outside, and also as a Lebanese who had left the country and has come back, you cannot say anything but that only a country like Lebanon could have supported this situation and remained peaceful,” she says. 

The comments by persons and institutions that are once-removed stakeholders in the Lebanese health system support the notion that Lebanese hospitals and PHC centers—dispensaries run by non-governmental organizations and charities, as well as those owned and operated by the Ministry of Social Affairs—have been able to deal effectively with the demands placed on them throughout the protracted crisis, which now spans more than six years of extensive and intensive needs. Moreover, the ability of Syrian refugees in Lebanon to access hospital care is not correlated with their legal status; according to UNHCR assessments, the barrier in accessing secondary healthcare is cost—the same barrier that locals must overcome in accessing hospital care.

Throughout the crisis, the capacities of the Lebanese PHC network continued to improve and the country’s healthcare networks were additionally boosted by growing collaboration between non-governmental organizations in Lebanon and international civil society. The PHC network grew out of a state of disorganization from its founding in the mid-1990s, having been designed by the MoPH to be the cornerstone of a health system that would focus on assisting the poorest Lebanese. Through effective collaboration with local NGOs, the MoPH’s network grew from 29 PHC facilities at the time of its establishment in 1996, to 85 facilities in 2005—a number that has almost tripled to 220 centers by the time of this writing.

Moreover, according to Hala Abou Farhat, associate public health officer in the UNHCR Inter-Agency Coordination Unit, there now is a sizeable and increasingly stable network of international and national organizations involved in UNHCR-coordinated aid efforts, including about 50 organizations that have indicated their interest in receiving funding under the Lebanon Crisis Response Plan (LCRP). “Many of [these organizations] work in health or are interested to expand their existing health services to the refugee population in Lebanon. They are interested to appeal for funds and interested to liaise with donors, but in 2017, out of all organizations, 31 partners received funds,” she explains.

Close partnership

Abou Farhat says that this group of NGOs is dependable and consistent. “The network has become more or less stable in size. In every year, we hear of new partner NGOs, but the traditional partners are the ones that have been working for the past four to five years consistently,” she says.

This increasing stability contributes to continuity and to the development of healthcare provision to extremely vulnerable population groups. Abou Farhat says that the MoPH-NGO collaboration has also produced other benefits, including the formalization of the PHC accreditation program, and investments in training and capacity building. She notes, however, that such improvements may not be highly visible in short-term comparisons, between periods spanning from a few months to a year.

“I would say that the system has improved a lot over the years. It has evolved greatly and the MoPH has been at the forefront of this development,” she says. Regarding collaboration with NGOs, she notes that “the MoPH has a very different mentality from other ministries, by acknowledging that it is the partnerships with NGOs that allow them to work.” Between the lines of such evaluations, listeners might think they detect unspoken messages that the Lebanese healthcare system is still vulnerable to influence by partisan interests and non-optimal political approaches, but that its ability to overcome such restraints is advanced compared to that of other institutions.

Many of the problems that persist in the area of refugee health care mirror the issues that afflict the Lebanese population, but with added severity. For both populations, cost is the main barrier. Anhem explains that the UNHCR has had to make tough decisions regarding hospital care for Syrian refugees: “We have been forced to prioritize when we set up the program of health services for specialized hospital care,” he says. “We decided to prioritize deliveries, i.e. obstetric care, and [the treatment of] urgent life-threatening conditions or conditions that might lead to disability. In the case of some conditions that are life-threatening, like renal failure, or cancer, where long-term expensive treatment is required, it was decided that we cannot support this. So, we had to ask the international community and other NGOs to step in with funding.”

In practice, this means that for the current year, UNHCR made an appeal for $67 million for healthcare funding in Lebanon. Of this funding appeal, which would contribute to the total required budget for 2018, “$18 million is currently funded, which leaves the total gap at $49 million,” UNHCR spokesperson Lisa Abou Khaled told Executive in early July. Moreover, when the funding gap is further qualified according to what is urgently needed to cover minimal assistance levels to ensure access to life-saving hospital care until the end of December, the need, according to Abou Khaled, is for $28 million.

Taking into account the time dimension of the process to acquire donor funding, the outlook for 2018 is not very dissimilar to the previous year, when funding needs were met to 80 percent, Anhem explains. But the process sounds at the very least like an exercise in stress induction. “It is my impression that we are biting our nails every year and wonder if we will need to make severe cuts to our programs by September, but by the year’s end, we have always been able to provide a decent level of care,” he says.

As Abou Farhat points out, however, this appeal does not cover all of the health needs seen by the community of NGOs. “We need to be mindful that UNHCR does not cover everything. From an interagency perspective, things look a bit different, because the total amount we have requested for 2018 is $290 million, out of which $193 million is requested for secondary healthcare and $94 for primary healthcare. [This total] includes [the $67 million budgeted under] UNHCR but also accounts for dialysis, cancer treatments, and other conditions which are not covered by UNHCR,” she says. A further $2 million is budgeted for improving outbreaking control and $500,000 for improving youth health. While there are different population groups included in this funding appeal, the bulk is requested for Syrian refugees, whose healthcare needs are seriously underfunded, she adds. 

The resilience of Lebanon’s healthcare system is a narrative with two intertwined strands. One strand tells a story of healthcare assets owned by diverse stakeholders, from private, for-profit enterprises to non-profits to the public sector, which have performed for both the Lebanese and the Syrian refugee population at a surprisingly high level. The second strand of the narrative reveals that the system is still marred by special interests and imbalances, the most important of which is that the total financial requirements far exceed the available means for delivering the required healthcare to all needy people, of whatever nationality, in Lebanon. This nevertheless makes the performance and resilience of the existing healthcare system ever more surprising, in its efforts to provide care for Lebanese poor and refugees alike. 

0 comments
0 FacebookTwitterPinterestEmail
HealthcareMental healthSpecial Report

The social and economical cost of mental health in Lebanon

by Nour Chehab
written by Nour Chehab

In Lebanon, one in four people suffer from mental illness in their lifetime, according to non-profit mental health NGO Embrace. Mental health refers to the condition of a person’s emotional or psychological well-being, in the same way that physical health refers to the condition of their body. Although the public discussion around mental health in Lebanon has been increasing in recent years, a strong societal taboo surrounding the issue still lingers. Combatting this stigma in Lebanese society is now a mission of both governmental and non-governmental organizations (NGOs). There has been a recent increase in the number of NGOs advocating on mental health issues, as well as in the number of practicing psychologists, psychiatrists, and other mental health professionals, according to a 2015 World Health Organization (WHO) report on mental health in Lebanon.

How the government deals with the mental health of its citizens is one factor that influences how society views mental illness. “If [the government] recognizes that these people need help, it changes the public’s perception [of mental health for the better],” says Omar Dewachi, a physician and assistant professor of Anthropology, Social Medicine, and Global Health at the American University of Beirut (AUB). Shifting the public perception of mental health is important because neglecting mental illness can—in addition to other potential ramifications—negatively affect society’s productivity. When people suffer from untreated psychiatric disorders it can limit their ability to work, and, without adequate state assistance, the burden of care will often fall on family members. These caregivers, in turn, will be less productive and will often suffer a hit to their own mental well-being. The negative impact of untreated mental illness on a society’s productivity can be used as a counterargument to the economic logic of not covering mental health expenses. In Lebanon, as in other countries worldwide, there is insufficient awareness of the importance of mental health and a dearth of good, free healthcare services geared toward those with mental illnesses. Given the reticence of profit-driven private insurance companies to cover mental health treatment and the government’s lack of budgetary allocation for mental health, the burden falls on non-governmental and international organizations.

Private sector

Lebanese private insurance companies do not provide coverage for the treatment of mental illnesses. Pascale Abou Nader, head of the Medical Claims Department at insurance company Libano-Suisse, says that private insurance companies do not cover the potential psychiatric care-related expenses of their clients due to the long-held belief that “mental illness is not a real illness.”

In Abou Nader’s opinion, all private insurance companies would fight against the implementation of a law requiring that there be no mental illness-related exclusions in individual health insurance policies. However, the private sector is involved in one scheme concerning mental illness. An insurance package offered to big corporations covers the full supplementary cost of all of the treatments that are partially paid for by the NSSF. Since the NSSF pays for 90 percent of the treatment for mental illnesses, private insurance companies in this particular package are beholden to pay the remaining 10 percent.

In practice, however, Libano-Suisse has yet to deal with a case of an employee covered by the “Delta NSSF” insurance who has claimed the supplementary 10 percent coverage for treatment of a mental illness, even though clients regularly use this particular insurance for other physical ailments. It is statistically unlikely that none of these employees has ever been treated for a mental illness, so Abou Nader speculates that it is likely employees do not ask for this coverage either because they are unaware that the company’s insurance policy covers it or because they have internalized the stigma surrounding mental health issues. In other words, the societal cost is perceived to be higher than the economic cost and individuals would thus rather pay the supplementary cost themselves rather than claim it on their insurance.

It is also worth mentioning that psychiatric disorders are treated differently from the usual exclusions stipulated by private insurers, such as cancer, chronic diseases, and pre-existing conditions. The Insurance Control Commission (ICC), a body in the Ministry of Economy and Trade, implemented a ministerial decision (No. 109) in May that required insurance companies to cover chronic diseases, pre-existing conditions, and cancer, and to offer guaranteed lifelong renewability of individual healthcare insurance if the client gets sick six months after they have entered the contract. This policy does not, however, include psychiatric illnesses, with some minor exceptions.

These exceptions come with very strict limitations. First, consultations, tests, and medications are never covered, and hospitalization is covered only for those with schizophrenia and bipolar disorder, and only for 30 days. Hospitalizations due to attempted suicide, self-inflicted injury, or substance abuse are not covered because these afflictions are described as “caused by the individual,” Abou Nader says. The issue here is that because of the lack of physical proof and the intangible nature of such illnesses, a medical diagnosis is not seen as justified. Dewachi suggests that one of the reasons for  insurance companies’ reticence to cover psychiatric-related costs is that they “are afraid of the fact that there are very blurry lines between what is really an illness and what isn’t, because there are no real diagnostic tools, such as CT scans and blood tests for mental illnesses.”

Stigma aside, the associated costs also prompt insurance companies to exclude mental illnesses from their coverage. As Abou Nader explains, including psychiatric treatment in insurance policies would be very expensive for these companies, because psychiatric treatments are continuous and often last a lifetime. Such an inclusion would thus entail an unwelcome financial burden on these profit-oriented groups. And, unlike in the case of chronic physical illness, the lack of legal obligation to cover these treatments means that insurers have no motivation to do so.

Public sector

The NSSF is under the supervision of the Ministry of Labor, and decisions concerning changes in insurance policies require the ministry’s approval. “When we go to the Council of Ministers with proposals, it happens through the Ministry of Labor,” explains Mohamad Karaki, director general of the NSSF. The social security fund insures Lebanese employees in three categories: sickness and maternity care, family allowances, and end-of-service indemnities.

Employers from all economic sectors are required by law to enroll their employees in the NSSF. The NSSF covers mental illness-related expenses under the umbrella of sickness and maternity care. Unlike private insurance companies, its policy covers cases of attempted suicide, self-injury, and substance abuse, among others. Mental illness is treated in the same way as physical illnesses, with no special or specific policies or exclusions.

The NSSF’s general policy for all illnesses, whether mental or physical, is that there are no fixed budgets or limitations. Therefore, there is no specific budget directed toward mental health. Given that the institution does not produce statistics on insurance usage, it is impossible to know how many people make use of this coverage, or to determine, roughly, how many suffer from and receive treatment for mental illness. The lack of information means that it is not possible to calculate the social and monetary ratio between physical and mental illnesses.

However, the director general believes that even if there were official statistics, the taboo around mental illness in Lebanon would lead to popular misrepresentations of the country’s mental health landscape. Karaki believes that many people who need treatment for mental health problems do not seek it, and their illness therefore has no impact on the NSSF. This inaction, he says, might be either because of a fear of social repercussions or due to a lack of awareness about mental health and available psychiatric care. According to Karaki, just as in the private sector,  “there are no official requirements [on the NSSF] coming from the government and the Ministry of Public Health (MoPH).” Requiring both the public and private sector to cover mental health could be transformative, in ensuring increased access to good, free treatment for mental illness and a lessening of the social stigma around it.

The Ministry of Public Health

The goal of the MoPH is to provide free, universally accessible, high-quality health services to those who are not insured by either the private sector or the NSSF. In an effort to improve the state of mental health in Lebanon, the ministry in 2014 put in place a National Mental Health Program (NMHP). The NMHP aims to raise awareness about the importance of mental health through yearly campaigns designed to reduce the societal stigma around the issue. It also offers training for various professionals (general practitioners, nurses, social workers, etc.) in primary healthcare centers (PHCs) and provides medical attention to people who need it, not only via PHCs but also via specialized community mental health centers and inpatient facilities.

The NMHP put in place a five-year strategy for 2015 to 2020 aiming to lead the reform of mental health care in the country and develop a country-wide system at both the preventive and the curative levels. The NMHP has a collaborative governance model, meaning that it works with different actors to accomplish its goals. First, it cooperates with other public institutions, such as the Ministry of Education and the Ministry of Social Affairs. Second, it interacts with civil society, as can be seen in its collaboration with Embrace. In addition, international organizations such as the WHO, UNICEF, and the International Medical Corps (IMC) are financial partners in the program and provide some technical support.

These partnerships are very helpful in achieving the NMHP’s goals, especially since the MoPH does not allocate a budget to the program. There is one stakeholder, however, that the NMHP has yet to reach: private insurance companies. The program aims to ensure the full coverage of mental health-related expenses by these companies. “We cannot punitively make them do it, but we can discuss together potential schemes that can be integrated. It is something we are preparing at the moment,” says Nour Kik, policy and advocacy coordinator at the NMHP.

Because of the lack of fixed funding, some of the planned year-by-year goals of the NMHP have not been met on schedule. Nevertheless, Kik notes that, “it is still important to have a roadmap in order to know our priorities.” The program relies on opportunities arising to sign agreements with different partners funding a particular project. On the curative level, the NMHP is progressively introducing mental health treatment at PHCs and is also developing community-based mental health care facilities. They train non-specialized staff such as nurses, social workers, and family doctors who are already present in the PHCs to manage these issues and conduct outreach activities. Nevertheless, the  government’s actions are undoubtedly limited because of a lack of stable funding and their resulting dependency on civil society to conduct anti-stigmatization campaigns, as well as to help provide free healthcare for the mentally ill.

Non-governmental organizations

Lebanon’s two most prominent nonprofits for mental health, Embrace and the Institute for Development Research Advocacy and Applied Care (IDRAAC), work to compensate for the government’s deprioritization of mental health. They also make it their mission to encourage the public sector to take action. “The public sector should do more when it comes to raising awareness and IAPT [Increased Access to Psychological Treatment] by training more people. They need to create dispensaries that people can easily access,” says

Aimee Karam, a clinical psychologist, member of IDRAAC, and president of the Lebanese Psychological Association (LPA). There are currently initiatives in place to reach out to policy makers and advocate for mental health care as a basic human right, via lobbying and the drafting of laws. Embrace’s website also mentions their aim to support the policies of the NMHP. The NGO participated in a dialogue to put in place a national policy “securing access to quality mental health services in primary health care in Lebanon.” It also collaborated with the MoPH, the National Committee for Ethics, and IDRAAC to draft a mental health law to submit to Parliament for the protection of persons with mental illnesses.

In Lebanon, the latest legislation decree concerning mental health dates back to 1983. Despite efforts by different associations to provoke discussions and drive policy making initiatives, no new policy has been implemented by Parliament to ameliorate and regulate the way mental health is treated both medically and socially for over thirty years.

In other words, NGOs have taken on the responsibility of bridging the gap between the needs of society and the shortcomings of different public institutions when it comes to mental health.

0 comments
0 FacebookTwitterPinterestEmail
Financing healthcareHealthcareSpecial Report

Issues and concerns at the intersection of health and finance

by Thomas Schellen
written by Thomas Schellen

In the opening line of American economist and public health expert Selma J. Mushkin’s paper titled “Towards a definition of health economics,” she pointed out two factors shaping the health issue: technological progress and increases in life expectancy. That was in 1958, a few years after the first wave of mass immunizations in the United States using Jonas Salk’s polio vaccine had raised hopes that mankind could overcome diseases that had plagued it for thousands of years. Polio had been among the most-feared scourges for children for two centuries before the introduction of the vaccine.

Over the six decades since health economics became a specialization in the economic sciences, the story of human health has been shaped and reshaped continually. Health, and with it, life, has been boosted by improved or entirely new treatments based on medical scientific discoveries. The very map of mortal existence has been redrawn by increasing life expectancies, which in turn have been driven by countless improvements in the realms (naming but some) of vaccinations and hygiene, food safety and food security, social safety, nutrition and wellness, the protection of human rights, and reduction of political violence.

As of 2018, increased life expectancy and constant improvements in medical technology have not only been with us throughout the living memory of most people, they are reaching levels that have no historical precedent outside of fairytales and myths. But these two blessings of the Anthropocene also are the drivers of countless personal worries as well as individual and systemic challenges. We now worry about diseases that in the past had hardly a chance to erupt because lives tended to be terminated early by a million other factors. And as our medical care technology is achieving new heights in its ability to treat diseases, societies face increasing challenges to align life expectancy and healthcare with finance and economics.

State-designed pension and care solutions that worked in the 19th century—when the interval between the end of a person’s work life and the end (largely) of their physical life was commonly measured in weeks and months—are becoming increasingly impracticable at a time when such intervals are on average counted in years and decades. Safety nets in medical care—which were based on compulsory mass insurance and worked when a surgical procedure, albeit primitive by today’s standards, cost hundreds of dollars or a few thousand—are becoming overstretched, now that both common chronic diseases like cancer and uncommon neuromuscular disorders require treatments that reach from thousands of dollar per month for advanced oncology drugs to up to a million dollars per year for the treatment of an infant with spinal muscular atrophy.

In the context of the Lebanese economy—keeping in mind that, despite the national love for economic complaints, Lebanon is in the higher middle income bracket, in the upper 50 percent of nations by GDP—the issue is the same as in many upper and middle income societies: how to finance treatments that are available in the country but have become hardly affordable for individuals, families, or the state. As Walid Ammar, the director general of the Ministry of Public Health (MoPH) sees it, the problem begins with expensive drugs. “We now have an increasing number of very expensive drugs that patients sometimes have to take for the rest of their lives. What this means for many countries is that [public healthcare officials] have to look at the [financial] resources and have to decide on the basis of what is available how they can offer services that are to the greatest benefit of the population,” Ammar says.

Complex/competing interests

Besides comprising public health officials who have to manage more or less scarce resources to the best utility for the largest number of citizens, the reality for any health system operating under scarcity includes patients in need of medical care as stakeholders with particular and possibly extreme private interests. People diagnosed with a serious disease in particular, understandably tend to be desperate enough to grasp at every promise of a new and untested cure, regardless of the treatment’s cost or proven effectiveness.

Other stakeholders in the complex health equation are involved in influencing the patients’ choices—in the form of physicians, who in turn are influenced by commercial interest holders, such as pharmaceutical manufacturers. In this setting, friction between public and private interests can hardly be avoided, in Lebanon just as anywhere else.   

But there are a few additional peculiarities to be observed in Lebanon’s health system, beginning with political interference. “New drugs often do not come with enough proof [to be accepted by the MoPH medical committee of highly qualified professors] while you often have evidence showing that cheaper and well tested medications generate improvements,” Ammar says. “This is a major problem since politicians are telling their constituents, ‘Yes, you have the right to get this medicine,’ but actually, no, they don’t have a right to have this medicine financed by the society. People think they have a right, and then are not happy if they are told that they can’t get a medicine from the MoPH. On the other hand, also, the government does not allocate enough [of a] budget to the MoPH.”

Moreover, under Lebanon’s entrenched dynamic of political clientelism between politicians and the public, a patient for whom their physician has prescribed a very expensive drug will often go to the minister. The minister then may sign an order to purchase the drug and in doing so contribute to the depletion of MoPH resources. “Every Lebanese can find a way to reach a minister. This then creates [a deficit] because I do not have the money to cover the others if I start giving very expensive medication to some people,” Ammar says. “It is not easy to explain to the population that we have limited resources and thus can provide them with good care but not necessarily give the latest state-of-the art medication to everybody.”

As all these factors play out in Lebanon—sometimes sparking arguments over which drugs a patient needs and which drugs their commercial insurer must cover if they have insurance, or whether the MoPH has to provide for needy Lebanese as the health payer of last resort—the local situation is driven to new heights by something that could be defined as inverted favoritism.   

According to Ammar, the MoPH has done its best to develop equal and decentralized access to the public health system, ensuring that the ministry has at least one office in every district, where citizens can obtain MoPH approval if they are eligible for coverage. This then does away with the need for travel or to have forms signed by a whole echelon of administrative entities.

“When we made the system transparent and guaranteed that everybody was equal under our rules—which mean rules of coverage of 85 percent and 15 percent co-payment—we thought that people would not need intermediaries,” Ammar says. “They would not need to knock on the door of the minister to get approval. But they still seek the intermediation by the political figure, because the minister tells them, ‘If you come to my office, I give you 100 percent coverage, not just 85 percent as under the rules.’ Because we were able to institutionalize and computerize everything and have a system where everybody is equal, so that people do not need anyone’s favor to get what is their right, now people seek to get something extra.”

Private sector worries and coping strategies

It seems that, short of a reprogramming of the Lebanese cultural genome, nothing will deter people from playing games of favoritism and pursuing clientelism as a national sport, and the efficiency of the Lebanese health system, despite its remarkable gains in the recent past, does not look set to reach optimum levels—which is problematic, as healthcare costs are increasing at a faster rate than GDP growth.

Private sector health management stakeholder Joe Abou-Chacra, general manager of third-party administrator (TPA) GlobeMed Lebanon, confirms that the technology and medical skills available in Lebanon are following the innovation cycle that prevails for medical machinery and advanced procedures in developed economies and top healthcare markets, but the cost is becoming very high.

To illustrate the blown-up medical costs, he tells Executive that the price for closed-heart surgery today can be as high as $60,000 to $70,000, compared to open-heart procedures of five years ago that would cost $20,000. According to Abou-Chacra and other health finance experts, the cost for a box of certain advanced cancer drugs has increased in the past few years into the range of $5,000 to $11,000 per month, five to 10 times more in monthly expenditure than the less beneficial radiation treatments cost a few years earlier.

The extreme rise in funding needs associated with common medical risks such as cancer and heart disease necessarily leads to responses from institutions and companies dealing with the management and finance of healthcare. Over the past years, insurance companies—the prime commercial stakeholders in the management of health risks—have increasingly relied on TPA companies for cost-optimization and the processing of payments to healthcare providers such as hospitals.

Issue of the hour

In the ongoing confluence of new medical treatments and increasing cost pressures, guaranteed renewability (GR) might emerge as a key issue influencing the future direction of insurance behavior. The industry, represented by the Association of Insurance Companies Lebanon (ACAL), has welcomed the recent introduction of GR and focuses on the positive aspects of the new regime. “[GR] is the proper response to the worries of our insured, especially persons of old age,” ACAL president Max Zaccar tells Executive. “It has also the advantage of enhancing the loyalty of the insured, since a client, if she or he decides to leave the current provider, will have to submit to new thorough underwriting procedures and health assessments.”  He notes, “All insurance companies are in a position to provide [policies with GR]. It is just a question of premium calculation.”

The calculation of new premiums, however, could translate into changes that will, in the view of GlobeMed’s Abou-Chacra, be felt by the insured population. “For Lebanese society, there is a good side and a bad side to guaranteed renewability. On the one good side, every member of society will have guaranteed renewability and will not be told that there is an exclusion here or that they are not covered there. On the bad side, to have medical coverage will cost the insured more than they used to pay … So what will be good on the side of coverage, will not be easy on the side of prices.”

While the new GR rules, introduced in April, add to the complex scenarios of uncertainty on the horizon of financial conditions in the Lebanese health system, the stakeholders financing the system are turning to mechanisms that they expect to help them cope with the new GR reality. Insurance companies positioned away from the budget end of the market, such as Libano-Suisse, which has been providing GR to its policyholders for over 20 years, seek to affirm their competitive edge. At a large product launch event in April, Libano-Suisse General Manager Lucien Letayf Jr. told a crowd of insurance intermediaries and media that “we invented GR in Lebanon.” The company introduced a package of “exclusive privileges” called Health Plus for its insured, with Class A policies. But in addition to betting on reputation enhancement by offering their insured free value-added benefits and a few feel-good gimmicks, the forward thinking insurers are also seeking to enhance the health equation by expanding their focuses on wellness and prevention.

The strategy is to promote wellness under the rationale that any improvement in clients’ pursuit of wellness will lower the need for medical treatments and hospital visits, and be beneficial for health insurance costs. Efforts to increase the commitment to wellness and prevention strategies among insurance clients have been going on for a few years, but awareness appears to spread unevenly. “I think that regarding wellness and prevention, the market growth is slower than the growth in deployment of machine surgery and conventional medical treatments, and it can take a lot of time to reach older people and make them change their behavior,” says Abou-Chacra of TPA GlobeMed, in which Libano-Suisse is a major shareholder. “Wellness and prevention needs more marketing and awareness building among the Lebanese people. However, I am confident that we can market wellness and prevention quickly and very well among the younger generation.”

Stronger impulses to reposition health insurance as the primary private sector financial constituent in the national health system of Lebanon could arrive in the foreseeable future, if Insurance Commissioner Nadine Habbal—by now “interim” Insurance Control Commission head only in name—follows through on her plans to introduce rules mandating risk-based capitals in the insurance sector and to look toward a compulsory health insurance and pension plan program to power up the collective financial body of the population.

Another, non-financial, issue that in Executive’s experience plagues all stakeholders in the diverse Lebanese health system is communication with the public—and sometimes even the effective projection of one united voice when interacting with the state.   

The MoPH, for example, is perceived very differently by people who rely on its services and those who are only exposed to politically driven media rants that badmouth the public health system. “One of our weaknesses is still about how to communicate with the community,” Ammar acknowledges. “Politicians monopolize the media and thus have a stronghold on how the health issue is perceived. People who are not in need are not really informed. If you ask people what opinion they have of the MoPH and if they benefited from the ministry, you get very positive feedback—if they have received services. If they did not, you get a negative feedback because they are influenced by the media.”

Misperceptions, in this case of the Lebanese health system as backward, tend to get dangerously entrenched when they are allowed to grow unchecked. The improvement of health provisions and affirmations of the resilience of Lebanon’s health system in the past few years, and the shift in the Lebanese people’s international perception as ready to help the needy are valuable gains that it would be a shame to squander.

0 comments
0 FacebookTwitterPinterestEmail
HealthcareOverviewSpecial Report

A look into Lebanon’s healthcare

by Thomas Schellen
written by Thomas Schellen

Health encapsulates economic activity that amounts to trillions of dollars by the—in this context crude—methodology of collating production of goods and services as gross domestic product (GDP). The Global Health Observatory of the World Health Organization (WHO) puts the world’s expenditure on health at $7.2 trillion (2015 estimate), or 10 percent of the world’s GDP. Many countries have health expenditures representing between 7 and 9 percent of their GDP. However, some economies (for example, on the Indian subcontinent and in Sub-Saharan Africa) allocate less than 4 percent of GDP to health spending. Upward outliers, mostly from member countries in the Organization for Cooperation and Development, clock in above 9 percent.

According to a Human Development Report (HDR) by the United Nations Development Programme in 2013, low-income countries early in this decade spent on average 5.7 percent of GDP on financing healthcare, whereas high-income countries show average health expenditure of 12.3 percent. Reports generally show that higher levels of healthcare spending are reflected in higher life expectancy and are very visible in data points such as the number of physicians and hospital beds in relation to a country’s inhabitants.

Disparities between low-income and high-income countries in the density of available health services as shown in the HDR are enormous, with 0.7 physicians per 10,000 people in the former versus 29.2 in the latter. Likewise, low-income countries have about 13 hospital beds per 10,000 inhabitants whereas the average for high-income countries is over three times that, at 42.3 beds. (Nevertheless, having a high share of healthcare expenditure does not automatically signify that a nation’s system is superior in terms of being beneficial or efficient).

A number of international healthcare rankings indicate that Lebanon is on a trajectory of continuous improvements in coverage and performance. The 2018 Healthcare Access and Quality (HCAQ) index by international medical journal The Lancet, for example, ranks Lebanon in 33rd place with 86 points (in a previous HCAQ edition, Lebanon was ranked 31st with the same score), rubbing shoulders with European nations like Estonia and Portugal. Lebanon in this index is also positioned a mere four spots lower than the United States and ahead of Taiwan and Israel.

A May 2018 study on Lebanon’s health governance notes that the country’s diverse (some say fragmented) health system provides “compared to other countries, good value for money.” When the HCAP score is put in relation with total healthcare spend as share of GDP (in constant purchase-power parity dollar), Lebanon’s score of 86 places it below some countries with higher health spending but, as the study points out, the country “is on the frontier curve.” This is to say that none of the countries with lower healthcare spend than Lebanon as share of GDP rank above it in the HCAQ index.   

Good health on systemic level: a function of quality supply, evidentiary decisions, and collaborative governance

According to the Ministry of Public Health (MoPH) in Lebanon, the national spend on healthcare as share of GDP is 7.5 percent. On the basis of the 2017 GDP estimate of $53.4 billion, the health bill would be about $4 billion and be paid for by three main streams of financing in roughly equal measure. One third is government expenditure from tax revenue, one third is covered by private insurance and also provided via contribution-based schemes, such as the National Social Security Fund (NSSF) and cooperative funds, and the remaining third is composed of direct private expenditures by patients, as out-of-pocket (OOP) payments. Commercial stakeholders in the management of healthcare services in the Middle East agree that Lebanon represents an interesting value proposition to its population, even as they note that the growth of the healthcare insurance business has, in recent years, not been as strong as in countries with higher economic growth.

[media-credit name=”Ahmad Barclay & Thomas Schellen” align=”alignright” width=”590″][/media-credit]

“Although we haven’t witnessed tremendous growth in GDP in Lebanon in recent years, there has been growth in the market for health insurance. This growth was mainly because of higher health inflation when compared with GDP inflation in Lebanon. However, when I look at all markets under my responsibility, Lebanon has been performing resiliently over the years. There are flaws, and the market is not growing in the double-digits like the Gulf markets, because the economy is not growing in double digits. But the market has been growing steadily and is providing quality care,” says Christian Gregorowicz, chief executive officer of regional third-party administrator (TPA) Nextcare.

“If we compare costs of insurance in Lebanon to those in the Middle East or in Europe, the cost of insurance premiums is still cheaper and people here have better coverage than in many other countries,” Joe Abou-Chacra, general manager of TPA GlobeMed Lebanon, notes. “But it is not at all certain how long the insurance sector in Lebanon will be able to keep going without increasing premiums massively.”

Factors contributing to the improved standings of Lebanon’s health today, as compared to its state at the turn of the century, included gains in efficient usage of the people’s private financial resources. For example, OOP health expenditure dropped from 6.2 percent of GDP in 2000 to 2.4 percent in 2015. Further important benefits were generated by a set of successive reforms and systemic improvements implemented under the leadership of the MoPH, in the course of which the health sector was transformed from one oversupplied with underutilized expensive machines and characterized by “perverse incentives”—where the old MoPH system had provided compensations to hospitals irrespective of their competencies or quality—to one that is driven by evidence-based decisions and collective governance.

Fragmented to diverse

The transformation of the healthcare system was in large part systemic but it also entailed a change in perception: discovering strength where the previous perception of Lebanon’s health system structure with its multiplicity of actors had been negative. “In describing this situation, we usually spoke of fragmentation, which has a negative connotation,” explains Walid Ammar, the director general at the MoPH. “You have overlap in some areas of coverage and gaps in others, and you don’t have the global picture. [This fragmented system] is difficult to govern. However, if you apply good governance principles and succeed in managing fragmentation, you mitigate for the negative effects of the multiplicity and what remains is diversity. Diversity is very important, as it gives you flexibility and this means you can adapt to unpredictable situations. In describing the multiplicity of the Lebanese health system, we now use [the term] diversity, which has positive connotations. But if you are not able to govern a system of multiplicity, you have a fragmented system that is inefficient.”

[media-credit name=”Ahmad Barclay & Thomas Schellen” align=”alignright” width=”590″][/media-credit]

Lebanon’s national health indicators (see infographic) show values that are today in better balance. No longer is the number of medical doctors higher than the number of nurses, and the number of hospital beds is moving away from previous congestion that was sometimes characterized by questionable quality, toward a more balanced supply, also in comparison with the primary healthcare system. Research by GlobeMed shows some interesting trends in the number of nosocomial infections (infections contracted in hospital and requiring additional treatment). According to findings that GlobeMed shared with Executive, the average rate of nosocomial infections in Lebanese hospitals was 1.6 percent for the period from 2010 until 2017. While this rate fluctuated between 2010 and 2015, it dropped to 1.3 percent in 2016 and then to 1 percent in 2017.

“We do continuous studies on medical care and we inform the hospitals if our studies show any red flags [of rising incidence rates] or when more care is needed because we percieve hospitals as our partners. Our studies on nosocomical infections are indicating that the rate of infections contracted during treatment in hospitals has decreased a lot compared to five years ago. Talking about hospitals in Beirut, the rate of these infections has decreased by 60 or 70 percent,” says GlobeMed’s Abou-Chacra.

The successful shift from a system dominated by divergent self-interested commercial players to a resilient system with better coordinated actors has been demonstrated convincingly during the ongoing Syrian refugee crisis.

An industry with many vital sides

What complicates the overall scenario is the fact that the health sector combines commercial stakeholders with clear profit motives for achieving high sales of goods and services—such as private hospital operators and pharmaceutical manufacturers—with other stakeholders whose business models are driven by cost optimization and rationalization, such as third-party-administrators and insurance companies. This map of health system dynamics is incomplete, however, as there are further important  elements involved, namely third-party stakeholders—medical practitioners—who can or cannot be driven by profit motives, and the usually extensive involvement of public sector interventions.

The production of health goods and services has increased international trade and the manufacture of goods for export. Just to give an idea of its dimensions, European pharmaceutical exports, according to statistics portal Eurostat, have more than tripled since 2002, going from less than 50 billion euros to over 153 billion euros in 2017, and imports grew similarly, from about 26 billion euros in 2002 to 76.7 billion in 2017. IFPMA, the global federation of pharmaceutical manufacturers and associations, reported in a 2017 study that global pharma production was worth almost $1 trillion and that the value added rate of producers was 45.5 percent, or $453 billion.

[media-credit name=”Ahmad Barclay & Thomas Schellen” align=”alignright” width=”590″][/media-credit]

While the Investment and Development Authority (IDAL) highlighted Lebanon’s pharmaceutical industry for its investment opportunities and reported that pharma sales reached $1.63 billion in 2015, the bulk of pharmaceutical trade is inbound. Lebanon’s pharmaceutical exports, according to the Najm system tracking Lebanese trade at the customs level, have yet to lift significantly beyond the $50 million per year range. Several leading members of the Lebanese pharma industry were not available or unresponsive when Executive approached them to inquire about the sector’s export development potential.

Beyond pharmaceutical products, Lebanon by all logic has the potential to increase the export and import of qualified human capitals—doctors, nurses, pharmacists, lab technicians, etc.—plus immense potential for health sector disruption by information technology—currently in the form of full digitization—as well as new or growing adjacent economic activities, from preoccupation with wellness and nutrition to medical and wellness tourism.

All in all, it seems practically impossible to overestimate how much health writ large could contribute to this nation’s GDP, beyond what is spend on health as share of GDP. Common categorizations apparently are unable to quantify the role of health in the economy in the way that agriculture and mining can be quantified. However, as Executive examined different health-related fields of the Lebanese economy, it appeared that the proverbial glass is still eminently fillable.

There is room, firstly, to further improve the medical system. Overlap and gaps need to be addressed and, in the management of financial assets that people dedicate to their healthcare, economies of scale could be deployed by introducing a system of compulsory medical insurance, argues Nadine Habbal, the head of the Insurance Control Commission at the Ministry of Economy and Trade.

Untapped potential

Then, there is the presence of ignored societal costs from the neglect of mental health. Arguably, the costs that result from the stigmatization and denial of mental health issues can have repercussions for the Lebanese workforce, including drops in employee productivity, impairment through substance abuse or depression, or mental affliction-related work absences. The resulting costs are staggering and could be reduced by investing more attention and resources into the treatment of mental disorders .

Outside of opportunity costs incurred by employers not securing comprehensive insurance packages or failing to address mental health, there are untapped potentials in Lebanon’s pharmaceutical sphere. This is illustrated by the newly revived discussion of medicinal cannabis, as well as currently untaken opportunities for research into and development of the medicinal potential of other local plants and herbs. In addition, the potentially lucrative fields of wellness tourism, medical tourism, nutrition, and wellness services from yoga to life coaching can all be advanced to realize better economic and health outcomes. Also, with regard to the ambitious Lebanese entrepreneurship sector, which has throughout the decade been striving to make the best of new opportunities in the knowledge economy, IT, and mobile applications, health-tech entrepreneurs tell Executive of unnecessary obstacles and missed growth opportunities.        

[media-credit name=”Ahmad Barclay & Thomas Schellen” align=”alignright” width=”590″][/media-credit]

In the bottom line, the health industry of Lebanon appears rife with opportunities that have not yet been fully taken advantage of, or that are still waiting to be captured. At the same time, very encouraging signals as to our health economy potentials are being sent by the health system’s improvements over the past two decades and by its duress-defying performance under conditions of worsening national poverty and inbound despondencies since the outbreak of the Syrian refugee crisis.   

[media-credit name=”Ahmad Barclay & Thomas Schellen” align=”alignright” width=”590″][/media-credit]

[media-credit name=”Ahmad Barclay & Thomas Schellen” align=”alignright” width=”590″][/media-credit]

All this potential comes with the caveat intrinsic to all dealings with the market for medical care. The economics of health is much more than a matter of pure price and profit, in contrast to markets for goods and services that one can easily live without. As famed economist Kenneth Arrow wrote in the conclusion of a seminal 1963 paper on uncertainty and the welfare economics of medical care, “the limitations of ideal competitive behavior under uncertainty force us to recognize the incomplete description of reality supplied by the impersonal price system.”

0 comments
0 FacebookTwitterPinterestEmail
Economics & PolicyInflation

High oil prices and a weak dollar hurt the Lebanese

by Jeremy Arbid
written by Jeremy Arbid

It is August in Lebanon, which means stifling heat during the day, and humidity that hugs the skin late into the evening like a hot, wet blanket. Traffic jams choking major roads and garbage washing ashore make beating the heat at the beach less appealing, and, adding to the woe, a seaside lunch is becoming a little more pricey. A dollar in Lebanon is just not buying as much these days.

Consumer prices are on their way up. Lebanon’s inflation rate reached 7.6 percent this June in a year-on-year comparison of the consumer price index (CPI), a measure of a basket of consumer goods and services gathered by the country’s public bean counter, the Central Administration for Statistics (CAS). Since the start of 2018, however, the inflation rate has risen at a slower pace, at 3.1 percent.

There could be a number of contributing factors to year-on-year inflation. These include a slumping US dollar, a rise in the price per barrel of oil, and this year, to some extent, the implementation of new taxes that went into effect at the beginning of January.

In recent years, the US dollar has weakened. According to the US Dollar Index, a measure of the value of the US dollar relative to a basket of foreign currencies, the dollar fell from a high of $102.92 in 2016 to $94.49 on July 22 this year. Lebanon’s is a highly US dollarized economy, with the local currency pegged to the dollar, so the country has little room to maneuver regarding its monetary policy. A depreciated US dollar could mean imports from Europe to Lebanon become more expensive.

An additional factor contributing to Lebanon’s inflation may be the rising price of a barrel of oil, which leapt up by 54 percent since last June, when a barrel cost about $50. This June, the price reached almost $80. The price of oil and the weakened US dollar were the main reasons for Lebanon’s inflation in 2017, which the International Monetary Fund calculated at 5 percent, in its most recent Article IV concluding statement, published this June.

The elusive reason

To a lesser extent, tax increases that went into effect at the beginning of 2018 may be a factor in the inflation. The new taxes, which included an increase in the Value Added Tax (VAT), has affected prices on household consumer items, says Jad Chaaban, an economist at the American University of Beirut. Chaaban argues that the increase in VAT and other indirect taxes was the main driver behind rising inflation, and that the resulting rise in the costs of doing business had really hurt consumer prices.

Two other economists who Executive spoke with had not yet definitively pinpointed the reasons behind the inflation increase. Louis Hobeika, an economist at Lebanon’s Notre Dame University, expressed surprise at the increase, saying he thought that the year-on-year 7.6 percent inflation figure was a high estimate. He suggested looking to the central bank’s inflation rate (4.5 percent for the full year of 2017) for a more conservative indicator. Kamal Hamdan, of the Consultation and Research Institute, is still mulling over how to explain the upward trend. He argues that the inflation rate suggests something abnormal, and lists a few possible reasons, including the increase in the price of meat, fruits, and vegetables. But he said that the regulated price formula for fuel imports had somewhat tempered the effect of fuel prices on the CPI.

Prices are rising in Lebanon, and the country has not been able to boost economic growth for several years now. This summer, Moody’s, a credit rating agency, forecast only “a modest rise” in Lebanon’s GDP growth, at 2.5 percent this year, up from 1.9 percent in 2017. Textbook economics would suggest that higher inflation coupled with low economic growth could lead Lebanon’s economy to stagflation.

The higher oil prices and weaker US dollar point toward Lebanon’s year-on-year inflation rate as an imported phenomenon. Experience has taught us that Lebanon has a hard time insulating its economy from external pressures. It is possible that November’s reapplication of unilateral sanctions by the US targeting Iran’s oil exports could result in an oil price spike, which may push inflation even higher in Lebanon.

0 comments
0 FacebookTwitterPinterestEmail
Economics & PolicyIran deal

Iran showdown threatens Lebanon’s economy

by Jeremy Arbid
written by Jeremy Arbid

It is common knowledge that Lebanon is in an economic rut. The six-year war in neighboring Syria has negatively impacted the local economy, just as domestic politics, particularly the two and a half year presidential void, eroded confidence and piled on pressure. While government formation following May parliamentary elections has carried on through the summer, the expectation is that the next cabinet will at least partly endorse reforms promised at this year’s CEDRE conference in order to unlock donors’ pledges for infrastructure investment.

Commitments made at CEDRE, held in Paris in April, may be necessary to keep the Lebanese economy afloat—if waves from regional disturbances do not sink these plans first. A July report from credit rating agency Moody’s forecast only “a modest rise” in Lebanon’s GDP growth, to 2.5 percent this year, up from 1.9 percent in 2017. But the accompanying press statement also suggested that geopolitical unrest could damage confidence and disrupt Lebanon’s CEDRE dreams. Syria’s civil war may be all but over, but a potential showdown between the United States and Iran may hurl swells Lebanon’s way.

The Donald effect

In May, US President Donald Trump announced that his country would withdraw from the Iran deal, formerly known as the Joint Comprehensive Plan of Action (JCPOA), and would begin unilaterally reapplying sanctions against Iran that had been removed as part of the deal. American sanctions will be reinstated over two “90-day and 180-day wind-down periods for activities involving Iran,” according to the US Treasury Department website. The first wind-down period ends on August 6, with sanctions resuming on certain Iranian activities.

But it is the second wind-down period, which will end on November 4, that has greater implications for Lebanon and the global economy. This period will see American sanctions reapplied to key Iranian trading and energy activities, targeting: Iranian port operators, shipping companies and shipbuilders; petroleum-related purchases from Iran; provision of underwriters, insurance, and reinsurance; and Iran’s energy sector. On November 5, the United States will formally revoke government authorization for American companies to do business in Iran, and will reimpose sanctions on entities that were removed in 2016 from the SDN list—the Specially Designated Nationals list, produced by the US Office of Foreign Assets Control, which names individuals, groups, and entities whose assets are blocked by the US and with whom US nationals are generally prohibited from dealing. American and foreign entities currently doing business in the specified areas of activity are, according to an FAQ published by the Treasury, “advised to use these time periods to wind-down their activities with or involving Iran that will become sanctionable at the end of the applicable wind-down period.” Those that do not comply with the American directive could be sanctioned themselves or targeted by US law enforcement.

United we stand?

The United States wants to significantly reduce Iran’s crude oil sales. US Secretary of State Mike Pompeo has said the Trump Administration wants to curb exports of Iranian oil from some 2 million barrels of oil per day to “as close to zero as possible” by the end of 2018. But can this happen unilaterally?

If the United States is to pressure Iran effectively, it will need other countries to comply with American directives. So far, there have been mixed signals from governments around the world about following the lead of the US, and the private sector has its own interests.

Turkey has already said it may not recognize the reimposition of American sanctions. “The decisions taken by the United States on this issue are not binding for us,” Nihat Zeybekci, Turkey’s economy minister, said, in comments published by Hürriyet Daily News in late June. Turkey shares a land border with Iran and was allegedly facilitating gold transfers to Iran (gold is not registered in the banking system) to bypass sanctions.

Whoever is willing to cross the US and continue to deal with Iran, however, must also be able to protect themselves from American sanctions and risk a possible downturn in their relations with the US. It remains to be seen whether any countries are capable of doing so.  The Indian government has said it may not comply with unilateral American sanctions. India does not always align with the United States geopolitically, having struck some Russian military agreements in the past. But its private sector may have other interests. Likewise, despite European Union leaders wanting to keep the Iran deal alive, EU companies have been fleeing the Iranian business scene in droves because they do not wish to jeopardize their standing, assets, holdings, or activities in the American market. China is posited as one possible savior for Tehran, if the Europeans are unable or unwilling to salvage the Iran deal—but will China have the appetite to absorb Iranian oil and invest where Western companies pull out? A Lebanese senior public banking official told Executive that it does not seem likely the Chinese will be wholly capable of filling the void left by the likely European exodus, and speculated that because of ongoing nuclear weapons negotiations between the US and North Korea, and the specter of a trade war between the US and China, the Chinese may not wish to further antagonize the Americans at this stage.

The price of oil

Data from the US Energy Information Administration (EIA) shows Iran’s oil exports increased by 70 percent after sanctions were lifted. In 2015, Iran exported over 1.1 million barrels per day, and by 2016 it was exporting almost 1.9 million. Exports reached 2.13 million barrels per day in 2017, according to the Iranian oil ministry’s news agency, Shana. In July, Shana reported the previous month’s exports at 2.28 million. If the United States is successful in cutting down Iran’s oil exports, who can fill the gap to keep global oil prices stable?

It will not be easy to fill the supply gap produced if the Iranians are forced to give up market share, says Mona Sukkarieh, a political risk analyst and a frequent contributor to Executive on oil and gas topics. Sukkarieh says supply disruptions from other oil producers may make it difficult to cover an Iranian supply gap, pointing specifically to the ongoing political and economic crisis in Venezuela that has affected that country’s production and exports. Ups and downs in Libyan production has also proven difficult to address, she tells Executive. At the June 2018 OPEC/Non-OPEC meeting, it was agreed to boost supplies by bringing overall compliance to the initial production adjustment reached on November 2016 to 100 percent, after it had reached 147 percent in May. But the crisis in Venezuela, sanctions on Iran, further disruptions or declines in production here and there, possible geopolitical shocks, and so on mean that further efforts will be required. The dynamics will start to emerge toward the end of the year, in time for the next OPEC/Non-OPEC meeting.

Market disruption

If the Iranian oil supply to the market is disrupted, it could cost price shocks and keep the cost of a barrel of oil high. Reuters’ most recent  poll of oil analysts and economists (conducted and published in June) saw forecasts of increased future oil prices. The respondents thought the cost of oil would stay above $70 per barrel, citing the same reasons that Sukkarieh gave Executive.

We still do not know what, if anything, was agreed upon at the Trump-Putin summit held in Helsinki in July, but any agreement between Russia and the United States related to the Middle East is likely to be partly shaped by Russian efforts to limit Iranian presence in the south and southwest of Syria. The Israelis have been lobbying against having any Iranian presence near their border for some time, and the country reportedly secured security guarantees from the US and Russia at the Helsinki summit.

A tripartite deal involving Russia, the United States, and Saudi Arabia may also be in the works. As long as the Saudis and Americans can work together regarding oil production, they might strongly coordinate global oil prices. The experience of 2014 and 2015 was that the Saudis were displeased with the ratcheting up of oil shale in the US. The increase in production due to shale extraction was accelerated by its technical feasibility, and this was instrumental in pushing oil prices below $50 a barrel. The Saudis, by maintaining their production levels, kept global prices low and sought to force shale extractors to halt their development of production capacity, which came at high cost to the kingdom and became unsustainable around 2015. After Trump’s inauguration in early 2017, there was sudden outburst of oil driven friendship between his administration and Crown Prince Mohammad bin Salman (known as MBS), who was appointed heir to the Saudi throne around the same time. It may be possible that a coordination of interests between Trump and MBS could be directed against Iran, to make sure there is a balance of whatever pressure is placed on Iran to limit oil trading in global markets.

Domestic repercussions in Iran as a result of the sanctions are also uncertain. It is true Iranians continue to protest the worsening economic situation in the country, but it is questionable and maybe wishful thinking by observers that this street pressure could lead to regime change. There may not be enough internal momentum. The Iranians are still trying to salvage the JCPOA and comply with its requirements. European analysts think that the country is playing the waiting game, and probably praying that Trump will not be reelected in 2020.

If American sanctions do curb Iranian oil exports, a rising oil price could prove positive for Lebanon given that so many of its nationals work in oil-producing countries in the Gulf and send cash back home in the form of remittances. However, higher oil prices could offset these gains by rising inflation and higher government expenditures for fuel purchases to produce electricity. It is still too early to say what will happen regarding Iran, or how Lebanon might be affected. In a worst-case scenario, any wide scale military confrontation against Iran by the US would paralyze Lebanon’s politicians and sink CEDRE plans.

0 comments
0 FacebookTwitterPinterestEmail