'Unhealthy' competition: Delayed insurance payments put pressure on healthcare providers

Healthcare providers have been sustaining heavy operating expenditures by taking loans and investing more money to set up a new department that only handles insurance-related activities.

Healthcare providers in the UAE are facing serious challenges to ensure the quality of services to patients and sustaining their operations due to delayed payments from insurance companies. Leading healthcare players in private sector said insurance firms hold their payments - worth millions of dirhams - and have taken up to six months to be cleared, causing serious disruption in their cash flows, leaving them with no choice but to borrow from banks to continue running their operations.
Market insiders said healthcare providers have been sustaining heavy operating expenditures by taking loans and investing more money to set up a new department that only handles insurance-related activities. They said there were less than 600,000 policyholders in Dubai until 2013; however, the situation turned around when health insurance was made mandatory and more than 5.1 million medical insurance policies registered in the system.
According to Dubai Health Insurance Corporation's e-claims data from January to September 2019, gross claims worth Dh12.2 billion were processed through 7,752 healthcare providers, including group and single facilities.

Official data shows that there are more than 75 insurance companies and third-party administrators (TPAs), and over 12,280 insurance products available on the market. In terms of claims, electronic claims were 26.8 million, electronic prescriptions were 6.42 million, submitted claims activity was 87.7 million and 25,603 were physician claims.
Healthcare providers acknowledged the proactive attitude of authorities, who have introduced new regulations to make the whole process better and smoother for all stakeholders - individuals, healthcare providers and insurance companies.
According to the Dubai Health Authority (DHA), policyholders are able to benefit from services and health insurance packages anywhere in the country within the approved network that includes more than 3,000 health facilities and 20,000 accredited doctors.
"New policies introduced by the authority are making things easier for all the participants of Dubai's health insurance market, which is now generating more than Dh17 billion annually and includes 75 insurance companies that offer more than 12,000 insurance policies of various kinds and benefits," according to an official.

Healthcare providers under strain
Dr Azad Moopen, founder chairman and managing director of Aster DM Healthcare, said healthcare providers are under strain due to the delay in payments by insurance companies.
Unlike many other businesses, healthcare is one area where a large part of income has to be dispersed as salary to staff, irrespective of the receipt of dues from payers, he noted.
In earlier days, he said the cash component of the business was 70 per cent to 80 per cent, which help providers to settle the salaries for its staff.
"This is not possible now due to the fact that almost all the business is coming from insurance, which produces pressure on the providers. The working capital has increased several folds, which is causing strain in the sector," he said.  
To a question about payment delays, he said insurance company payments take, on average, three to six months. "There are companies that pay up within 100 days, which is very rare. Most of the insurance companies take five months on an average for paying up the dues. This has produced significant impact in our cash flow and increased bank borrowings," Dr Moopen said.
"Apart from the delay in payment, insurance companies also hold on to many payments by rejecting claims. The first pass rejection rate of some of the insurance companies is as high as 30 per cent. Even after resubmission, some of the insurance companies reject up to 15 per cent, which effects not only the cash flow but also reduces total cash inflow," he added.

Late payments put extra burden
Dr Atul Aundhekar, chief executive officer of Avivo Group, said revenue cycle management is experiencing extra burden due to delayed payments. "Healthcare providers find it very difficult to manage their cash flows in a healthy manner if these delays are not foreseen and anticipated in the cash flow assumptions," he said.
Elaborating, he said the DHA has tried to close this loophole this by regulating the revenue cycle management in 45 days and the whole billing-to-claim cycle to be wrapped up in 90 days. "Close monitoring and effective execution of this will lead to saving healthcare providers from delayed cash-in-cash-out cycle," he said.
Typically, he said insurance companies take 90-120 days for payment of claims. Some insurance companies, due to the increased percentage of rejections, delay the payment cycle by even more than six months.  
"In this scenario, the accuracy in claims and following the right approvals is the best practice one can follow. We make sure we follow best practices in pre-approval, claims, submission, resubmission, proper coding and appropriate paperwork with supportive evidence in the form of representation and documentation," he added.
"About 87 per cent of our revenue is locked into insurance receivables. Due to proper documentation and rigorous follow-ups, we actualise 50 per cent payment of all our claims in a timely manner, up to 30 per cent or more usually follows in 60-90 days. We always have 5-10 per cent bad claims that either we must write off or negotiate," Dr Aundhekar said.
On the reason behind delayed payments, he said it is usually due to claim rejections and resubmission re-rejections. "This significantly increases the time to get the claim settlement. These reflect as the delayed payments. In certain cases, medical insurance companies delay the payment on non-ethical administrative grounds, but because of supportive mechanisms by the DHA, these types of practices are becoming rare," he said.
New regulations to solve the problem
Ali Fareed Lutfi, head of payer regulation and licensing at Dubai Health Insurance Corporation (DHIC), said the government is fully aware of the situation and took appropriate steps to address the issue being faced by healthcare service providers.
He said the corporation has limited the claims and payment cycle of medical insurance claims between payers and providers as of October 2019.
"These new regulations stipulate both the period within which a provider has to submit a medical insurance claim and the timeframe within which an insurer has to pay the claim. The regulations grant the ability to the payer/provider to impose financial penalties on the other party if there is a delay in claim submission or claim payment," Lutfi said.
Prior to the above-mentioned regulations, he said the time taken for claim submissions and claim payment were mutually agreed upon between providers and payers, with the claim cycle regulations.
"With the introduction of the new regulations, the claim cycle will be standardised, it will become much more efficient and regulated and thus the duration including resubmissions from providers will become much shorter," he said.
Lutfi said the new regulations published in October 2019 should correct the imbalance and address the issue.
"DHIC tries to leave as much room for innovation and commercial arrangements between market participants. However, there are circumstances, such as this one, where our intervention is required. We feel this move will create a healthier and more balanced healthcare ecosystem in the emirate of Dubai," he said.
Asked if healthcare groups are cutting services or downsizing staff because of the cash flow issue while the rejection rate of medicines and other medical services is much higher, he said this is not true.
"As per our data, this is not a market norm nor is it a general trend in the market; this may be the case for certain providers and payers due to their own agreed arrangements.
However, the average rejection ratio across the emirate is reasonable and in line with other healthcare markets whereas the average waiting times are much quicker than most," he said.
Health insurance posts strong growth
The UAE health insurance market is presently witnessing strong growth following the government's decision to make health insurance mandatory. With a population of around 9.6 million, the UAE health and medical insurance market is growing at a faster pace and likely to post a 16.5 per cent compound annual growth rate during 2019-24. The UAE's health expenditure, which had hit Dh50.3 billion in 2018, is expected to increase 5.4 per cent to Dh53 billion in 2019.
Analysts said the UAE health insurance sector is overcrowded, with too many players competing for too little market share in the overall market. There are players with less than 0.01 per cent market share within the industry. They were of the view that mandatory health insurance provided a business boost to the insurance industry, but at the same time quality of health services is deteriorating due to rejection of claims, more waiting time at the hospitals and pharmacies.    
- muzaffarrizvi@khaleejtimes.com