TBY talks to David Hadley, CEO of Mediclinic, on bridging gaps and facing the realities of healthcare provision in Dubai and beyond.

David Hadley
David Hadley is the CEO of Mediclinic, which is owned by Mediclinic International. He has worked for Mediclinic International since 1993 and has enjoyed many positions throughout the company, including command positions in Human Resources, Finance, Operations and Hospital Management. Mediclinic sent Hadley to Dubai in 2007 to complete the Mediclinic City Hospital Project and to head up the opening of the company’s first "off shore" facility, which opened in 2008 in Dubai Healthcare City. David completed his commerce undergraduate education in South Africa, dividing his time between work and school, and holds a master's in Business Administration.

What are the major lessons from the acquisition of Al Noor so far?

Firstly, Abu Dhabi is a different business environment from Dubai. The differences are vast in terms of the economic situation, the regulatory environment, the government involvement, and the medical insurance market. We anticipated most of this beforehand, but the impact on the business has been greater than we expected. A major challenge has been the integration of the people and the distinct cultures of the two companies. We have retrenched over 400 people from the Al Noor campus in this integration and removed a lot of duplicate roles. Many of the facilities that we acquired need upgrading. The company was partially owned by a private equity company, which often results in delayed spending when they are going to sell it. We have also been working hard to get the right people in place in the right positions, which takes time.

The Health Authority Abu Dhabi has reduced the insurance coverage for Emiratis under the Thiqa plan and for expatriates and their families under Daman Insurance's Abu Dhabi Basic Plan. What effect has this had?

It has had a significant impact on our business and has made us reconsider future investments. Regarding Thiqa coverage specifically, which was announced on July 1, 2016, for all Thiqa members there would be 20% co-payment in the Abu Dhabi private sector and a 50% co-payment in Dubai. It is basically a directive to use government and semi-government (Mubadala) hospitals, which could be viewed as an anti-private move. We think that whilst a co-payment is an effective mechanism to manage utilization, it needs to be applied to the entire healthcare industry, be enforced, and should exclude certain uncontrollable services. The only providers currently exempt from collecting the co-payments are the Cleveland Clinic and Mubadala facilities, which does not support a level playing field within the private sector.

What initiatives could be taken to achieve a more sustainable healthcare system?

To manage quality, you need a proper ethical framework and environment, this should be the main focus of the regulators. There is a lot of corruption and fraud in the Abu Dhabi and Dubai healthcare market amongst certain providers, such as payment for referrals, payment for tests, non-collection of co-payments for example, which Mediclinic does not tolerate or advocate. This is causing problems in terms of quality and in terms of cost. Incorrectly aligned incentives such as payment for referrals and tests results in overutilization and thus inflates the cost. The second issue is that prices are too low in the Abu Dhabi market and people need to realize that if they want quality healthcare they will have to pay for it. That is why only correctly priced medical insurance networks support patients visiting Mediclinic facilities in Dubai. You cannot get to Mediclinic if you are on a AED600 a year health insurance premium, it is quite simple to calculate that those metrics will never stack up.

In what ways did the acquisition of Al Noor create more value for your shareholders?

It actually lost value for our shareholders in the short term because we paid a high price for Al Noor, but that is what you pay for healthcare companies these days. What the acquisition did do was to give us the ability to list in London and to grow the business. We used to be listed in Johannesburg, but the capital markets are a lot more fluid in London than in Johannesburg. Secondly, we were looking to grow into Abu Dhabi, and Al Noor was looking to grow into Dubai, so it made sense from a geographic point of view. It takes a long time to build a hospital, so if you can acquire a facility, upgrade it, change it, it would only take one or two years instead of five.