Lap­ping up man­age­ment of health and dis­eases

Chang­ing TPA busi­ness mod­els in med­i­cal in­sur­ance

Executive Magazine - - SPECIAL REPORT -

As the tide of trans­for­ma­tion in the in­sur­ance in­dus­try makes its way across ge­ogra­phies and busi­ness lines, it not only floods the field’s core play­ers with un­cer­tainty, but it also af­fects busi­ness mod­els in aux­il­iary ven­tures af­fil­i­ated with in­sur­ance. One im­por­tant aux­il­iary area con­sists of en­ter­prises that en­gage in the man­age­ment of med­i­cal in­sur­ance claims. Called third-party ad­min­is­tra­tors or TPAs, en­ter­prises in this spe­cialty ser­vices in­dus­try bun­dle the han­dling of med­i­cal claims for a va­ri­ety of pay­ers – in­sur­ers, mu­tual health­care mu­tual schemes and self-in­sured or­ga­ni­za­tions or cor­po­ra­tions.

The TPA busi­ness model historically has added value to in­sur­ance by pro­vid­ing a layer of ef­fi­ciency through man­age­rial skills and bar­gain­ing power vis-à-vis health­care providers due to the economies of scale in­volved. While many in­sur­ers lo­cally and re­gion­ally might run their med­i­cal claims de­part- ment un­der the ti­tle of TPA, the role of gen­uine “third-party” or­ga­ni­za­tion that is in­de­pen­dently serv­ing nu­mer­ous pay­ers has for more than two decades most strongly associated in Le­banon with the TPA GlobeMed (for­merly MedNet).

How­ever, what was a stri­dent growth busi­ness in the 1990s and early 2000s (GlobeMed cel­e­brated its 25th an­niver­sary in Beirut in May 2016) cur­rently faces pres­sures that re­quire se­ri­ous in­no­va­tion, con­cedes Walid Hal­las­sou, the gen­eral man­ager of GlobeMed Le­banon. “The med­i­cal in­sur­ance busi­ness is be­com­ing less of an in­sur­ance story and more of a man­age­ment one. We re­al­ized that op­por­tu­ni­ties in terms of healthy growth in the port­fo­lio through new in­sur­ance com­pa­nies or self-funded schemes were not very vis­i­ble,” he tells Ex­ec­u­tive.

As he de­scribes the sit­u­a­tion, ti­dal pres­sures and cross­winds buf­fer the TPA busi­ness model

from dif­fer­ent di­rec­tions. One fac­tor is med­i­cal in­fla­tion through new medicines and im­proved treat­ment meth­ods. Like in­fla­tion, which has be­come un­der­stood as a good thing for the econ­omy when it oc­curs in mod­er­a­tion, the rate of in­no­va­tion in med­i­cal treat­ments is on the whole re­garded as ben­e­fi­cial to the pa­tient. How­ever, it is also associated with in­creases in costs for pa­tients and their cov­er­age providers. In any case, this rise in costs can­not be stopped and a TPA’s ca­pa­bil­ity to mit­i­gate im­pacts of med­i­cal in­no­va­tion through con­trol of treat­ments and hospi­tal ad­mis­sion pro­ce­dures is lim­ited.

Also com­pletely out­side of the con­trol of a TPA is the boost fac­tor in med­i­cal treat­ment costs that is re­lated to chang­ing de­mo­graph­ics. Pop­u­la­tions in the Mid­dle East are age­ing, and the shift of coun­tries char­ac­ter­ized by high pop­u­la­tions un­der 30 to so­ci­eties with grow­ing pop­u­la­tions over 60 is, well, only a mat­ter of time. Whether their needs are for treat­ments or long-term care­giv­ing, older pop­u­la­tions have higher med­i­cal re­quire­ments that are also associated with higher costs. With these two driv­ing el­e­ments, med­i­cal in­fla­tion has be­come a fact of life for TPAs.

On the other side of this equa­tion, how­ever, stand re­straints on their abil­ity to pass on higher costs to the in­sured pop­u­la­tion through in­creased pre­mi­ums. As TPA clients, com­mer­cial in­sur­ers face a trade-off where higher med­i­cal in­sur­ance pre­mi­ums trans­late into lower num­bers of an in­sured clien­tele. Un­der ei­ther sce­nario of sta­ble pre­mi­ums and con­tract­ing mar­gins, or of higher pre­mi­ums and shrink­ing client num­bers, the po­ten­tial for or­ganic busi­ness growth from man­ag­ing med­i­cal claims ap­pears to be much lower than in the past.


In re­sponse to these re­al­i­ties, GlobeMed has de­vel­oped a strat­egy of en­cour­ag­ing and as­sist­ing peo­ple to stay healthy, Hal­las­sou tells Ex­ec­u­tive. He ex­plains that the TPA can only avert hav­ing to pay hospi­tal bills for its in­sur­ance clients by pro­mot­ing health and well­ness among its healthy clients and by pro­vid­ing dis­ease man­age­ment to clients with known ail­ments or vul­ner­a­bil­i­ties to­keep them out of hospi­tal as much as pos­si­ble.

“We told our­selves that it is bet­ter if we can stop peo­ple from be­ing ad­mit­ted to hospi­tal. [The idea is] to tell them them, ‘stay healthy, go see your doc­tor and do the tests, [and] pre­vent your dis­eases. Let us man­age you out­side the hospi­tal.’ There are so many ways for health to be man­aged. This is where we try to push, and we have de­vel­oped well­ness pro­grams, pre­ven­tion pro­grams and dis­ease man­age­ment pro­grams,” Hal­las­sou says.

A first prac­tice un­der the new strat­egy was ini­ti­ated in 2016 with a dis­ease man­age­ment pro­gram for di­a­betes suf­fer­ers. The pro­gram in­cludes en­cour­ag­ing pa­tients to take tests such as HbA1c, which shows long-term av­er­age blood su­gar lev­els – and mak­ing in­sur­ance providers ac­cept to pay for these tests. The eco­nomic ra­tio­nale for of­fer­ing the test to the in­sured is based on global ev­i­dence, which in­di­cates that low­er­ing HbA1c av­er­age blood su­gar

We told our­selves that it is bet­ter if we can stop peo­ple from be­ing ad­mit­ted to hospi­tal

lev­els by one per­cent­age point can ex­po­nen­tially lower the num­ber of com­pli­ca­tions that re­quire hos­pi­tal­iza­tions, or emer­gency room ad­mis­sions.

Ac­cord­ing to Hal­las­sou, pa­tients in the pi­lot pro­gram for man­ag­ing di­a­betes with as­sis­tance from GlobeMed have now re­ceived alerts for their health ex­ams for al­most a year. “We call them and send them an SMS that it is time for their test, we help them get the re­sults, and we rec­om­mend ac­tion. All of this is go­ing in the di­rec­tion of im­prov­ing the health of the pop­u­la­tion,” Hal­las­sou says.

While it is still too early to as­sess the fi­nan­cial ben­e­fits of re­duc­ing treat­ment needs un­der the cam­paign, there has been a re­duc­tion of 10 and 12 per­cent in in-pa­tient ad­mis­sions and emer­gency room vis­its in a test pop­u­la­tion dur­ing 2016 un­der the GlobeMed di­a­betes dis­ease man­age­ment pro­gram, ac­cord­ing to af­fil­i­ated well­ness partner GoodCare Clin­ics.

In fur­ther de­vel­op­ment of dis­ease man­age­ment pro­grams, the TPA plans to roll out to as­sist in dis­ease man­age­ment of car­dio­vas­cu­lar and pul­monary suf­fer­ers. Other mea­sures un­der the health-fo­cused strat­egy are to pro­mote well­ness and pre­ven­tive ac­tiv­i­ties to in­sured pop­u­la­tions. As a dig­i­tal tool for these mea­sures, GlobeMed in­tends to re­lease a mo­bile ap­pli­ca­tion in the near fu­ture, which Hal­las­sou de­scribes as “a well­ness app” and “not an in­sur­ance app.”

Func­tion­al­i­ties will in­clude es­tab­lished ones like count­ing steps and calo­ries burnt by walk­ing, but the app will also con­tain coun­try-spe­cific data­bases of avail­able foods, al­low­ing users in Le­banon, Saudi Ara­bia or Egypt to en­ter in­for­ma­tion about the food they are about to con­sume and re­ceive in­for­ma­tion on what eat­ing this food means in terms of in­take of calo­ries, su­gar, fat or the health-boost­ing min­eral potas­sium. Hal­las­sou says that the app will en­able GlobeMed to alert peo­ple if they eat some­thing they shouldn’t in­dulge in for the sake of their health. It can also give re­minders on when to take med­i­ca­tions, alerts of in­ter­ac­tions be­tween medicines, store med­i­cal records and test re­sults and – hav­ing an in­sur­ance re­lated func­tion after all – sup­port and track in­sur­ance ap­pli­ca­tions and re­im­burse­ments.

The new app also fits into an in­dus­try sce­nario, whereby dig­i­tal tech­nol­ogy and con­sol­i­da­tion in in­sur­ance rep­re­sent fur­ther cross­winds in the path of GlobeMed and the TPA model. On the dig­i­tal front, the en­vi­ron­ment in which TPAs op­er­ate is chang­ing be­cause new­fan­gled apps and dig­i­tal gad­gets lead to cus­tomer be­hav­ior mod­i­fi­ca­tions and changed ex- pec­ta­tions in the com­pa­nies that take care of in­sured pop­u­la­tions, with an over­all in­crease in the im­por­tance of dig­i­tal tools and coun­try-spe­cific sys­tems that an in­surer can op­er­ate on­line.


As to the other cross­wind, con­sol­i­da­tion in the re­gional in­sur­ance in­dus­try is a ne­ces­sity but also mixed bless­ing for the TPA busi­ness. To­day, the Mid­dle East houses a large num­ber of in­sur­ance providers, over 100 of which have con­tracts with GlobeMed to use the TPA. These are all small com­pa­nies by in­ter­na­tional com­par­i­son, and they are not ca­pa­ble of man­ag­ing their claims in-house, hir­ing an ac­tu­ary or hav­ing a dig­i­tal trans­for­ma­tion, ex­plains Ziad Kharma, GlobeMed group’s vice-pres­i­dent for busi­ness de­vel­op­ment, ac­tu­ar­ial and in­ter­na­tional health ser­vices.

Con­sol­i­da­tion with a field of so many play­ers is nec­es­sary and de­sir­able, he tells Ex­ec­u­tive, but it also means that the needs of health in­sur­ance providers will change. “We rec­og­nize that these com­pa­nies are go­ing to get big­ger, and a lot of them are al­ready get­ting larger, to the point where they won’t need a TPA any­more. This is why our strat­egy is not just to have a TPA fran­chise, as we do, but to add a ven­dor line where we sell our sys­tem so that in­sur­ance com­pa­nies, for ex­am­ple, can man­age their own,” Kharma says.

While he ac­knowl­edges that soft­ware sys­tems de­signed for the ad­min­is­tra­tion of health man­age­ment pro­cesses and med­i­cal in­sur­ance claims han­dling are avail­able from many large in­ter­na­tional soft­ware firms, he em­pha­sizes that GlobeMed has de­vel­oped its own sys­tems over the past 25 years and that these sys­tems are cus­tom­ized and lo­cal­ized for their mar­kets. “We have de­vel­oped our sys­tem from our ex­pe­ri­ence as a TPA, and this is some­thing that we are pack­ag­ing and sell­ing now as a so­lu­tion on its own,” he says.

The logic be­hind this pivot from be­ing a TPA into of­fer­ing sys­tems is to cap­ture the po­ten­tial for do­ing busi­ness with in­sur­ance com­pa­nies, which grow to a scale where they have enough clout in price ne­go­ti­a­tions with health providers and can reap the prof­its of ef­fec­tive med­i­cal claims man­age­ment through their own claims depart­ment. “When in­sur­ers are get­ting

As to the other cross­wind, con­sol­i­da­tion in the re­gional in­sur­ance in­dus­try is a ne­ces­sity but also mixed bless­ing for the TPA busi­ness

big­ger, they are not in need of a TPA, they need a sys­tem, and this sys­tem will in­clude dig­i­tal plat­forms to man­age health­care,” Kharma ex­plains. Ac­cord­ing to him, GlobeMed is ven­tur­ing into the pro­vi­sion of sys­tems with a mul­ti­pronged ap­proach. We have the op­tion of on-premises setup and of­fer busi­ness process out­sourc­ing; we are very flex­i­ble,” he says.

Note­wor­thy in re­gards to the group’s cor­po­rate struc­ture is that the GlobeMed brand is not op­er­ated by a mono­lithic com­pany, but by a twin set or cor­po­ra­tions con­sist­ing of GlobeMed Lim­ited – a com­pany reg­is­tered in the Bri­tish Vir­gin Is­lands – and of lo­cal en­ti­ties in dif­fer­ent coun­tries. “GlobeMed Lim­ited is the hold­ing and the owner of the IT and the know-how and brand,” ex­plains Hal­las­sou. “Our model is a fran­chise model, so each of our op­er­a­tions is a fran­chise, and we trans­fer to them our know-how – how to man­age a claim, how to do un­der­writ­ing, how to set up a net­work,” adds Kharma, who notes that GlobeMed Ltd could en­gage in a coun­try fran­chise with­out hold­ing any eq­uity.

In most coun­tries, the two en­ti­ties are akin to fra­ter­nal cor­po­rate twins that share a brand iden­tity but have ge­netic (own­er­ship) dif­fer­ences from each other. In some ju­ris­dic­tions, GlobeMed Lim­ited par­tic­i­pates with as lit­tle as 5 per­cent in the eq­uity in the lo­cal fran­chisee that op­er­ates the TPA, and in some, such as Syria, GlobeMed Ltd. holds all the eq­uity. In Le­banon, the two com­pa­nies are more like iden­ti­cal cor­po­rate twins un­der share­hold­ing struc­tures, where the same ba­sic in­vestors own GlobeMed Le­banon through a com­pany called Murex Hold­ing and the BVI com­pany, GlobeMed Ltd.

When in­sur­ers are get­ting big­ger, they are not in need of a TPA, they need a sys­tem, and this sys­tem will in­clude dig­i­tal plat­forms to man­age health­care


An ad­verse force in the com­pany’s path, for GlobeMed un­avoid­able – and in busi­ness terms not un­usual but rather ex­pected – is ris­ing com­pe­ti­tion. Whereas the Le­banese com­pany once could claim undis­put­edly to be the largest TPA in the Mid­dle East, it has in re­cent years been chal­lenged in re­gional mar­ket lead­er­ship by Dubai-based NEXtCare. This TPA, whose cor­po­rate par­ent is the multi­na­tional in­sur­ance car­rier Al­lianz of Germany, claimed last month on its web­site to have 3 mil­lion “man­aged lives,” mean­ing in­di­vid­u­als with med­i­cal cov­ers pro­vided by com­mer­cial in­sur­ers, cor­po­rates, and pub­lic sec­tor en­ti­ties that are han­dled through the com­pany. NEXtCare, more­over, said on its web­site that it had a provider net­work in 14 coun­tries with a to­tal of 11,000 prac­ti­tion­ers, clin­ics and hos­pi­tals around the re­gion.

Kharma claims that the re­gional pres­ence of NEXtCare is not as wide as GlobeMed’s but ad­mits that “NEXtCare is the pri­mary com­peti­tor for us, and I think we both drive each other to stay ahead of the other.” Judg­ing from other in­for­ma­tion avail­able from the cor­po­rate web­site and sources in in­sur­ance com­pa­nies, NEXtCare is strong­est in Dubai. It is pur­su­ing growth in re­gional ex­pan­sion, which took it to es­tab­lish of­fices in other GCC coun­tries, the Le­vant, and re­cently Egypt. Ac­cord­ing to sources, the com­pany will be a spon­sor of an in­sur­ance con­fer­ence in Le­banon next month, and it is re­puted to em­ploy com­pe­ti­tion on price in its growth strat­egy.

Un­for­tu­nately, how­ever, NEXtCare de­clined to be in­ter­viewed on jour­nal­is­tic terms by Ex­ec­u­tive last month or re­spond to a list of ques­tions after hav­ing re­quested this list from the mag­a­zine through its pub­lic re­la­tions com­pany. After be­ing con­tacted by Ex­ec­u­tive, the “key num­bers” in­for­ma­tion on the NEXtCare cor­po­rate web­site was re­vised to say the com­pany has over 4 mil­lion man­aged lives and a partner net­work of over 13,000 providers in 12 coun­tries. Not hav­ing been able to in­ter­view a de­ci­sion-maker in the com­pany, Ex­ec­u­tive can­not con­firm if these were 2016 NEXtCare num­bers, re­port on the com­pany’s cur­rent strate­gies or com­pare its cor­po­rate struc­ture and po­si­tion in GCC or Le­vant mar­kets with that of GlobeMed.

Ac­cord­ing to Kharma, GlobeMed has more than 1,200 em­ploy­ees re­gion­ally, works with over 100 pay­ers, has over 17,000 health providers un­der con­tract, and serves be­tween 4 and 5 mil­lion peo­ple – when one in­cludes those who ob­tain ser­vices through the Min­istry of Pub­lic Health in Le­banon. In con­clu­sion, it may be a moot ques­tion which TPA is cur­rently the size leader in the Mid­dle East in terms of man­aged lives and net­work. As only a small por­tion of the re­gional pop­u­la­tion is cov­ered by any man­aged health­care scheme, it seems clear that the need for evolv­ing the ad­min­is­tra­tion of health and med­i­cal ser­vices to more in­clu­siv­ity is greater than the po­ten­tial for com­mer­cial providers to do so prof­itably.

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