Rational Demand Planning for Healthcare in the UAE “Getting it Right.”

“If you build it, they will come.” (Field of Dreams, 1989) While this quote may a wishful adage of a baseball dreamer you may be surprised to find it true for healthcare utilization as well. Dr. Milton Roemer a Professor at the UCLA School of Public Health made a similar observation; a positive correlation between the number of short term acute care hospital beds per 1,000 population and number of hospital days used per 1,000 population as far back as 1959. In short, healthcare is unique in that in an unregulated market, supply generates demand. Ordinarily, market forces would regulate supply through downward pressure on supply reimbursement. However, in the absence of either a strict regulator or a resource-limited payor,  healthcare supply grows, unabated. 

Why does this matter?

After all, it is the sole discretion of the private sector as to whether they wish to invest in any given market. It matters because an unregulated healthcare market fails to serve the complete healthcare needs of a given population. Investors, understandably, chase returns. In the absence of acceptable returns, investors will stop investing. Yet, illnesses, diseases, and accidents don’t stop. As populations age, the prevalence of chronic disease increases. In essence, this is where the concept of the “Certificate of Need” (CON’s) initially developed. Healthcare regulators, in the United States, and elsewhere, developed licensure restrictions for the private sector, related to healthcare need (as adjudicated by undersupply and/or lack of timely access). Although far from perfect, these CON’s worked to avoid investment in the gross oversupply of specific healthcare services. Moreover, in the absence of an unregulated healthcare market, key clinical services and top clinical talent will simply not be sustainable. Over-duplication of similar clinical services will result in a reduction of volume-based competencies, and, ultimately, a decline in quality and patient safety. And this vicious cycle will only serve to ultimately erode net operating margins.  

Where is rational decision making today, in the United Arab Emirates?

Market studies by independent consultants abound, and, in and of themselves, can be quite self-serving. Yet, many private healthcare institutions are, in fact, flourishing in this environment. However, is our population being well-served by a plethora of super-sub specialty polyclinics and the newest acute care hospitals rising out of the sand? Although the quality of medical care being provided has increased throughout the region, much to the credit of our regulators, we continue to be flooded with more and more posh, acute care facilities providing the very same medical services, rendered from private and government competitors; often on the same city block. As an example: Abu Dhabi continues to lack a tertiary-care pediatric center and mental-health services continue to be in very short supply. Yet, there are no shortages of IVF centers or the latest dermatology/cosmetics centers. Why is this the case? In an unregulated market, pursuant to rational choice theory, investors will pursue optimal returns and therefore the best reimbursing clinical services.

 Carrots and sticks.

Having the privilege of working in both the public and private healthcare sectors, I firmly believe both are needed and necessary for a functional healthcare system. And both must work together, to serve the healthcare needs of the population. While the government can select where and how to place healthcare resources, the government must successfully utilize a combination of sticks and carrots necessary to entice the private sector to develop fewer “me too” services and invest in underserved healthcare projects. Examples of sticks are straightforward: licenses (e.g. CON’s). If the government  regulator deems a particular private investment as consistent with their demand projections, the license can and should be granted. But should the regulatory agency deem the proposed project unnecessary and therefore adequately supplied, no certificate or licensure should be granted. Carrots, on the other hand, can serve to entice the private sector to consider projects and services, that, heretofore, may not have been on their radar. Carrots in the form of higher, initial reimbursement, land grants, visa blocks, fast-track approvals, and government subsidies can all serve to attract the private sector to much-needed services, otherwise left underserved.

Rational demand planning requires the discipline to occasionally say “no, thank you.”

And simultaneously, it requires regulators to think and act creatively. As we hear more and more about “public-private partnerships” (PPP’s), it is critical that our regulators as well as the private investors work together to identify both over-capacity and under-capacity clinical services so that as we enter the next generation of healthcare in the region, we strive to develop a coherent, efficient, high quality healthcare system that simultaneously serves the needs of patients and investors. 

-HSP