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Islamic Finance And The Blockchain In Healthcare Increasing Medical Costs Is A Risk To Global Health


As the global spending on healthcare passes the seven trillion-dollar mark, a new type of global financing mechanism is required, specifically, one that combats rampant medical inflation (700%) and taps into the potential of the growing trend of medical tourism.

Underlying this increasing cost in healthcare services is the growing global population and the rise in unhealthy lifestyle, which places a correlative burden on chronic diseases such as obesity, heart disease and diabetes. Diabetes is directly linked to the prevalence of obesity, which in many countries can plague between 30 to 66% of the population. When it comes to chronic diseases, the top 10 countries are estimated to have around 30% of the adult population with diabetes type 2. This is indeed alarming, as diabetes has been linked to an increased hospitalization risk of over 400%.

The Global Medical Tourism Market was worth over USD20 billion in 2016 and estimated to be growing at a CAGR of close to 20%. It is estimated that the global medical tourism market will reach USD50 billion by 2022.

Medical tourism is defined as travel across countries with the reason for benefiting from medical treatment of some form, which might not be accessible in the travellers’ nation of origin. This treatment may incorporate a wide cluster of therapeutic services. However, the most frequently profited services include dental care, elective surgery, fertility treatment, and cosmetic surgery. Developed nations like the US, Germany, UK, Japan, Canada, and France offer highly advanced treatments. So, patients travel to such destinations when quality care is not available in their respective countries.

High treatment costs and long waiting time surrounding the circumstances for medical procedures, advancements in technology and development of the market are major factors driving the growth of the market. Stringent documentation forms, issues related to visa endorsement, and limited protection scope are some limitations faced by this market. On the other hand, developing countries with evolving innovation and technology are fueling the market.

On a regional level, it is no secret that the Gulf Cooperation Council (GCC) governments are spending billions of dinars, riyals and dirhams on upgrading their traditional healthcare infrastructure. Local and regional newspapers are filled with stories on newer, bigger and flashier hospital projects.


Saudi Arabia’s most recent budget includes funds for 19 new medical cities in addition to the 102 hospitals currently under construction in the Kingdom with around 9 of these projects having strong involvement from the private sector. The Kuwaiti Ministry of Health is planning approximately USD5 billion worth of hospitals and medical towers to upgrade its current infrastructure. Abu Dhabi and Qatar are both building multibillion-dollar hospitals and medical (research) centres with both the Cleveland Clinic Abu Dhabi and Sidra Medical Research Center slated to come online within the next few years.

In Dubai, the picture is a bit different, and despite the Dubai Health Authority’s USD816 million and USD43.8 million upgrades to the Dubai and Rashid hospitals respectively, most of the hospital and clinic capacity in the City of Life is being built by the private sector, which will enjoy a rapid boost when mandatory private healthcare insurance is fully implemented.

Dubai is truly unique in the sense that most hospitals in the GCC receive vast majority of their revenue from the traditional Fee-For-Service or FFS model, whereby patients pay out-of-pocket for medical services. This is not the case in Dubai where most of the revenue for private sector hospitals comes from private health insurance reimbursements.


One solution could be a takaful-inspired token that uses a blockchain-based payment system and financing solution that combats medical inflation by assigning a unit of value to certain high-demand diagnostic-related groups (DRGs) that are not covered by traditional healthcare insurance. Such a takaful token could be developed as an ERC-20 utility token, built using smart contracts on the Ethereum blockchain using a tired and true technological infrastructure powered by an open-source enterprise blockchain software firm working with a broad blockchain ecosystem.

This takaful token would be accepted at top hospitals and clinics, which are part of a single Patient Portal and Payment System. A key component of any successful preventative healthcare plan are the incentives used to encourage participants to lead healthier lifestyles. As a crypto-first solution, these takaful tokens can be earned through the wellness loyalty program, which will be offered to both individuals who download a Patient Portal Application as well as through customised corporate Employer Health and Wellness Programmes.

Such takaful token will provide the global healthcare industry in general and the regional Middle East and South-East Asia medical tourism sector specifically with much-needed

  • Accountability
  • Consumerism
  • Combating Medical Inflation

This is perhaps one of the most interesting recent global trends in healthcare and it forms the crux of the Affordable Care Act (what is known loosely as Obamacare) in the United States. The main idea is that healthcare practitioners will no longer profit from the sickness of patients, but instead will be incentivized to keep patients healthy and encourage preventative and evidence-based medicine. This is, of course, nothing new. In the Fertile Crescent in 17th century BC, the Code of Hammurabi called for physicians to be paid only if their patients were healthy.

Fast forward to the Middle East today, where the aforementioned FFS model is the norm. GCC states are trying to reconfigure their healthcare systems (in which at least 80% of the spending is covered by the government) to a more sustainable and accountable system that includes strong involvement from the private sector.


Another interesting global trend in healthcare, which has affected other industries such as travel and tourism, is consumerism or a paradigm shift by which patients are taking increasing ownership of their own healthcare needs. Whether it is ‘shopping’ via the phone or online for the best-priced healthcare service, or even as far as self-diagnosing themselves prior to a doctor’s visit by browsing the multitude of online healthcare resources, the traditional paternal model of medicine whereby the physician’s word is the unequivocal law is slowly eroding. In particular, price transparency is an increasingly important global sub-trend since consumers have greater access to pricing information before availing the medical services. Also, insurers’ claims payments are lower, according to new research published in the Journal of the American Medical Association.

This healthcare consumerism is accentuated in the Middle East, as many Arabic medical portals do not have the proper oversight and peer-reviewed integrity as western websites. This is also enhanced by the high mobility of GCC patients who are not limited by the primary care gatekeeper model of medicine and instead prefer to be seen directly by a specialist or plunge themselves directly into an emergency room when a routine primary care visit would suffice.

Another issue is the lack of coordination of care when it comes to the medical consumer. The average person in the USA will see about 18 different doctors in their lifetime according to a survey by Gfk Roper. A similar case can be made for patients in the GCC, where it is probably an even more acute issue as many GCC patients do not have any rapport with a primary care physician and would be hard-pressed to even name their family doctor.

Within the topic of consumerism in healthcare, the Middle East has traditionally been known for outbound medical tourism to Europe, the UK, the US and even South-East Asia. But this dynamic is shifting, especially in Dubai. The GCC spends approximately USD12 billion (USD10 billion in government funds) sending patients abroad for life-saving surgeries, chronic cancer and physiotherapy.

Dubai is one of the few places in the Middle East region that has a solid medical tourism strategy and perhaps the strongest potential to become an international medical tourism hub. According to expert calculations, Dubai currently has a bed/population rate of 1.65 beds/000. The government of Dubai is planning to add over 400 hospital beds whereas the private sector will be adding around 2,486 beds which will increase the bed/000 ratio to 2.72 beds/000 in the next five years assuming a 3% growth in the population. This ratio is still far behind the 4 beds/000 ratio across the OECD but well above the GCC average of around 2 beds/000 meaning that Dubai facilities will need to attract patients (and demand) from outside of Dubai to meet this increasing supply.


Inflation in the healthcare sector has outpaced the inflation in the CPI by almost 700% over the past 40 years according to the US Bureau of Labor Statistics. Within healthcare, the largest cost bucket is typically the remuneration of healthcare workers. Whether it is the salaries of healthcare executives, clinicians or administrative staff, it is costing more and more to staff healthcare facilities and technology has still not been as disruptive in healthcare as in other industries. Only around 50% of doctors in the USA use some form of electronic health record (EHR) according to US-based Practice Fusion, and this number is substantially lower across the GCC. Another cost barrier is the high administrative costs associated with healthcare. This is estimated to be between 24 to 31% according to the research by the New England Journal of Medicine on the United States, which many experts agree is the world’s most bloated healthcare system as healthcare spending is between 16 to 18% of the GDP (the average is closer to 3 to 4% in the GCC).

Countering the lack of transparency and organisation in patients’ health records, the purpose of the blockchain is to provide a secure and private platform to amass one’s medical data historically and in real-time. The era of fragmented patients’ records is to be bygones.

This peer-to-peer network also lends itself to create an affordable and cost-saving mechanism and impact for health care cost in the long-term. How does it work? By converting real money into cryptocurrency, patients receive boosts in trade-in value with medical treatments within a supported network of hospitals and doctors. Its centralised format is an optimisation of what originally was an inflated cost structure, and is the collective and direct result of “investments”

A key takeaway is that health care, if not planned conscientiously could ultimately cost you, your family and your next generation in terms of inflated loans and unnecessary debt. It is a multi-faceted business that can both heal and harm. As a patient it is a birthright to concede with the most competent approach in your medical journey — and the intersection of Islamic Finance and the Blockchain is our vehicle.

Dr Razouki has over 15 years of experience in venture capital and private equity investment with a focus on healthcare and technology. He is the current Chief Business Development Officer of Kuwait Life Sciences Company (KLSC). Dr Razouki continues to work closely with the Council of Ministers of Kuwait and is currently advising the government on the development of the Sabah Al Ahmad National Genome Center together with the Kuwait Foundation for the Advancement of Sciences, a National Pharmaceutical Quality Control Laboratory, and the USD 1billion Jaber Hospital project.


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