Tariff determination
Council for Medical Schemes
1
Contents
• Complex contractual relationships
• Expenditure trends
• Public-Private Sector Imbalance
• Market concentration
• Market structure
• Statutory pricing framework
• Recommendations
• Conclusion
2
Medical Schemes(Mutual funds- Pooling function)
Contractual relationships(Different reimbursement models, Designated Service Providers and
Network arrangements, risk transfer arrangements )
Contractual relationships(Purchasing benefit options, payment of contributions, application of
scheme rules , access and/or limitations/ exclusion of benefits)
Complex contractual relationships
Co
mm
un
ity ra
ting
/ op
en
en
rolm
en
t /so
cia
l
so
lida
rity
Medical schemes third
parties (Administration, managed care, brokerage,
Actuaries etc.)
Pre
sc
ribe
d M
inim
um
Be
ne
fits /
co
rpo
rate
go
ve
rna
nc
e /p
res
crib
ed
so
lve
nc
y le
ve
ls
Partial regulation:
Private health care
providers (Acute & sub-acute hospitals, PHC
centres, , day clinics, step down
facilities , doctors, pharmaceutical
industry, other health care providers
)
Medical schemes members/beneficiaries
Distribution of healthcare benefits paid
4
37
,4
15
,8
7,3
6,8
5,9
5,4
5,3
4,4
4,4
2,3
2,1
2,0
0,7
0,0
0,1
37
,1
16
,5
7,3
6,7
6,3
5,4
5,3
4,7
4,3
2,4
2,1
1,2
0,7
0,1
0,0
37
,0
16
,4
7,0
6,5
6,4
5,2
5,1
5,0
4,2
2,4
2,0
1,9
0,7
0,1
0,0
0,00
5,00
10,00
15,00
20,00
25,00
30,00
35,00
40,00
Ho
spit
als
Med
icin
es
Dis
pen
sed
Sup
ple
me
nta
try
and
Alli
ed H
eal
thP
rofe
ssio
nal
s
Med
ical
Sp
ecia
lists
Ge
ner
al P
ract
itio
ner
s
Pat
ho
logy
Surg
ical
Sp
eci
alis
ts
Tota
l ou
t-o
f h
osp
ital
man
age
d c
are
arra
nge
men
ts
Rad
iolo
gy
Den
tist
s
An
aest
het
ists
Oth
er
He
alth
Ser
vice
s
Den
tal S
pec
ialis
ts
Ex-g
rati
a p
aym
ents
Med
ical
Te
chn
olo
gy
Per
cen
tage
(%
)
Distribution of healthcare benefits paid 2015 and 2016
2016 2015 2014
Total payment by provider type
5
R369,20
R757,59
R842,83
R956,61
R991,75
R1 010,66
R1 318,52
R1 744,23
R2 030,56
R2 935,67
R0 R500 R1 000 R1 500 R2 000 R2 500 R3 000 R3 500
General Practitioners
Pathology
Medical Technology
Dentists
Supplementary and Allied Health Professionals
Medical Specialists
Dental Specialists
Radiology
Surgical Specialists
Anaesthetists
Total benefits paid per event (visit) 2015
2016 2015 2014
PMB expenditure
6
-2,3%
0,9%
2,4%
2,8%
0,8%
-0,1%
-1,7%
2,7%
1,5% 1,1%
3,1%
1,2%
4,5%
4,5%
5,7%
5,3%
7,3%
5,3%8,4%
-
100 000
200 000
300 000
400 000
500 000
600 000
700 000
800 000
900 000
(10)
490
990
1 490
1 990
2 490
2 990
3 490
< 1
Yea
r
1-4 5-9
10-1
4
15-1
9
20-2
4
25-2
9
30-3
4
35-3
9
40-4
4
45-4
9
50-5
4
55-5
9
60-6
4
65-6
9
70-7
4
75-7
9
80-8
4
85 +
Num
ber
of B
enef
icia
ries
PM
B E
xpen
ditu
re p
bpm
Age
PMB Expenditure by age band for 2016 and 2015
Beneficiaries 2016 Beneficiaries 2015 PMBs 2016 PMBs 2015 Average PMBs-2016 Average PMBs-2015
Public-Private Sector Imbalance
Market concentration
8
HEALTHCARE PROVIDER MARKET
STRUCTURE
Province 1 Province 3Province
2Province 4
Province
6
Province
5Province 7 Province 9Province 8
Market Structure – Conduct-Performance
• Market structure informs spatial allocation
of resources.
• High concentration of resources in some
Incentivizes supply-induced demand
• Quality health outcomes
Market Definition: Provincial Postal Code
Level
Indicators:
• Density & Ratios
Availability of healthcare providers per 10,000
beneficiaries.
• National Market Share of Providers
Provinces that capture the largest share of
providers
Provider
Postal Code
Beneficiary
Postal Code
Provider
Postal Code
Beneficiary
Postal Code
Provider
Postal Code
Beneficiary
Postal Code
Market Structure – Conduct-Performance
Market structure informs spatial allocation of
resources.
• High concentration of resources in some
centres, leaves others underserved.
• Incentivizes supply-induced demand
• Quality health outcomes
Market Definition: Provincial Postal Code
Level
Indicators:
• Density & Ratios
Availability of healthcare providers per 10,000
beneficiaries.
• National Market Share of Providers
Provinces that capture the largest share of
providers
Market Structure – Conduct-Performance
• Market structure informs spatial allocation
of resources.
• High concentration of resources in areas
leaves others underserved.
• Incentivizes supply-induced demand
• Quality health outcomes
Market Definition: Provincial Postal Code
Level
Indicators:
• Density & Ratios
Availability of healthcare providers per 10,000
beneficiaries.
• National Market Share of Providers
Provinces that capture the largest share of
providers
Market structure
10
Descriptive trend
(National and provincial outline)
HASA hospitals , Independent Hospital Groups, Clinix Health Group , Public hospitals, NGO hospitals &
Other
Ownership & Market Share (Provincial distribution of the total number of facilities owned)
Number & type of beds
High care
Surgical
Medical
Day ward
Maternity
Specialised ICU
Neonatal ICU
Other (clearly defined)
Facility types
• Acute hospitals (clear definition required)
• Sub-Acute hospitals (clear definition required)
• Step down facilities (clear definition is required)
• Unattached operating theatres / Day clinics
• Rehabilitation Centres
• Palliative care Centres
• Mental facilities
• Provincial facilities
• Travel clinics
Market structure
Market structure
• Barriers of entry for low levels of care:
- Sub-acute facilities, outpatient surgery other
forms of step-down facilities.
- With regards to same-day surgery, it has
been acknowledged that the following
barriers are widespread
• Group practice vs sole practice
11
Ways to influence supply side
behaviour • Enabling factors:
– PMB review- a move away hospi-centrict
– Efficiency discounted options – valuable lessons to be learned
– The existing “silo-type” benefit option framework for medical schemesallows for risk-related pricing for common benefits offered by medicalschemes. This contradicts the intention of the Medical Schemes Act, as wellas of health policy in general.
– Section 29(1)(n) of the Act limits the potential pricing configurations formedical schemes to variations in income or number of dependents. Thislimitation, for instance, prohibits the Council from registeringarrangements where pricing varies exclusively on the basis ofalternative provider contracts. This prohibition is inappropriate andprevents schemes from creating and pricing benefits in a manner thatpromotes reasonable provider competition.
– Interim measure – EDO exemption framework ,Section 8 (h) MSA
Statutory pricing framework
Commission
Management
of
negotiation
chamber
Technical
Review of
Prices
Advice to
Minister
Independent
Arbitration
Courts(review but
no appeal)
Should be completely
independent to achieve the
trust of all stakeholders
Research Arm
Compliance
Investigations
Enforcement
Should consider the
role of the RPL &
Pricing Committee
Provide information to other
agencies where appropriate
Pricing Authority framework
14
• Impartial treatment - all affected parties
• Full transparency - all information supplied to,
used in, and produced by the process at all times
to all parties and the general public
• Opportunity to engage offered to all parties
• Evidence required for all positions taken by all
parties
15
Statutory pricing framework
Recommendations
• Function of tariff determination and OMRO to be considered under one authority– Efficient regulation- mindful of fragmentation
– Cost of private health care to demonstrated by quality health outcomes
• Synergies with HPCSA ethical tariff determination • CMS 2010 proposal on tariff determination
• Funding to consider tax burden:• Proposed OMRO funding
• CMS funding model
• Proposed NHI funding
16
• CMS has engaged in discussions with various stakeholders to explore a process of tariff determination.
• Consideration of CMS role:– 2006 NHRPL
– 2011 price determination framework
– Guideline for contribution increase
– Cost assumptions analysis
– Discussion with the Competition Commission of collection, analysis and reporting data on contribution increase inflation
– Quality health outcomes 17
Recommendations
Recommendations
• Bilateral negotiations are not always practical or
feasible
• A framework has to be established for negotiations
that are not bilateral.
• Preference for a collective or multi-lateral negotiation:
– All affected parties need to participate in the process.
– Address all technical issues relating to code structures and
billing rules
• Material impact on costs and behavioural incentives
• need to be properly and fairly negotiated.
18
• There are inequalities in accessing healthcare providers
• Inequality is larger for secondary care disciplines than primary care
disciplines
• Concertation of acute hospital services vs sub-acute care
– Anomaly – consider international trends
• Understanding where inequalities is important:
– Demonstrated through data from the tariff determination process
and quality health outcomes regulator
– Evidence can inform where networks should be encouraged; i.e.
network options, capitation options and EDO’s
– Approval of practice licensing
Conclusion
Conclusion
• Absence of Statutory Tariff Determination process
affects long term sustainability of the healthcare
sector:
– Maldistribution of financial and human resources
– Huge opportunity costs to the public & private healthcare
sector
– Welfare losses within the National Health System
– Limited impact affecting the economies of scale
20
Conclusion
• The OMRO and the Tariff Determination process will
create enabling environment for the following:
– Strategic purchasing
– Performance based reimbursement and contracting
– Quality health outcomes
– Review the impact of market concertation
– Provide an opportunity to explore and understand inefficient
supply and demand side factors
– Efficiency and equity within the national health system
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THANK YOU
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