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Healthcare Overutilization: Why South African medical schemes are still struggling with lowering overutilisation levels

12 March 2021 Medical Reviews International
Nir Kaminer at Medical Reviews International

Nir Kaminer at Medical Reviews International

Towards the end of 2019, South Africa’s Competition Commission completed the Health Market Inquiry report and published its findings. The first conclusion in the summary report states:

In our review of the South African private healthcare market we found that it is characterised by high and rising costs of healthcare (…) and significant overutilization, without stakeholders having been able to demonstrate associated improvements in health outcomes”.

Overutilisation of medical services is damaging South African society as a whole: it harms patients physically and psychologically; it wastes financial resources for the medical schemes which causes an inflation of premiums and it deteriorates resources in both public health and social spending.

Overutilisation of medical services is identified as the top factor driving up medical costs and whilst the full impact of the pandemic is yet to be realised, medical costs is South Africa are still expected raise by about 6% in 2021 (Willis Towers Watson, 2020).

The Competition Commission report then goes further in describing overutilisation in South Africa: “We have found that utilisation rates were higher than can be explained (…) and that excessive utilisation was a significant driver of healthcare costs”. Overutilisation is mostly driven by “Incentives in the market promote overutilization. In particular fee-for-service means that the more services practitioners provide, the greater their income, which creates a perverse incentive for profit maximising individuals or groups”.

According to South Africa’s Council for Medical Schemes, fraud, abuse or waste accounts for about 15% of the R160 billion in claims that medical aids pay out annually (CMS News, 2018). Referring to statistics from the Board of Healthcare Funders of Southern Africa (BHF), this added R22 billion in expenses to the R150 billion private healthcare industry (Omarjee, 2018).

Focusing on medical necessity alone, South Africa has, for example, a higher rate of cataract procedures than many other countries. There are high levels of unexplained admissions, length of care and level of care in hospitals, as admission rates increased significantly since 2010 and were higher than in all but two of 17 OECD countries (OECD Health Working Paper No. 85, International Comparison of South Africa). Utilisation rates in the private sector were higher than the average for 6 of the 7 procedures studied, and the highest of all countries for 4 out of 7 procedures studied.

The Council for Medical Schemes noted that doctors admitted patients when this may not be required, keep patients in hospital longer than may be needed, use a higher level of care than may be indicated as well as order greater numbers of often more expensive tests than are medically necessary. Some practices in particular drive-up costs, even though they appear to have no explicable basis.

The Competition Commission reports also found that supplier-induced demand (SID) is not uncommon in South Africa: “We identified over-servicing and SID as a feature in the private facilities market that may undermine competition and consequently harm consumers”. The Inquiry also found that all schemes have failed to adequately manage SID. Given that SID is known to exist in healthcare markets (and has been shown to exist in South Africa as well), the Inquiry report encourages medical schemes to force their administrators to actively manage SID in the interest of protecting scheme members’ health and the financial sustainability of schemes. The ability to effectively manage SID should be regarded as a competitive differentiator for administrators.

Healthcare market players in South Africa are aware of the risks and challenges that overutilisation brings and strategies to tackle cases of fraud and abuse are constantly being updated and implemented. However, despite many processes, systems and analytical tools, significant rates of overutilisation are still evident in the private healthcare system.

If overutilisation is so well documented, has high awareness levels and is being tackled by endless efforts and initiatives, how come it is still so widespread in the South African healthcare system?

MedRev (Medical Reviews International), an Ireland-based utilisation and clinical reviews organisation is tackling the global issue of healthcare overutilisation and started its first steps in the Southern African market just before the pandemic emerged. MedRev, through a combination of technology, analytics and its network of medical specialists, helps healthcare insurers to lower overutilisation levels and improve outcomes quality. According to Nir Kaminer, MedRev founder, South African healthcare schemes and their administrators are barking up the wrong tree when attempting to lower fraud, waste and abuse levels. The focus on fraud, waste and abuse prevention in South Africa receives more attention than in any other country we have seen, says Mr Kaminer, with dedicated professional summits, collaborations, provider’s programs, risk management tools, digital assets, forensic investigation units and creative benefits authorisation processes.

However, there is an over-reliance on data analytics and automated software solutions that approves cases only when they correct from data perspectives. These systems are looking at correlation between services rendered and tariff codes charged, they identify trends and predictive modelling outliers, they check prices and billing issues and etc. Cases are investigated further by the professional teams, only if they deviate from the pre-defined data related rules.

It’s easy to conclude then that the current processes are falling short of effectively tacking overuse, based on the evidence that such problems still exist in almost every area investigated.

The medical necessity question: According on MedRev’s international experience of reviewing tens of thousands of cases including few pilot projects in South Africa, if the question of medical necessity is posed, about 40% of the reviewed cases are determined as medically inappropriate, they fail to deliver best clinical outcome to patients and are wasting funds to the system.

MedRev implements a process where high-volume of cases are reviewed individually by specialty-matched physicians to determine if services provided were necessary based on evidence-based literature and established standards of care.

Specialists themselves are best at ensuring that treatment plan is optimized to the patient and they propose best course of action if requested. The specialist’s written reports are an effective structured approach that delivers an immediate positive impact on providers’ practice and behaviour.

This approach has been implemented in several international markets and the results are consistently positive, according to MedRev’s client’s experience. This is a subtle cost-effective method which is effective in reducing overutilisation levels, improving patients’ safety and promoting good healthcare practice.

South African market players are well aware of the problems and challenges that overutilisation brings and are willing to put the effort and resources to tackle these. In the post-Covid19 period, healthcare schemes will have to focus their attention on implementing the right processes and methodologies, rather than expect better results from managing the same exercise time and again.

Based on international best-practice combined with a South African physicians’ network, this approach of external specialists’ reviews for medical necessity will deliver better patient’s outcome, reduce overutilisation levels and lowers healthcare costs for the benefits of patients, schemes and the market as a whole.

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Covid-19 may accelerate certain industry trends. What are we likely to see?

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Adoption of contactless technologies and digital experiences will likely be accelerating emerging technologies further
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Value chain disruption is likely to lead to an increase in creative partnerships, which may in turn cause organisations to further invest in developing the mindset and agility to collaborate across sectors in the ecosystem
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