Looking for an equitable solution on cost containment

Since the National Reference Pricing List was set aside by the High Court in July 2010 and a tariff list for 2011 not being published, many medical schemes have been feeling their way around tariffs and increases this year, without much guidance.

Katy Caldis, CEO and Principal Officer of Fedhealth, says the problem with having no reference price is that it leads to ambiguity. She believes that providers ideally need a guideline of what the medical schemes reimbursement rate will be to set their charges. Without these parameters, there is confusion in the industry which can lead to unintended out-of-pocket payments from consumers, even in cases where healthcare professionals are not aiming to charge higher rates. Eliminating ambiguity is the first objective of Fedhealth's partnership approach in contracting healthcare professionals directly. "We are thus able to offer our members a range of healthcare professionals that they can choose from where they enjoy the guarantee of no co-payment."

The greater challenge however remains that medical inflation continues to outstrip CPI annually. "Increases are a complex issue and always incur much debate," says Caldis. "When you begin to unpack the factors influencing medical increases you become aware of just how complex the situation is."

She explains that one factor is that care is currently very fragmented in the South African environment with patients often seeing a variety of different doctors none of whom speak to each other. "Care is also focussed primarily on curative medicine and not on prevention, and unfortunately, where lip-service is paid to prevention it usually is only early detection as opposed to really preventing disease in the first place. We often confuse curing disease with treatment of symptoms," she says.

Complicating the scenario is the fact that competition in the healthcare environment does not work in the same way as it does in normal business.

"Take innovation and technology, for example," says Caldis. "Whilst innovation and new technology is often of value in the healthcare environment it generally comes with an exorbitant increase in costs. One would expect these costs to decrease over time as more people make use of the new technology, but in healthcare the costs tend to remain high even as utilisation increases. On the other hand computers, TVs and cellphones get cheaper despite higher specifications and functionality every year."

Price is not dependant on actual health outcomes but is generally independent of the actual outcome, explains Caldis, and price setting is often not linked to actual costs, but rather to a perception of the 'value of life' or 'particular organs' e.g. eyesight, teeth and heart.

The third party payment system also leads to inefficiency and overuse/over-servicing. "Members often do not see the connection between high claiming patterns and higher contributions. The higher the contribution, the more members feel that they should ensure they get their value for money, driving up costs further," she says.

In order to manage and contain the cost of healthcare in South Africa, Caldis believes all parties need to work together to make the system more sustainable by improving outcomes and reducing cost. This requires partnership, dialogue and true sharing of responsibilities between consumers, healthcare professionals and funders/facilitators of healthcare.

The main objective of the Fedhealth healthcare professional partnership model is to create a sustainable platform of engagement between funders and providers such that the member and in particular the member's health is the winner.

"Fedhealth's strategy has always been to search for a mutually beneficial solution and has always acknowledged the valuable and scarce resources that we have in our well-trained South African healthcare professionals.

Historically the scheme has often reimbursed providers at higher rates than most competitors. We are currently solidifying this history by directly contracting with healthcare professionals in order to create a guarantee and certainty for our members that their bills will be reimbursed in full. We are also creating a partnership with healthcare professionals through our contracted networks to work together to both improve health outcomes and improve efficiency in the system," she concludes.