Hospital negotiations crucial to healthcare cost – containment

Gerhard van Emmenis, Acting Principal Officer of Bonitas Medical Fund.

Strategic negotiating results in cost containment and no hospital co-payment for Bonitas members.

The Life Hospital Group has waived the 30% co-payment on hospital admissions for Bonitas Medical Fund members which impacted 14 previously demarcated hospitals. Bonitas considers this a victory for consumers in general and their members in particular. Gerhard Van Emmenis, Acting Principal Officer of Bonitas Medical Fun, which covers more than 500 000 lives, says, ‘shortly after we informed our members of the 30% co-payment, Life Hospital Group re-considered their stance.’’

Van Emmenis says the Scheme is delighted that ‘part of our hospital strategy to reduce the burden of escalating healthcare costs for our members, was successful. We just wish that this could have been raised during negotiations.’ He says hospital admissions account for half of the Scheme’s annual claims costs, around R6bn a year. ‘Last year we negotiated with the three largest hospital groups in South Africa with a view to creating a network of designated service providers (DSPs) to ensure the lowest possible increases, to keep costs down while maintaining the sustainability of the Scheme. A hospital network allows the Scheme to negotiate preferential tariffs with participating hospitals, this then assists in ensuring quality and affordable healthcare for our members.’

The price discounts and future tariff increases offered by each hospital group, along with its current level of cost efficiency in an actuarial cashflow model, were considered by Bonitas. The negotiation process included agreeing on the tariffs charged for all hospital services used by members, as well as assessing the quality of service. Bonitas used its increased size, due to the amalgamation with LMS, to its advantage and was able to negotiate more favourable hospital tariffs for the 2017 benefit year and beyond.

However, they were unable to strike a favourable deal across all of Life Healthcare’s facilities. For this reason the Scheme excluded 14 Life Hospitals from being DSPs. This meant that members could go to other network hospitals in their area or pay a 30% co-payment if admitted to one of the 14 excluded Life Hospitals. The 14 hospitals are situated in major metropolitan areas, where there are a number of similar alternative facilities available, within a short distance, where no co-payment would be incurred. The co-payment has since been waived by the hospital group.

With the rising costs of healthcare, especially hospital spend in South Africa, many medical schemes had to implement a double-digit increase in their contributions for 2017. This had a direct impact on the affordability of medical schemes for many South Africans as, due to a number of additional external factors, the average disposable income of households in South Africa is decreasing.

Runaway healthcare costs have various contributing factors, many of which are beyond the influence of schemes. One solution is to negotiate individually with service providers.

This follows one of the core tactical pillars of Bonitas – strategic purchasing – which mandates the Scheme to use its market power to negotiate and influence prices in favour of its members.

However Van Emmenis says, ‘Bonitas continues to explore and implement solutions to limit contribution increases as far as possible so that our members can still afford quality healthcare. Managed care interventions, family practitioner upskilling and partnering with quality service providers are all crucial to cost-containment.’

‘The past few years have been challenging for the medical aid industry. In 2015 and 2016, we experienced an increase in medical claims much higher than previous years. This prompted most schemes, including Bonitas, to increase contributions for members. We remain committed to making healthcare affordable to all South Africans and have implemented various initiatives to assist in managing future claims costs without impacting on the level of benefits that our members currently access.’

Further good news for Bonitas members, is that the rates negotiated in the latter part of 2016 with various service providers, should result in significant savings in 2017, which bodes well for future contribution increases.