Innovative thinking a must to curb rising healthcare costs

01 November 2012 Andrew Edwards, Liberty Medical Scheme

South Africa’s healthcare funders, like their global peers, are grappling with the challenge of balancing the books in the face of an ever-increasing healthcare bill. Their salvation lies in innovative thinking to contain rising costs.

An ageing population; increasing utilisation; costly new technologies, medicines and treatment and adverse selection by medical schemes members are some of the factors that drive up healthcare costs. .

Trapped in a cost whirlwind

"Spiralling healthcare inflation is challenging medical schemes to come up with innovative solutions to ensure fulfilment of their mandate; promote sustainability, affordability and accessibility; eliminate wastage and reduce costs,” says Andrew Edwards, Executive Principal Officer of Liberty Medical Scheme (LMS). "This innovation translates into savings for members and employers”.

From a formulary point of view schemes are essentially regulated in terms of the minimum offering that they are able to offer members. But greater transparency and rigour must be applied to the process of defining what this minimum requirement entails.

Drug choice under scrutiny

As we move into an environment of expensive (biologic) and novel drugs the existing regulations expose schemes to increased risk. Members on low-cost capitation options are now able to access expensive care, even if the true clinical benefit is unclear or has not been found to be cost-effective. "Greater clarity is required in defining the true extent of these minimum treatment requirements,” says Edwards.

The same holds for the Diagnosis and Treatment Pairs (DTPs) contained in the Medical Schemes Act’s Prescribed Minimum Benefits (PMBs) package. The interpretation of the chronic funding requirement of some of the 270 conditions intended for in-patient / hospital management is extremely difficult. The absence of minimum therapeutic requirements in these instances has resulted in a varied interpretation of these entitlements and greater inequity within the market.

Profit over life?

Edwards observes that there is little regulatory interrogation of the exorbitant prices charged for certain drugs and that the manufacturers are seldom held to account. "There is a need for greater transparency in the manner in which these prices are derived,” he says. "Moreover, there is an urgent need to ensure that profits are not generated through the vulnerability of the sick”.

Aside from the need for more provider networks, GPs also need to be reinstated as the coordinators of care. The private sector has actually done itself a disservice in that the way in which benefits are structured promotes tertiary and specialist-level care over primary healthcare.

Smart healthcare provision

While regulation limits medical schemes in terms of their option offering, they can contribute to cost savings through engaging and promoting clinical centres of excellence with a view to achieving better patient outcomes.

"Through this mechanism you know that the professionals treating your members are best equipped to do so and that the probability of a superior outcome is better,” says Edwards. "At the same time, the volume based discounts may offer a scheme the opportunity to enhance efficiency and reduce associated costs”.

Redesigning model of care

Alternative reimbursement models for professionals should also be considered. Innovative thinking in this area may include promoting preventative rather than curative care. There is an urgent need to address the fee-for-service remuneration model with a view to increasing efficiency and decreasing wastage.

By adopting alternative reimbursement models one can influence desirable preventative care practices which are known to be clinically effective and cost effective in the long term. And by incentivizing stakeholders accordingly, favourable outcomes can be achieved for all.

Working together

It is also important for wider collaboration on the provision of care. "There needs to be far greater interaction with members in terms of enhanced disease management initiatives, patient support and education,” concludes Edwards. Certainly, from a medical scheme point of view, there is an opportunity to be more hands-on to prevent and manage ‘conflicts’ between funder and provider, with the patient caught in the middle”.

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