The private sector’s role in transformation of national healthcare

03 June 2013 André Jacobs, Gusto Health

Medical schemes need to relook at how they can drive accountability and performance measurement across all healthcare sectors.

The ANC said in December 2011 at the Polokwane conference that a National Health Insurance (NHI) system will be implemented in South Africa. The news has been welcomed by some, but feared by others. Fortunately the government recognises that an NHI system cannot be successfully implemented without a well-functioning public healthcare system.
The National Development Plan (NDP), adopted by the ANC at Mangaung in December, makes it clear that this is not a system that will be implemented overnight. The NDP provides guidelines for rectifying the poor state of public health, with quantifiable targets to be achieved by 2030.

However, two critical aspects are lacking in the NDP: the role of the private sector; and the systemic poor functioning of the private healthcare system.

The private business sector can contribute hugely towards a transformed healthcare system through skills, knowledge, infrastructure and capital.
At the same time, as employer of about 7 million people who cannot afford private medical scheme cover, the private sector stands to benefit substantially from a transformed healthcare sector. For this reason a social compact between government, the private sector, organised labour and civil society should be formed as soon as possible.

Who carries the risk?

Under the private healthcare system, medical schemes are not-for-profit entities that benefit a range of profitable stakeholders. While many defend this system, healthcare consumers should be challenging this status quo.
Currently it is the private medical schemes that carry the financial risk of providing affordable healthcare to their members, not the many service providers who tap into the benefits of such schemes.
Medical scheme trustees also take all the risks, since they are tasked to manage the medical scheme on behalf of the members.

Figure 1 illustrates that service providers in the outer circle (managed care providers, brokers, auditors, etc.) depend on the medical schemes for their profit without having to take on any risk. All the risk is carried by the medical schemes in the inner circle.

Figure 1

A business model where the client takes all the risk and the seller of the services does not take any risk, cannot, and should not, be sustained. The new frontier for medical schemes and the public healthcare system is to innovate the way we pay for health care, and how health care is delivered, funded and administered. This will require a shift towards increased collaboration with performance- and risk-based contracting.

Transform health care

Performance-based contracting should include a clear definition of a series of objectives and indicators. These can be used by a medical scheme or healthcare system to measure a service provider’s performance, and implement appropriate consequences like incentives, rewards or sanctions.

Risk-based contracting represents an evolution in clinical, administration, management and payment methodologies that will create quality and cost outcomes, foster greater accountability, and take advantage of innovations in medical technology.

These contract models should align incentives across providers, members, employers and payers, to improve clinical outcomes and the patient experience, along with improving cost efficiency.

Medical schemes, not their service providers, should establish quality and efficiency targets that service providers must achieve to earn reimbursement.

The risk-based performance measures can include: the risk-adjusted total cost of care; a percentage of in-patient re-admissions; in-patient admissions per 1,000 admissions; in-patient days per 1,000 days; risk pool adjustment; member awareness; complaints; disputes; and member retention.

Transformation of the way we pay for health care and how health care is delivered, funded and administered, starts with leadership and a pledge to innovate and adapt to rapid change. Forward thinking medical scheme trustees should take the lead and make these changes to positively transform health care for their members.

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