COMPETITION COMMISSIONHEALTH MARKET INQUIRY

TOWARDS SUSTAINABLE HEALTHCARE

17 May 2016

Presenters

CEO

Medscheme Holdings

CA (SA), MBA

Experience in the

healthcare and

banking industries

15 years with

Medscheme

Head: Actuarial

BSc (Hons) FASSA,

FFA

Local and international

healthcare actuarial

experience, ITAP,

ASSA, IAAHS

9 years with

Medscheme

Senior Medical Advisor

MBChB, MBA

Public and private

clinical practice with

public health medicine

experience in academic

and State sectors

2 years with

Medscheme

Head: Provider Relations

and contracting

MBChB

Local and international

experience in private

and public practice

11 years with

Medscheme

Head: Administration

B.Cur Honours, BCom

Honours, MBLExperience in both

public and private

healthcare in SA

16 years with

Medscheme

Head: Managed Care

Strategy

MBChB MPharmMed

Former Professor of Clinical

Pharmacology and Dept. of

Health Director of Primary

Healthcare

21 years with

Medscheme

Kevin Aron

Alex Brownlee

Dr Laubi Walters

Dr Manshil Misra Dr Mike Marshall

Modjadji Tati

Agenda

Part A

• Who we are

• What we do

• How we interact with stakeholders

Part B

• Key challenges

• Understanding healthcare financing

• Common language and purpose

Part C

• Recommendations

Part A

• Who we are

• What we do

• How we interact

Agenda

Medscheme – An overview

44yr Proven 44-year track record in Southern Africa

Largest Black owned managed care provider and administrator, Level 2 B-BBEE

More than 3.6 million lives under health administration and managed care

Country wide networks of 6 200 GPs, 4 000 specialists, 2 100 pharmacies

2 716 full time employees

ISO 9001 certification in health administration

17 South African client schemes (14 restricted schemes & 3 open schemes)

Medscheme – Part of a Health Focused Group

Medscheme’s Vision and Mission

Vision

Creating a world of sustainable healthcare

Mission

We create access to sustainable, affordable,

quality healthcare through the application of

innovation and expertise, delivered as an

efficient, seamless experience

Part A

• Who we are

• What we do

• How we interact

Agenda

Medscheme’s role

Medscheme’s Services

Administration

• Membership administration

• Claims assessing

• Fund management and secretarial services

• Member communication services

• Broker commission processing

• Legal, governance, risk and compliance

• Internal audit (ISAE3402)

• Forensic services

• Financial management and reporting

Incl. credit control management services

• Enquiries incl. appeals processes

Managed Care

• Hospital Benefit Management Services

- Pre-authorisation services

- Case Management

- Clinical Audit

• Pharmacy Benefit Management Services

- Pre-authorisation

- Drug Utilisation Review (DUR)

• Active Disease Risk Management Services

• Dental Benefit Management Services

- Basic and Specialised Dentistry

• Managed Care Network Management Services

and Risk Management

- Networks of General Practitioners, Specialists, Hospitals

and Pharmacies

Interaction with Client Schemes

Being a multi scheme administrator

• Client schemes determine their own strategy

• Medscheme’s function is to effectively implement each client’s individual strategy

• Dedicated business unit structures are reflective of individual clients’ needs

• Services are provided in terms of Service Level Agreements (SLAs)

• Regular, transparent reporting to schemes of Medscheme’s performance to SLAs

• Contracts with clients include penalties for poor performance

• Internal and external audits including independent SLA audits

• Trustee meetings driven by Scheme officials and Medscheme input provided by invitation only

• Client schemes can contract with any other service providers they choose

Key Stakeholders

Scheme

Beneficiaries

Medical

schemes

Healthcare

service

providers

Third PartiesIndependent advisors and

providers appointed by client

schemes

Brokers

57 external

IT interfaces Incl. other

administrators and

managed care

providers

Independent

advisors incl. actuarial firms

and other

consultancies

Regulators

Other

electronic links incl. Health24 portal

Member Communication Channels

Web Services

And Adaptive

Website

Member Event

Driven SMS

Walk-in Centres

Written Letters

(letters, ad hoc

and system

generated)

Instant

Messenger /

Web Chat

Interactive

Voice

Response

In- and outbound

Call Centres

Emails

Newsletters

and

educational

material Statements

Statements

and apps

Mobi

Voice of the

Customer

Surveys

Voice

Member Communication

• 52 million emails sent out to beneficiaries p.a.EMAILS

• 28 million SMS sent to beneficiaries p.a.SMS

POST • 1.8 million letters sent out to beneficiaries p.a.

INBOUND CALLS

VOICE OF

THE CUSTOMER

• 2.4 million inbound calls received p.a.

• Average 780 000 surveys submitted per annum

• 22% Return rate

• 89% rated our Service GOOD & EXCELLENT

Member Communication

Complaints

• Formalised complaints process

• Complaints on HelloPeter and social media

monitored daily

• Transparent reporting to the client schemes

Appeals Process

• Formalised appeals process in line with

Scheme’s mandate

• Clinical Review Committees (including the

inclusion of external consultants and opinions)

reviews escalations

Voice of the Customer surveys

• Customer can be a member, trustee, PO or

healthcare provider

• Data analysis and transparent reporting of

findings to client schemes and management

structure

In case of dissatisfaction

• Analysis of free format questions and call back

where concerns were raised

• Root cause is categorised and process includes:

Investigation of sequence of events, Tracking

reasons for experience, Remedial action taken

Accessibility: Our National Footprint

Functions

• Process authorisations

• Hold focus sessions with members

• Resolve members queries

• Assess refund claims

• Process membership transactions

• Enroll new members

• Member education

• Scan claims

• Assist brokers

• Print statements for members and

providers

• Conduct wellness days

• Print tax certificates & cards

288 000 Member visits per Annum

Managed Care

The Need for Managed Care

Cardiovascular %

Diabetes %

Mental health %

Respiratory (Chronic) %

Musculoskeletal %

Average Age

65%

23%

41%

16%

26%

55

16%

5%

10%

5%

8%

29

35%

13%

18%

7%

15%

47

Population % 4% 88%8%

Risk claims per life per year R84 349 R8 246R23 352

6.5 0.91.4

Already high prevalence of

lifestyle disease

Low co-morbidity index

Ave gross contribution plpy R16 925 R16 925R16 925

Value Based Healthcare

Volume

Value

Quality

Affordable

Access Outcomes

The patient journey illustrates the

importance of roles and relationships &

structural features driving adverse market

outcomes, e.g. information asymmetry

Patient Journey

Patient Primary Care Practitioner

Disease or injury

Coordination of Care and Information Sharing Needed

Informed

Activated

Beneficiary

More

Empowered FP

More Empowered Specialists,

Hospitals & Auxiliary

Professionals Contracts

with ARMs

Education,

Training

& Care

Pathways

Strategic Purchasing &

Coordination of Care

Home Based Care

& Community Support

Workplace

Integration

Patient / Family Education

& Counseling Digital Strategy

Including EHR, EMR

and PHR

Contracts

with

ARMs

Productive

Interactions

Part of Virtual/Actual

Primary Care Teams

Case managers and

medical advisory services

Arrows: Information sharing

Patient Journey

Patient Primary Care Practitioner

Disease or injuryPrescription

Pharmacist

HospitalStep down / home care

PathologistConfirming diagnosisSpecialist

Our Approach: Population Health Management Framework

Cornerstone of integrated administration and managed care capability and capacity

Fraud, waste and

abuse managementActuarial and clinical

policy services

BI modelling, analysis and

reporting (incl. data

warehousing)

Member- & provider-

centric processesReliable operational IT

systems with EHRLegal support

Strategic purchasing &

coordination of care

Contracting with ARMs

Education, training &

care pathways

Digital strategy & EMR with

decision support

Stratification of

beneficiaries

Pro-active

communications

Active disease risk

management (ADRM)

Intervention process

including lifestyle

interventions

Digital strategy

including PHR

Outcomes monitoring &

reporting & info sharing

Digital strategy including

central EHR

Outcomes monitoring &

reporting & info sharing

Managed care network

management services and

risk management

The relevant benefit

management services as well

as the disease risk

management support

services, adhering to CMS

accreditation standards,

processes, systems and

reports

Outcomes monitoring &

reporting & info sharing

Provider

Empowerment

Other

managed care

services

Patient

Activation

The Value of Managed Care – Our Experience

HIV/AIDS VIRAL LOAD: Above 80% below

400 copies/ml is considered exceptional

inpatient admission cost savingsR387.30 plpm

inpatient admission rate61 per 1000 intervened lives

hospital ALOS0.28 days

ER admission rate25.7 per 1000 intervened lives

chronic medicine costsR36.00 plpm

psychologist visits45.3 per 1000 intervened lives

pharmacy visits219 per 1000 intervened lives

GP visits112 per 1000 intervened lives

specialist visits3.1 per 1000 intervened lives

HIGH RISK BENEFICIARY – PREDICTIVE

INTERVENTION (TELEPHONIC ONLY)Measurable overall managed care savings:

Claims 5 to 10% lower with an

ROI consistently > 200%

A 10% claims saving results in a 8% saving on contributions

Part A

• Who we are

• What we do

• How we interact

Agenda

Medscheme’s Interaction With

Healthcare Professionals

How we Engage with GP’s and Specialists

General Practitioners

• Medscheme Independent Practitioner

Association (IPA) Forum

• Structured engagement (3 – 4 times

annually)

• Cooperation agreement

• Charter

• Other (less structured)

• SAMA

• Individual IPA’s

• Conferences

• Individual GP’s

Specialists

• Medscheme Specialist Forum

• Structured engagement (3 – 4 times

annually)

• Terms of reference

• Other (less structured)

• Specialist societies

• Specialist management groups

(Healthman / Spesnet)

• Conferences

• Individual specialists

What we discuss

• Benefits – non covered items, exclusions, co- payments

• Claims administration issues

• Managed care interventions – pre-authorisation process, letters of motivation

• Interpretation of tariff codes

• Funding protocols

• New interventions

Challenges

• Structural & ideological fragmentation of doctor representative organisations

• Clinical leadership – some societies employ CEO’s and other rely on leadership from

doctors in full time practice

• Concern of transgressing competition law

• HPCSA legislation governing how doctors can practice

• Legislative framework influencing contracting

How we Engage with GP’s and Specialists

Professional Societies

Performance Based Reimbursement

PBR components

• Contracted network

• Payment arrangement

• Tiered reimbursement

• Profiling (REPI2)

• Cost

• Quality

• Peer management

Performance Based Reimbursement Outcomes

0,0%

5,0%

10,0%

15,0%

20,0%

25,0%

30,0%

35,0%

40,0%

45,0%

Cholesterol Colonoscopy TDH screening PAP Smearcoverage

HbA1ccoverage

Monitoringnephropathy

Percentage improvement in Indicators of Clinical Care from 2007 to 2013: Schemes with GP Networks vs Schemes without GP Networks

Network plans Non-network plans

Average GP tariff PMB’s network vs non network

Conclusions

• Members are protected against co-payments &

scheme protected against payment at cost for PMB’s.

• Networks seemed to perform better on quality metrics

than non networks

• Marginal overall improvement in quality

• Future models will need increased adoption of Health

Information Technology.

• Need to address structural issues in the healthcare

delivery model.

101 103100

119 120

127

80

90

100

110

120

130

NetworkNon-network

Source: Medscheme

2011 2012 2013

Pe

rce

nta

ge

of S

ch

em

e r

ate

Specialist Contracting Dynamics

1. Open to any willing specialist

2. Essentially a “payment arrangement” with the objective of;

• Protecting members against co-payments

• Mitigating payment at cost for PMB’s

3. Uptake related to quantum of offer

Scheme A

130% scheme rate

Scheme B

165% scheme rate

Number of specialists

contracted (excl.

anaesthetists*)

2 623 3 172

In addition Scheme B has been able to contract an additional 845 anaesthetists at a

rate of 235% of scheme rate for the anaesthetic unit 140% for the clinical consult and

procedure unit.

Specialist Contracting

Challenges in measuring specialist performance

1. Measuring quality outcomes

2. Measuring entire care process versus a specific procedure

3. Accommodating diversity of practice within a specific

specialty

Global fee model for hip and knee replacements

Medscheme’s Interaction With Hospitals

1% 2% 1%

96%

Sub acutefacilities (049)

Mental healthfacilities (055)

Day hospitals(076 & 077)

Acute hospitals(057 & 058)

Hospital Landscape

Hospital expenditure as a % of total expenditure

Source: CMS reports Medscheme data

0%5%

10%15%20%25%30%35%40%

% Market share (by expenditure) per facility type & procedure

Herfindahl–Hirschman Index (HHI)

market concentration of hospital groups by province

Acute hospitals Day Clinics Sub-acute Facilities

Mental health facilities Cataracts

Hospital expenditure by facility type

How we Engage with Hospitals

Engagement

Structured engagement

Negotiations

ProfilingAlternative

Reimbursement Models

Networks / DSPs

How we Engage with Hospitals – Hospital Profiling

No standardisation of descriptions and calculations of quality metrics

as published by Hospital Groups in their annual reports

1,170,58 0,55 0,45 0,32

1,18

2,66

4,71

2,17

0,09

8,6

2,92,4

3,22,7

0123456789

10

VentilatorAssociatedPneumonia

Surgical SiteInfection

Central LineAssociated

BloodstreamInfection

CathheterAssociated

Urinary TractInfection

HealthcareAssociatedInfections

FIM/FAM Patientincident rate

Employeeincident rate

Hosp Group 1

Hosp Group 2

Hosp Group 3

Hosp Group 1 Hosp Group 2 Hosp Group 3

Reporting period 1 October - 30 September 1 October - 30 September 1 April - 31 March

Ventilator Associated Pneumonia per 1 000 ventilator days per 1 000 ventilator days per 1 000 device days

Surgical Site Infection per 1 000 theatre cases per 1 000 theatre cases

Central Line Associated Bloodstream

Infection per 1 000 central line days per 1 000 line days since 2012 per 1 000 device days

Catheter Associated Urinary Tract Infection per 1 000 catheter days per 1 000 device days

Healthcare Associated Infections per 1 000 PPD's per 1 000 PPD's

Source: Annual Reports

How we Engage with Hospitals

Carve outs ModifiersClinical

exclusions

Stop lossesLine item

data

0% 50% 100%

2014

2015

2014

2015

2014

2015

Hosp

Gro

up

A

Hosp

Gro

up

B

Hosp

Gro

up

C

Fee for Service Fixed Fees Per Diems

Engagement

Structured engagement

Negotiations

ProfilingAlternative

Reimbursement Models

Networks / DSPs

Part B

• Key challenges

• Understanding healthcare financing

• Common language and purpose

Agenda

Understanding healthcare financing

Inherent Complexity in Health Insurance

4 250

900

Life Assurance Car Insurance Health Insurance

Number of claimants per 1000

Non-claimants

Claimants

Insurer &

policyholder

Low anti-selection

1 payment at death

Insurer &

policyholder

Low anti-selection

1 defined payment

Insurer & policyholder & facility & doctor

& pharmacist

High risk of anti-selection

Multiple codes, subject to protocols,

PMBs, etc.

Unknown incidence and cost per claim

Complex human body

Why are Benefits so Complex?

From Simple Financial Limits to Clinical-Criteria Defined Benefits

From simple financial limits…

Financial limits

Not for PMBs, which are clinically

defined

Co-payments

Can be overridden on

clinical grounds

Reg15(h)(i)(c)

Conditions covered / protocols

Clinical criteria used

to define benefit need

Reimbursement rate

PMBs at cost

…to a hybrid design with complex

clinical-criteria defined benefits

Underpinned by social solidarity principles:

Clinically defined benefits are more equitable

But Benefit Restrictions are Critically Important

Benefits, including protocols/formularies

are 2nd largest determinant of scheme claims expenditure

Health Profile of

membersBenefit limits and

protocolsOther cost drivers2 31

If no benefit

restrictions were

applied

Fewer non-PMB

benefits

or

Higher contributions

Inequitable allocation

of limited resources, favouring those with

PMBs or higher income

The aim is to efficiently offer the widest cover to the whole population with the greatest healthcare need

Meeting unique customer needs

Different benefit packages meet different needs

Setting all benefit limits at maximum levels to cater for all members in one benefit option is simply not affordable

Legacy options

Even a scheme with a poor profile can compete by opening a new benefit option

The existing poor profile members remain in so called ‘legacy options’

Thus, whilst many schemes appear to have many benefit options, typically only a few are actively marketed

It is typically better to not close down legacy options, since the financial impact on the remaining scheme members is negative

Most parties would prefer to close legacy options, if not for reasons above

Why are there so many Benefit Options?

Common Language and PurposeHealthcare Professional Tariff Coding Challenges

Lack of a Common Language: Tariff Coding

• Medical codes describe the context and content of clinical encounters.

• They form the basis of communication between funders and providers of healthcare.

• Whereas some codes like those for the identification of diagnoses are standardized, there

is no common coding structure, including terms of use, for professional services rendered.

The standards used by providers and funders are not aligned.

SAMA and Professional

Societies maintain coding

structures that underpin

billing.

Individual funders maintain

their own coding structures

for purposes of payment,

using RPL codes as the

foundation.

Doctor bills code ‘x’ Funder says ‘x’ invalid

Patient/member liable for doctor’s account

Why are funders not uniformly adopting SAMA’s coding

structure?

• It represents the interests of the profession

• SAMA is not a statutory body.

• Professional Societies and SAMA coding guidelines are not

always aligned.

Lack of a Common Language: Tariff Coding

What is the problem with the use of tariff codes?

• No industry review of codes and/or their associated RVUs in

more than 10 years. Codes do not reflect current practice.

• Some codes have become obsolete as procedures

are outdated.

• New procedures have no associated codes.

Void of

Standardized

Industry

Coding

and

Billing

Common Language and PurposePMB Challenges

PMBs: Lack of a Common Understanding

State doctor

‘We support international clinical

guidelines. It is a PMB.’

Technology company

representative

‘Doctors in State use our

technology. It is PMB.’

Patient

‘My doctor says it is a PMB’

Private doctor

‘The condition is a PMB.

That is why my

treatment is a PMB.’

Funder

‘It is only a PMB

if…………’

Does the patient qualify for the healthcare service on the basis of

clinical condition according to ‘prevailing State practice’

Treatment

Determining a PMB

PMB – YES or NO?

Does the treatment fall within broad descriptor of the relevant DTP?

Are there limitations to treatment detailed in Annexure A?

Is the diagnosis a PMB diagnosis?

Was it related to an emergency?Diagnosis

Clinical

condition

DTP: Diagnosis and Treatment Pairs

Determining a PMB

DSP

• Should care have been obtained from a Designated Service Provider (DSP)?

• If yes, was there involuntary use of a non-DSP?

Protocols• Are there managed care protocols or formularies that apply?

Exceptions

• Must exceptions to such protocols and formularies be considered on clinical grounds?

PMB PAYMENT IN FULL

– YES or NO?

Prescribed Minimum Benefits: Administering PMBs

• Payment of all claims linked to a PMB diagnosis would result in overpayment, inefficient use of

limited resources and ultimately inequity.

• Manually adjudicating all claims for PMB eligibility once insured benefits are exhausted is

administratively impossible.

• Accurate and efficient PMB payment is ensured through a hybrid of operational processes.

Pay all care linked to

PMB diagnoses at

cost

Hybrid model of:

• Automation

• Pre-authorisation

• Contracting

• Exception management

Pay any PMB above

standard scheme rules

only on pre-

authorisation

Common Language and PurposeFunding Guideline Challenges

Managed care protocols must be developed on the basis of

evidence-based medicine, taking into account considerations of cost-

effectiveness and affordability

Clinical Standards: Differing Views on Best Practice

Hyperlipidaemia Guidelines

SA Clinical Guidelines European Clinical Guidelines American Clinical Guidelines

Titrate statin dose according to

LDL-C target

Target defined in terms of patient’s

10-year risk of any CVS event.

Targets defined in terms of LDL-C

cut-off values (ranging from <1.8

to <3 mmol/l)

Titrate statin dose according to

LDL-C target

Target defined in terms of patient’s

10-year risk of fatal atherosclerotic

event.

As for SA guidelines. For very high

risk patients, LDL-C reduction of

>50% is alternative

NO treatment target

The expert panel was unable to

find randomized controlled trial

evidence to support use of targets.

Intensity of statin dose according

to estimated 10-year risk of

atherosclerotic CVS event

Managed care protocols must be developed on the basis of

evidence-based medicine, taking into account

considerations of cost-effectiveness and affordability

Clinical Standards: Best Practice vs Funding Guidelines

Hyperlipidaemia

PMB Algorithm SA Essential Medicines List

Titrate statin dose according to LDL-C target

Treatment defined in terms of patient’s 10-

year risk of any CVS event.

Target defined in terms of LDL-C <=3mmol/l

or reduction of at least 45% from baseline

No treatment target

Treatment defined in terms of patient’s 10-

year risk of any CVS event.

Use statin dose that lowers LDL-C by at least

25%

(patients with very high cholesterol should be

referred)

Part C

• Recommendations

Agenda

Recommendations

• Establish an independent authority to define

the tariff coding, the Minimum Reference Price

to be used as well as define quality standards

• Benefits clearly defined relative to industry

Minimum Reference Price List (MRPL)

• Healthcare practitioners and providers to

transparently display their billing rates relative

to MRPL

• Regulation to ensure the transparent reporting

of healthcare quality and cost information is

recommended

Establishing a

common language

Facilitate value based

contracting

Overhaul the PMBs

Further recommendations

• Alignment of differing legislation to allow for

selective contracting based on value

• Allow employment of practicing healthcare

professionals by corporate entities

• Public disclosure of any potential conflicts of interest

Recommendations

Establishing a

common language

Facilitate value based

contracting

Overhaul the PMBs

Further recommendations

• Simplify PMBs

• Benefit definitions

• Level of care

• Align to NHI policy direction

• PMBs paid in line with scheme rates, subject to

MRPL

Recommendations

Establishing a

common language

Facilitate value based

contracting

Overhaul the PMBs

Further recommendations

Recommendations

• Implement Risk Equalisation Fund

• Mandatory membership with income cross-

subsidisation

• Revise solvency framework

Establishing a

common language

Facilitate value based

contracting

Overhaul the PMBs

Further recommendations

THANK YOU