Dr Brian Ruff
CEO
PPO Serve
July 2015
Market-driven Reform of Healthcare delivery in South Africa
– and the road to Transformation
South African Private Healthcare System
produces sub optimal outcomes:
The system capacity i.e. the supply of clinicians and hospital beds, is poorly used.
It could serve many more South Africans; but instead it is:
•
•
Hospicentric ~ relative oversupply of beds for the Scheme population
Weak community clinical services because professionals work and compete in
isolation not in teams
The result is:
=> many avoidable admissions
 variable quality: especially for high needs patients with complex, long term
challenges – who get poor, costly care
Excess, wasteful
use of resources
Poor benefits /
High Scheme
premiums
Gaps in needed
care /
Unaffordable
access for most
South Africans
Economic framework
1. Structural Issues
2. Governance: Incentives
and rationing decisions
3. Production Efficiency
4.
5.
6.
Competition
issues
Barriers to
entry/exit
Impact on
affordability
Supply side economics - framing
1. Structural Issues: geographic plan matches demand (population size / need) with
supplied capacity (volume / organisation)
2. Governance: Incentives & rationing: remuneration mechanism supports provider
sustainability and fair rewards
3. Production Efficiency: relative costs, utilisation and outcomes
4. Competition Issues: choice / concentration and bargaining power
5. Barriers to entry/exit: demand / supply equilibrium signals – succeed / fail
consequences
6. Impact on Affordability: member selection and prices
Economic Connections
• Match local burden of illness with clinicians/beds available to avoid
denying access or wasted capacity.
• Incentives for consistent evidence based clinical decisions
• Providers competes on their reputation for excellence
• Local competition + busy system = fair payment negotiations =
affordable premiums = healthy new entrants
• Demographic changes = utilisation change = need for capacity change
Population
disease
burden
Demand
Matched
Capacity
~ Health
insurance
premiums
Competitive:
Hosp network;
Specialist assoc
Payment
mechanism
Structural issues
ROI
Sustainable
Incentives/rationing
Competition issues
Healthy
new
members
Affordable
premiums
Good
quality
Population
disease
burden
~ Health
insurance
premiums
Necessary
clinical demand
Balanced
payor
bargaining
power
Production issues
Increase /
Decrease
supply
Efficient
Prices
Equilibrium /
Disequilibrium
Efficient utilisation
/ Occupancy rates
Interaction
Framework
Interaction
Framework
Barriers to entry/exit
Impact on Affordability
Population
disease
burden
Excess
capacity
~ Health insurance
premiums
Structural Issues
Higher
premiums
Healthier
members
quit
High HHI:
Hosp network;
Specialist assoc
Reduced
payor
bargaining
power
Smaller Sicker
Insured
Population
FFS:
hosp/ single
practice
Target
Income
Incentives & Rationing
Competition issues
Production issues
Barriers to entry/exit
Supplier
Induced
Demand
Impact on Affordability
Apparent
undersupply
High
Prices
Healthier
members
quits
Over utilisation
Higher
premiums
Poor quality
Smaller
Sicker
Insured
Population
Apparent
worsening
disease
burden
‘Up’ Coding
Vicious cycle
Real
oversupply
The SA Private Healthcare System
produces sub optimal outcomes:
Absent triage
= unbalanced,
expensive
system
Current vs. Reform
care delivery
Hospital based
Specialist Care
Under investment
-> greater costs
Reduced
premiums
Effective
triage;
enhanced
production
Inappropriate site &
scope & type of services
Community care
delivery
Treat the patient and their problem
with the right service at the right time using the right resources
South African Private Healthcare System
produces sub optimal outcomes:
Managing the system:
Medical Schemes Act is based on a model of modified market forces - a ‘purchaser‘ vs. provider split:
• Schemes as ‘active purchasers’ from ‘selectively contracted’ provider networks:
o match populations with provider capacity
o align around patient ‘value’ i.e. maximum quality at lowest cost
But it’s failing:
• Schemes disregard the system management role i.e. effect tariff prices; but don’t commission basic
supply side reengineering to address over-utilisation
• Individual clinicians (supported by associations) resist Scheme selective contracts – as these don’t
provide financial security nor clinical autonomy
• Supply Side planning: there are no Policy aims nor a Regulator:
o Growing mismatch: limited members vs. supply of acute beds & clinicians
(especially some areas)
o ‘Fee for service’ = unnecessary, fragmented care (vs. cooperative team care
for populations)
Optimising the management of the SA private
healthcare sector:
Aim: Universal access to good quality healthcare in an efficient system
Economic Components:
Macro / System level:
• Structural plan related to need
• Competitive market driven system to deliver population value and market equilibrium
Micro / encounter level:
• Governance arrangements for effective decision making
Strategy and Tactics:
• Politically & economically viable: nationally affordable, with expanding cover and
evolving social solidarity
• Practical and realistic i.e. incremental and flexible change
• ‘Agents’ management role is clear and effective – to manage
demand and supply
Activism for healthcare reform –
Obamacare is making great, rapid progress
Don Berwick:
Strategies for Cooperation:
• Shared goals for the whole system
• Build trust amongst stakeholders
• Develop new business models that
combine competition and cooperation rather than either alone
• Mobilise to defeat preserving
institutional self-interest - including
mobilising in the community
from Competition and Confiscation to Cooperation and Mobilisation
JAMA November 2014
Curriculum Vitae:
Centers for
Medicare/Medicaid
Services Administrator under President Obama
Institute for Healthcare
Improvement (IHI) CEO
Harvard Med School:
Clinical Professor
Paediatrics & Health Care
Policy
Harvard School of Public
Health: Professor Health
Policy & Management
Integrated Local System
– this co-operation
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System A
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General
Hospital
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General
Hospital
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A planned, comprehensive and
integrated local system built on
Multidisciplinary teams
Clinical Teams use the same EMR
with clinical guidelines and
shared support staff and HealthIT
platform
Focus is on Individual patient and
Community needs
System rewards from Schemes
for the quality of care
Healthcare ‘System’ competition – consumer
‘choice’ is between competing systems:
Branded healthcare systems has Multi Disciplinary Teams (GPs, Specialists, Allied
Health Professionals & support services) + Economies of Scale + Management =
known standards, reliability
vs.
Independents = isolated; casual management = variable sophistication, reliability
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System A
System B
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20
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vs.
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20
vs.
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Independents
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Healthcare ‘System’ competition –
consumer choice
Branded chain – gyms/ mega: economies of scale, management team = known
standards, reliability
vs.
Independents = small; mom & pop management = variable sophistication, reliability
Independents
A Successful Reform Track for SA
The aim to achieve UHC in SA is aspirational and important:
•
Macro Economic / System framework:
– Link supply strategies to demand within income bands
– High income inequality country reform needs tactical focus on the ‘gap’ market
•
Regulatory support:
– Enabling & corrective regulation - demand side and supply side managers
– Ensure ‘agents’ / managers play their economic role or face consequences
– Supply side reform is key to success: systems that provide comprehensive care of good
quality at affordable price have strong community level primary care services
– ‘Gap’ market services will enable the NHI framework
•
State provide subsidies within the economic framework:
– Demand side: top up contributions to afford ‘gap market’ scheme products
– Supply side: support new efficient delivery models
High
income
Costly
Private
services
Everyone
else…….
Free
state
provided
services
• Typical emerging economy
country arrangements
• Reflects income / wealth
distribution
• Fragmented and silo
arrangements
• Wasteful and Inequitable
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High
income
Emerging
‘gap’
market
Poor
Costly
Private
services
Free
state
provided
services
• New emerging middle class
choices:
• Unhappily use State services –
with some disruption….
• Struggle to meet the high price
of accessing the private sector
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High
income
Costly
Private
services
Emerging
‘gap’
market
Low cost
provision
Poor
Free
state
provided
services
• In an effective competitive
marketplace new and better
models of services emerge to
match the needs and
affordability of the consumers
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High
income
Costly
Private
services
Major
market
Low cost
provision
Poor
Free
state provided
services
• In time the middle class grows
and the supply side reflects its
growth….
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Unified
market
Unified
supply
system
• At the end of the
developmental process is a
homogenous system with
equitable access
Our task is to be activists in
this project!
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