Demand

Competition to make the Healthcare Market
work for all South African communities
Presentation to the Health Market Inquiry
Dr. Brian Ruff
Durban, May 2016
There is an access & affordability
crisis in the SA health sector
2
There is an access & affordability
crisis in the SA healthcare sector
+/- 54 million people in SA
Medical
Scheme
market
• 8,8 million
• ± 10 million
• ± 35 million
= Medical aid members
= Employed, but uninsured
= Unemployed & uninsured
Monthly income
Households
Less than R3,183
8,547,006
74%
R3,183 – R6,367
1,772,576
13%
R6,368 – R12,817
1,267,165
9%
R12,818 – R25,633
996,357
7%
R25,634 – R51,200
659,057
5%
More than R51,201
383,589
3%
%
Average scheme
premium
R3,024 per
household
Family earning
R17,000 = 23%
of income
Majority of population cannot afford insurance & those who can are
Source: Census 2011, Foundation of Professional Development, Quarterly Labour Force Survey Q3 2015
3
finding it increasingly difficult to maintain
Medical schemes are not growing
Year
Number of
medical schemes
% increase
% increase
(Excl GEMS)
% increase excl. GEMS & adjusted
for population growth
2008
105
8,315,718
5.3%
-5.3%
-6.6%
2009
105
8,315,718
2.5%
-1.8%
-3.1%
2010
105
8,315,718
3.1%
0.9%
-0.3%
2011
97
8,526,409
2.5%
-1.7%
-2.9%
2012
92
8,679,473
1.8%
0.1%
-1.0%
2013
86
8,776,279
1.1%
0.8%
-0.3%
2014
83
8,814,458
0.4%
0.8%
-0.2%
Lives covered
10 000 000
8 000 000
Scheme lives
6 000 000
Excl GEMS
4 000 000
Adjusted for
population growth
2 000 000
2008
2009
Source: Source: CMS annual report 2014/15
2010
2011
2012
2013
2014
4
Current narrative
Industry is ever more expensive because…
• Older and sicker membership owing to selective joining and
lapsation:
o
o
Mandatory cover by income level cover missing
Risk Equalisation Fund not implemented – so focus remains on
selection not purchasing
• New technology - diffuses fast
But the narrative largely ignores:
• the unregulated, poorly performing healthcare system
produces unnecessarily high costs that result in high premiums,
so members need to join selectively
What’s the starting point? We suggest the crisis is also caused by the
5
dysfunctional supply structure with the wrong basis for competition
We believe a competitive market
solution contain the following elements
6
What an optimal competitive health
system looks like
State framing market efficiently
=
↔
Supply competing
Funders purchase effectively for the
Demand (its member population)
on value
•
Commercial supply side
•
With integrated healthcare teams
•
System that produces value
•
Effective triage & moving patients
up/down system as per individual need
•
That competes for Scheme network
contracts based on value
•
Accountable for population
•
Funders collect & use
the right information
to purchase high value
care on behalf of
members
•
•
•
State manages structural capacity of system
Defines & regulates demand & supply side management
role parameters
Consumer empowered to
chose Medical Schemes that
are good at purchasing high
value care at affordable
premiums
Supply matches the demand regionally & competes on value
7
This requires a purchaser/provider
framework
State framing market efficiently
=
Supply competing
on value
Structural design
Capacity control
(barriers to entry/ exit)
↔
Funders purchase effectively for the
Demand (its member population)
• Geographic plan matches demand
(size/capacity)
• Capacity organised in customized
teams to match disease profile
• Dynamic demand/supply equilibrium
• Success/fail consequences
Affordability &
accessibility
• Affordable pricing
• Member selection = sufficiently
large & healthy insured risk pool
Information
(collect & use)
• Disease burden index & system case
mix
• Health outcomes data
Incentives/ rationing
(Governance)
• Remuneration mechanism
supports good decision making
& sustainable & fair provider
rewards
Competition
• Choice, concentration &
bargaining/ purchasing power
Production
Regulatory control
• Relative costs, utilisation &
outcomes
• Manage structure & capacity
• Defines ‘agency’ roles &
efficacy
Regional supply matches demand with healthy competition
8
Our current health system
3rd party moral
hazard
Individuals buy
insurance
Individuals go
to individual
doctors
↔
→
Demand
Funders
Demand
Supply side
(Population)
(medical schemes)
(Patient)
(Healthcare providers)
Structural design
• Too few funded Scheme members for
available beds and clinicians
• Isolated clinicians, fragmented delivery,
no coherent systems
• Absent demand/supply equilibrium
Capacity control
plan, regulator: growing mismatch
(barriers to entry/ exit) • No consequences for failure
Affordability &
accessibility
• Deteriorating risk pool
• Over-servicing & inconsistent quality =
high premiums = access denied
Information
(collect & use)
• Absent information, variation in
outcomes, cost performance / value
unknown – no continuous improvement
• Obstructive tariff pays individual
Incentives/ rationing
professionals, not teams
• FFS payment for services not
(Governance)
outcomes
Competition
Production
Regulatory control
• Environment of no reward for
value = weak Scheme purchasing
• Hospital oligopoly; defensive
specialists
• Fragmentation = gaps & waste
• Oversupply = over servicing
• System policy absent
• Purchase & system delivery
‘agency’ role failure
Supply side factors are being ignored
9
How this competitive market solution
manifests practically
10
An optimal health system design
structure x process = outcomes (Donabedian)
Effective
Regional distribution
Capacity supply matched
to demand volume
Low
Med
Tertiary
services
Triage & referral
based on
segmentation
Appropriate
Investment
High
Secondary
services
Med
Low
High
Primary
services
Case
complexity
Supply structure depend on regional
population size
Number & mix of services
match regional population
requirements
Patient problem
managed at right level
National norms with regional application
Cost
System investment
at each level
matches demand
11
How this plays out in practice
Optimal integrated local system - cooperative care
A planned local healthcare
system = 70 clinicians/ 100 000
linked members
•
Community
Clinic
Community
Clinic
•
Community
Clinic
•
General
Hospital
Community
Clinic
•
Comprehensive, integrated
multidisciplinary clinical teams
Clinical teams use the same
patient Electronic Medical
Record / Health IT platform
with clinical guidelines and
share support staff
Patient centred within their
community
Clinician rewarded by Schemes
are for outcomes (including
quality of care)
12
Competition in an optimal health
system
Consumers have ‘choice’ between competing local systems
1.
Branded healthcare systems with Multi Disciplinary Teams (GPs, Specialists,
Allied Health Professionals & support services) + Economies of Scale + Effective
Management = known standards, reliability (e.g. System A & B)
vs.
2.
Independent providers = isolated + casual management = variable
sophistication, reliability (e.g. System C below)
System A
System B
10
System C
10
20
20
10
vs.
20
10
10
10
10
10
10
10
20
10
10
10
10
10
10
10
vs.
20
10
10
10
10
10
10
10
10
10
10
20
10
10
10
10
10
National vs. Regional competition
Problem - Schemes Act allows only national Scheme plans/options
• Schemes
o Advantage for incumbent Schemes & blocks new effective entrants
o Don’t reflect regional priorities, nor cost experience
• Supply side contracts
o Advantages existing national providers, ignores local needs
o Blocks innovative new delivery models
• CoMS 2006 review
o Reduced local premiums for discount prices – NHI ended proposal
Solution - Introduce Regional Scheme options
• Schemes
o Premiums reflect local production experience with national
risk equalisation
o Contracts local needs & support delivery model innovations
• Supply Side
o National structural capacity norms for hospital beds etc.
o Regional plans maximum cap - customised for regional
population size, disease burden, geography etc.
14
How healthcare ‘value’ is defined
Healthcare system performance measurement
Disease Burden Index
& Case Mix
• Measured Outcomes → soft (patient
experience) & hard (e.g. longevity)
• Efficient cost → actual versus
predicted
o Because sicker populations
predictably have poorer outcomes &
higher costs
o Regional context → local population
need
Measured
patient outcomes
(case mix adjusted)
Case mix
adjusted costs
Best value = Optimal
Outcomes at Lowest Cost
Source: Institute for Healthcare Improvement (www.ihi.org)
15
Value contract framework
OBJECTIVES
Population outcomes
Increased Quality of Life
AIMS
DRIVERS
Reliable clinical system
Client Satisfaction
Increased patient
satisfaction with health
services
Optimised health
functional status
Costs
Decreased Scheme PLPM
and OOP spend
Appropriate Social
Investment
Clinician Satisfaction
Inspired Clinicians
Integrated Care
Individual Care Plans
Preventative Care
Coordinated Care
Proactive Care
Patient Segmentation
Patient Safety
Standard Operating Procedures
Address at risk populations
Patient reconciled view
Data driven management and
continuous improvement
Discharge Planning
Appropriate Clinical and
social interaction
No denial of needed care
Timely access to
appropriate level of care
Family meetings
Shared decision making
Informed patient
Patient Centric System
Good clinical care with
minimal adverse events
Decreased inappropriate
hospital plpm
TACTICS
Patient centric system design
Family communication
Patient support system
Patient education/nudges
Integrated social services
Palliative Care
Home Assistance
Home Based Care
IT Support
Capacity Plan for local population
issues
Appropriateness of care services and
setting
Population Segmentation
Decrease cost of death in
last 6 months
Holistic treatment intent
Reporting
Generous and reliable
income
Flexible work time
Reliable base fee and upside rewards
Deceased admin
MDT meetings/ huddles
Good work life balance
Team Indemnity at lower levels
Balint Groups
Colleagial support
Multidisciplinary team
Increased appropriate OH
plpm
Population level projects
Commercial structure
Example …..
16
In summary - an optimal competitive
health system looks like the following
State framing market efficiently
=
Supply competing
on value
Value producing
supply side
↔
↔
Funders purchase effectively for the
Demand (its member population)
Effective Scheme
purchasers
↔
Consumer has informed
Scheme choice
State manages capacity and manages ‘agents’
Supply matches the demand regionally & competes on value 17
The framework dynamic for an
optimal health system
18
Supply side framework
How the components interact in a working system
Growth in local
medical
scheme pool
Competitive
provider networks
Healthy new
members
Balanced payor
bargaining power
Capacity matches
demand
Regional
Population
Structural
design
Capacity
control
Affordable
premiums
Information
Affordability &
accessibility
Incentives
Competition
Production
Regulatory
control
Within local
customised
teams
Efficient
pricing
Payment
mechanism
Good quality
health
outcomes
Make right
treatment
decisions
Sustainable
provider
income
Efficient utilisation
(incl. bed occupancy)
Regional context informs structure
19
Supply side framework
The role of information
Compete for
contracts based on
value measures
Choose scheme
on value
purchasing
Growth in local
medical
scheme pool
Competitive
provider networks
Healthy new
members
Balanced payor
bargaining power
Population size &
Disease Burden
Index (DBI)
Capacity matches
demand
Equilibrium /
dis-equilibrium
increases or
decreases supply
Regional
Population
Structural
design
Capacity
control
Information
Affordability &
accessibility
Incentives
Competition
PLPM
Efficient
pricing
Affordable
premiums
Whole system
outcomes
(DBI adjusted)
Within local
customised
teams
Payment
mechanism
Good quality
health
outcomes
Case mix of
member
demand
Sustainable
provider
income
Production
Regulatory
control
Make right
treatment
decisions
Efficient utilisation
(incl. bed occupancy)
Value = optimal
outcomes & best cost
State sets information standards & obligations
Case mix
adjusted
production
20
Supply side framework
The role of State
Supervision
of scheme
agency role
Facility licensing within
capacity + reviewed regularly +
conditional on risk adjusted
good quality health outcomes
Supervision
of provider
agency role
Growth in local
medical
scheme pool
Competitive
provider networks
Healthy new
members
Balanced payor
bargaining power
Capacity matches
demand
Regional
Population
Structural
design
Capacity
control
Affordable
premiums
Information
Affordability &
accessibility
Incentives
Competition
Production
Regulatory
control
Within local
customised
teams
Efficient
pricing
Payment
mechanism
State sets
information
standards &
outcome
obligations
Good quality
health
outcomes
Make right
treatment
decisions
Sustainable
provider
income
Efficient utilisation
(incl. bed occupancy)
State manages capacity & regulates competitive purchasing & supply
Applying the framework to the
current SA private healthcare system
22
Supply side framework analysis
How it currently plays out in South Africa
Excess
capacity
Lack of growth
medical
scheme pool
Concentrated
hospital ownership
& isolated doctors
Fragmented
delivery &
no teams
Regional
Population
Structural
design
Capacity
control
Information
Affordability &
accessibility
Incentives
Smaller sicker
insured
population
Schemes lack
bargaining power
Inefficient
pricing
Unaffordable
premiums
Poor quality
health
outcomes
Individual
FFS
Target
income &
excess
Over servicing &
Supplier induced
demand
Competition
Production
Over utilisation
Regulatory
control
Exacerbated by lack of information & regulatory control
23
Supply side framework analysis
Lack of information
No systematic calculation of
regional DBI & capacity
Concentrated
hospital ownership
& isolated doctors
Lack of growth
medical
scheme pool
Unmeasured
variation including
inefficiency of
fragmentation
Excess
capacity
Fragmented
delivery &
no teams
Regional
Population
Structural
design
Capacity
control
Information
Affordability &
accessibility
Incentives
Smaller sicker
insured
population
Schemes lack
bargaining power
PLPM
Inefficient
pricing
Unaffordable
premiums
Poor quality
health
outcomes
Individual
FFS
Target
income &
excess
Over servicing &
Supplier induced
demand
Apparent
under supply
Competition
Production
Regulatory
control
No
systematic
measure of
outcomes
Over utilisation
Up-coding & apparent
worsening disease burden
Inadequate information standards & obligations
24
Supply side framework analysis
Facility licenses issued without
consideration for supply & demand
Lack of State control
No supply side regulation
Concentrated
hospital ownership
& isolated doctors
Lack of growth
medical
scheme pool
Regional
Population
Structural
design
Capacity
control
Information
Affordability &
accessibility
Incentives
Smaller sicker
insured
population
Schemes lack
bargaining power
Fragmented
delivery &
no teams
Lack of support
for scheme
purchaser role
Inefficient
pricing
Unaffordable
premiums
Partial
implementation
of social
insurance
framework
Excess
capacity
Poor quality
health
outcomes
Individual
FFS
Target
income &
excess
Over servicing &
Supplier induced
demand
Competition
Production
Regulatory
control
Facility
licenses
never
revoked
Over utilisation
Inadequate supply side
quality measurement &
no supply side regulation
Regulation put on back burn due to working towards NHI
25
In summary – analysis of our current
health system
3rd party moral
hazard
Individuals buy
insurance
Individuals go
to individual
doctors
↔
→
Demand
Funders
Demand
Supply side
(Population)
(medical schemes)
(Patient)
(Healthcare providers)
Affordability &
accessibility
•
•
No data for consumer to make
informed choice of Scheme
Weak Scheme purchaser
environment
Structural design
Competition
Scant competition
disables the market
Information
(collect & use)
Incentives/ rationing
(Governance)
Production
•
No supplier performance data
•
Weak value producing
provider environment
Regulatory control
State fails to manages system capacity nor does it set data standards & obligations;
its regulators fail to police demand & supply sides role players
Value producing competition is weak
26
The 3 competition issues requiring
attention
27
1. Issues between members/schemes
Obstacles
• Weak regulation
o Dysfunctional marketplace favours incumbents; there is no coherent systems to create value
• Medical Schemes Act intention not fulfilled
o Consumers choose Schemes for the ability to purchase high value care including quality
outcomes, but current situation => competition is not on ‘value’ but on benefits and price
• Absence of comparator information
o Lower priced restricted network, benefit plans => seen as ‘cheap & nasty’
• Scheme/Administrator alignment
o Listed administrators not fully aligned to Scheme loss ratio & have a short term focus
• National Scheme plans/options
o Advantages existing dominant Schemes; hard for regional /new entrants
Consequences
• Schemes do not compete on best Value (optimal patient outcomes at lowest cost)
Solutions
• Transparent performance reports
• Regional plans & regional premiums
• Schemes with minimal nett loss ratio
28
2. Issue of the scheme purchasing role
Obstacles
• National mandate:
o Advantages existing dominant Schemes; hard to embrace innovative new models
o CoMS 2006 review: reduced local premiums for discount prices – NHI ended proposal
• Tariff:
o Regulatory limbo: ‘de facto’ FFS tariff for individual clinicians & hospitals
• Funder reluctance to undertake macro innovations:
o PMB rich hospital benefits & poor community level benefits = tough Scheme unilateral gamble
to invest in better community services hoping for quick reduction in hospital spend
o ‘free rider’ issue – other Schemes benefit from their efforts and investment
Consequences
• System is good with defined acute episodes; complex care sees duplicates, over-servicing & gaps
• Result: poor production – patchy quality at a high price
Solutions
• Regional purchasing
• Transparent reporting
• Team / population reimbursement schedule, rewards - returns governance to providers
29
3. Issues between providers
Obstacles
• Providers are fragmented:
o absence of local teams/systems means no systematic provider competition for consumers
(hospitals are not systems…)
o unhelpful competition between isolated individual clinicians (with no organisational
support); resist Scheme network which don’t offer security or return clinical autonomy
o hospital national oligopoly networks prosper
• No comparator measures for Schemes or consumers to base their choices
Consequences
• System is good with defined acute episodes; complex care sees duplicates, over-servicing & gaps
• Result is poor production – patchy quality at a high price
Solutions
•
•
•
•
Regional purchasing
Transparent reporting
Team / population contracts, rewards - returns governance to providers
Regular Scheme contract review and retender
30
Recommendations - enabling market
competition in SA private healthcare
Structural design
Capacity control
(barriers to entry/ exit)
Affordability &
accessibility
Incentives/ rationing
(Governance)
•
•
•
•
•
•
State supply side planning
New delivery models
Conditional facility licenses – ongoing value production
Underserved areas
Mandatory income level membership
Strengthen Scheme role as value purchaser
• Population value tariffs for integrated teams; Reward outcomes
Competition
• Regional Scheme options & national REF
• Align Schemes / Administrators with minimum loss ratio
Production
• Routine system performance assessment report
Information
(collect & use)
Regulatory control
•
•
•
•
Mandatory data standards & transparent information sharing
Routine reports - Scheme & healthcare systems performance
Regulatory oversight of Demand & Supply Side players
Disqualify habitual failures
Making the purchaser provider split work
31
Recommendations – enabling the
right regulatory environment
=
National Supply Side Regulator
↔
Expanded CoMS mandate
Structural design
Capacity planning
New delivery models
Affordability &
accessibility
Capacity control
(barriers to entry/ exit)
Conditional licenses
Underserved areas
Incentives/ rationing
(Governance)
Production
Performance reports
Competition
Information
(collect & use)
Data standards &
reports
Regulatory control
Income level mandate
Scheme Purchase role
Population Value Tariffs
Regional Schemes
Minimum loss ratio
Regulatory oversight
& exclusion
Creates a competitive, value producing market place
32
Working towards Universal Health
Coverage
33
The current two tiered system is
structured as follows
Demand
Supply
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
34
There is an emerging gap market
Demand
Supply
High
income
Costly
Private
services
Emerging
‘gap’
market
Poor
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
35
This gap market requires a different
service offering
Demand
Supply
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
36
Over time the model will grow
Demand
Supply
High income
Costly
Private
services
Emerging
‘gap’
market
Low cost
provision
Poor
Free
state
provided
services
• In In time the middle class
grows and the supply side
reflects its growth….
37
Only then is system reform to
universal access possible
Demand
Unified
market
Supply
Unified
supply
system
• In At the end of the
developmental process is a
homogenous system with
equitable access
38