Tamar Kahn: Business Day,

STRATEGIES for tackling the soaring costs of private healthcare topped the agenda yesterday at the annual Board of Healthcare Funders (BHF) conference, with medical scheme administrator Discovery Health describing how its managed care initiatives were saving schemes millions of rands a year. Discovery Health is a subsidiary of JSE-listed health and insurance company Discovery Holdings, and provides administration services to SA's biggest medical scheme, Discovery and 11 smaller schemes, which together cover 2,1-million beneficiaries. The term "managed care" is used to describe attempts to reduce unnecessary or inefficient healthcare expenditure. Discovery Health had taken steps to reduce unnecessary hospital admissions, negotiated with pharmaceutical companies to lower the price of medicines, and tightened up its oversight of the consumables used in hospitals, said the company's GM for strategic risk management, Jonathan Broomberg. Initiatives such as this were saving the schemes under Discovery Health's administration at least R1,4bn a year, he said. Over the past three years Discovery Health had sought to reduce the "very high rate" of hospital admissions for patients with conditions that could be better treated out of hospital, such as lower back pain. Discovery Health had managed to cut hospital admissions by 3,9% over the past two years without denying care to patients, saving R181m a year, said Broomberg. Once it was clear certain procedures would not be admitted to hospital, demand slumped, he said. He emphasised that only a small proportion (0,3%) of requests for patients to be admitted to hospital were challenged by the administrator on clinical grounds, but they nevertheless had a significant impact on costs. Discovery Health had used its market power to negotiate rates for hospital and pathology services that were "significantly below" the market average, saving R434m a year for the schemes it administered, said Broomberg. It had saved up to R90m a year by reviewing the surgical devices and consumables used for treating hospital patients, and had made further savings from encouraging wider use of generic medicines, which are often much cheaper than the so-called "ethical" drugs that they mimic. Discovery Health's negotiating weight had also benefited medical scheme members outside the schemes it administered, as it had secured lower medicine prices to the advantage of the entire private sector. By law, medicine manufacturers must sell their products to all their customers at the same price, regardless of the quantity purchased. As a result, each time Discovery Health persuaded a pharmaceutical firm to lower its prices, the benefits were felt across the industry. Discovery Health had saved R26m a year from lower medicine prices, leading to a saving to the medical schemes industry of R80m a year. Broomberg defended Discovery Health's administration fees for its main client, Discovery, which are markedly higher than the industry average, saying they reflected the complexity of the task at hand. Unlike administrators that managed the affairs of a single employer group, Discovery Health had to manage a much more diverse group of members belonging to Discovery, with myriad different employers.