Laura du Preez: Personal Finance, 30 September 2006
Healthcare provider networks are likely to develop into more consolidated managed healthcare systems that will be used to contain the cost of providing you with healthcare, Charles Mbekeni, the director of managed care at Prime Cure, told the recent Discovery Health/Personal Finance Health Focus seminars
CHARLES Mbekeni, who represents Prime Cure - a managed care organisation consisting of 38 medical centres around the country, as well as a network of about 1 900 general practitioner (GP) practices - says healthcare networks have been developed to meet the need to contain the cost of ever-increasing real (after-inflation) healthcare expenditure.
He says the reasons why healthcare costs continue to rise include technological innovations, changes in demographics as people live longer and the number of pensioners increases, and the relative price effect - as medical inflation tends to outstrip consumer inflation.
Mbekeni says the consequences of this are that as the cost of medical scheme cover has risen, there has been a decrease in the proportion of people who enjoy this cover. Those able to afford this cover have experienced a reduction in their benefits and/or an increase in co-payments and deductibles, he says.
These cost escalations have led to members opting for cheaper benefit options, known as buy-downs.
Rationing healthcare
To contain costs, healthcare has to be rationed, Mbekeni says, and this raises wide-ranging debates.Schemes have tried to incentivise consumers to use healthcare services judiciously by introducing cost sharing, such as co-payments and deductibles, or by limiting their indemnity - putting a limit on the amount they will pay for, for example, an organ transplant, he says.
However, schemes can also reduce costs by limiting your choice of healthcare providers, but ensuring that you always have access to the healthcare you need. This can be achieved by making fixed payments to providers, such as health management organisations (HMOs), and insisting that members use these providers. HMOs sometimes own healthcare facilities and pay doctors to work at these facilities. In other cases, HMOs contract with independent service providers.
Alternatively, Mbekeni says, members could be given incentives to use selected providers, such as preferred provider organisations.
Schemes can also contain costs by delegating the clinical decision-making process to a health professional - using your GP, for example, as a gatekeeper who will only refer you to a specialist, if he or she deems it medically necessary.
In the private healthcare industry, networks are organised in different ways. For example, Mbekeni says, you get Individual Practice Associations (IPAs), which tend to negotiate with schemes and they are often regional.
Managed care organisations also establish networks by contracting with sole practitioners or IPAs. Some of these networks have a wide geographic spread in order to ensure accessibility, Mbekeni says.
Major policy issues
There are a number of major policy issues that could result in an increase in the number of medical scheme members using networks. These include the Risk Equalisation Fund (REF), which is intended to equalise the cost of providing certain minimum benefits across schemes so that schemes will no longer compete for healthy members, but rather compete on the basis of the cost and quality of the healthcare they provide.
Mbekeni says when this happens, it will become necessary for schemes to make use of the efficiencies inherent in managed care.
Proposed changes to the way that schemes pool their risk, forcing them to identify common benefits across options and set a price for these benefits that applies to all members, is also likely to result in more schemes contracting with providers, Mbekeni says.
He also says initiatives, such as the Low Income Medical Scheme investigation and changes to the tax subsidies for scheme members, are aimed at lowering the cost of scheme cover and increasing the number of people who can afford cover. This could potentially increase the number of people using provider networks.
What networks can offer
Mbekeni says networks are capable of offering schemes:
- Preventive programmes to stop members from getting ill. The pre-scribed minimum benefits do not place an emphasis on preventative care and networks will have to introduce this so that consumers see some benefit in using a network.
- Disease management programmes to ensure that chronic diseases are properly managed.
- Utilisation management to monitor the use of various benefits by beneficiaries
- The ability to integrate services, for example, primary care and ancillary healthcare services.
- Advanced information technology systems - to integrate clinical, financial and other administrative systems.
Mbekeni says that in future it is likely that healthcare provider networks will become more complex. This will result from the development of alliances between different service providers.
