Tipping Point Leadership Neville Koopowitz
Post on 24-Apr-2015
36 Views
Preview:
Transcript
Tipping point leadership
Neville Koopowitz
CEO Discovery Health
Tipping Point Leadership
“To appreciate the power of epidemics… we need to prepare ourselves for the possibility that sometimes big changes follow from small events, and that sometimes these changes can happen very quickly”
“Look at the world around you. It may seem like an immovable, implacable place. It is not. With the slightest push – in just the right place – it can be tipped”
• We are looking for the small things that lead to epidemic-like contagion
• If we can find them – then a small concentration of resources in key areas will produce the maximum effect
From: The Tipping Point: How Little Things Can Make a Big Difference, Malcolm Gladwell, 2000
Evolution of private healthcare in SA
Tipping pointStaticMembership
Past
(Pre-2000)
Present2000 - today
Future
Industry Developments
Strengthened
Increased attention
Improved
ImprovedAccess
Regulatory framework
Low-income cover
Solvency
64%
R 0 - R 2,500 R 2,500 - R 5,000 R 5,000+ insured R 5,000+ uninsured
Income bands and insured status
Coverage of SA population
16%
7m current medical scheme population 4%
1m Wealthy uncovered
17%
Over 7 million South
Africans uncovered
Evolution of private healthcare in SA
Past
(Pre-2000)
Present2000 - today
Future
StrengthenedRegulatory framework
Increased attentionLow-income cover
ImprovedSolvency
ImprovedAccess
Tipping pointStaticMembership
Industry Developments
Evolution of private healthcare in SA
Past
(Pre-2000)
Present2000 - today
Future
StrengthenedRegulatory framework
Increased attentionLow-income cover
ImprovedSolvency
ImprovedAccess
Tipping pointStaticMembership
Industry Developments
Tipping Point Variables
1. Cost & Affordability
2. Risk Protection
3. Distribution
4. Capital
5. Bold Vision
Sound foundation to build on
1. Cost & Affordability
Present
Future
• Risk based pricing restricted access for old and sick• Inflation controlled through product design
• Community pricing• Price floor based on minimum benefit package• Inflation managed by focus on underlying cost drivers
Past
The affordability formula
Affordability f= [ ]Breadth of access( ), Quality of
care( ), Basket of benefits( )
* REF community rate
Active Network Management
Consumer & Manufacturer
demand for new technologies
Floor price for PMB’s R237* per life excluding:
•Administration
•Reserve build up
•Distribution costs
Co-operation RegulationCompetition
1. Cost & Affordability
Present
Future
• Risk based pricing restricted access for old and sick• Inflation controlled through product design
• Community pricing• Price floor based on minimum benefit package• Inflation managed by focus on underlying cost drivers
• Flexibility of PMB’s• Co-operation between funders, providers & suppliers• Compete on networks
Past
2. Risk Protection
Present
Future
Poor risks managed through:• Underwriting, declining poor risk members, loading
premiums and exclusions
• Guaranteed access allows sick & elderly affordable access to quality private healthcare
• Freedom of access increases adverse selection risk of groups and individuals with high cost conditions
Past
Adverse Selection
Medical Schemes Act Section 29A.6
A medical scheme may not impose a general or condition specific waiting period on a person in respect of whom application is made for membership or admission as a dependent, and who was previously a beneficiary of a medical scheme, terminating less than 90 days immediately prior to the date of application, where the transfer is required as a result of –
(b) An employer changing or terminating the medical scheme of it’s employees, in which case transfer shall occur at the beginning of the financial year, or reasonable notice must have been furnished to the medical scheme to which an application is made for such transfer to occur at the beginning of the financial year.
Impact of S29A.6(b) concessionA
ge
35
37
39
41
43
45
47
49
51
53
2004 2005 2006
45.4
49.750.7
Average age of members that joined under S29A.6(b) underwriting concession
Average age of Discovery Health new entrants during the year
Cost impact of high cost conditions
56
62 65 84 195 20
6
245
60%
Incr
ease
in
pre
miu
m t
o
fun
d t
reat
men
t
Stents (Original
Launch Price)
56
Xigris (Original
Launch Price)
6
Herceptin
adjuvant
Biologics for
conditions other
than cancer
Other new
registered drugs
for chronic
conditions
Biologics for
Oncology
(currently
available)
Pipeline
Biotechnology
Drugs
3 19 111
11 39
Mo
nth
ly m
em
be
r p
rem
ium
0
20
40
60
80
100
120
140
Base premium
Technology
10,0
00 m
emb
ers160
Monthly Premium per member
Estimated number of members that would benefit
•Only way to manage today is to avoid coverage
•Expectation of coverage but co-operate to minimize financial risk
2. Risk Protection
Present
Future
Poor risks managed through:• Underwriting, declining poor risk members, loading
premiums and exclusions
• Guaranteed access allows sick & elderly affordable access to quality private healthcare
• Freedom of access increases adverse selection risk of groups and individuals with high cost conditions
Past
• REF – responsible solution to adverse selection• Strengthen underwriting protection to restrict opportunistic
member movements• Ensure cover for low frequency, high cost treatments
through industry co-operation
3. Distribution
Present
Future
• Unregulated broker market - no barriers to entry • No qualifications, experience or education necessary
• Extensive accreditation required• Regulations on how advice is given and recorded (FAIS)• Cost to industry capped, controlled and transparent• 9, 426 accredited brokers (www.medicalschemes.com)• Powerful, educated asset for industry growth
Past
Upfront Expenses
FAIS licensing application fee- R1,150
Education (FAIS credits) - R1,000
Council broker accreditation - R1,000
Council brokerage accreditation - R1,000
Petrol, telephone, fax
Assume R3,000 per month
Assumptions
•Writes 21 cases per month
•Average premium of R600
Legislated commission of R18 per member per month
A new broker focussing on low-income products
Environment unlikely to attract new entrants
Ra
nd
s p
er
mo
nth
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33
Months
Income
1 year to reach minimum wage of
R1,500 pm
2 years to recover upfront losses
3. Distribution
Present
Future
• Unregulated broker market - no barriers to entry • No qualifications, experience or education necessary
• Extensive accreditation required• Regulations on how advice is given and recorded (FAIS)• Cost to industry capped, controlled and transparent• 9, 426 accredited brokers (www.medicalschemes.com)• Powerful, educated asset for industry growth
Past
• Create incentives to encourage growth of distribution capabilities - especially for individual members and low-income products
4. Capital
Present
Future
• Guideline only• Lower levels of capital
• Stringent requirement• Rapid build up of internal capital• Inefficient use of excess capital
Past
Industry Reserve Levels
15%
20%
25%
30%
35%
40%
2000 2001 2002 2003 2004
Re
se
rve
as
% o
f G
ros
s p
rem
ium
Source: COMS annual reports
R7.4bn
R18.5bn held at end of 2004
R13.7bn
R9.7bn
R6.2bn
R12.9bn needed for 25% level
R5.6bn excess capital held in industry at end
of 2004
Potential capital available for
improved access
4. Capital
Present
Future
• Guideline only• Lower levels of capital
• Stringent requirement• Rapid build up of internal capital• Inefficient use of excess capital
Past
• Utilise capital efficiently to create optimal balance between member security and future contributions
5. Bold Vision
Present
Future
• Cottage industry – little capital• Underdeveloped infrastructure• Low competitive pressure to meet consumer needs
• Period of consolidation leading to world class private healthcare, administration and managed care
• Sound regulatory framework
Past
Consolidation over time
Total number of Medical Schemes in South Africa203 198
189181
165154 156
149 145
0
50
100
150
200
250
1996 1997 1998 1999 2000 2001 2002 2003 2004
Source: COMS annual reports
More than 1 in 4 have been consolidated
SA exceeds world class service standards
Measure US Benchmark
Answer speed 80% in 21.93s
Average 38s
Abandon rate Average 4.58%
Best 3.52%
First call resolution Average 75.33%
Best 79.32%
Measure US Benchmark
Turnaround HMO’s*: Mean 71 Days
Medicare**: 95% of claims in 30 days
Accuracy US Managed Care***: 98% - 99.1%
Source: 2005 Purdue Report on health insurance industry call centres
*From interstudy 2000 analysis of 600 HMO’s
** From US Managed Care handbook
*** Cap Gemini, Ernst & Young US Managed Care Benchmark Study 2002
Calls Claims
25
SGA+EBIT for Companies in most Similar Operating Environments
Having most Similar Operations – Monitor Survey of Healthcare systems 2002
International costs of administration
World class service at lower cost
Note: The admin cost comparison is inclusive of broker commissions; the average is calculated excluding the 4 outliers at the top and the bottom of the range; Source: Company financial statements; Monitor analysis
% of Total Premium Income
Sanitas (Spain)
AXA PPP (UK)BUPA (UK)
Masvida (Chile)Brasilsaúde (Brazil)
Adeslas (Spain)
Colmena Golden Cross (Chile)Sul América (Brazil)
Isapre Banmédica (Chile)ING Salud S.A. (Chile)
Consalud S.A. (Chile)Norwich Union Healthcare (UK)
Bradesco (Brazil)VHI (Ireland)
Standard Life Healthcare (UK)Asisa (Spain)
Vida Tres (Chile)
Multinacional (Venezuela)
9.8%
9.9%
13.1%
14.2%
16.1%
16.2%
18.4%
19.4%
19.7%
23.0%
23.1%
30.0%
43.5%
15.7%
15.6%
14.7%
14.7%
14.5%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
SA open scheme average (12.7%) as per 2004 COMS report
Segment Average = 17.0%
5. Vision
Present
Future
• Cottage industry – little capital• Underdeveloped infrastructure• Low competitive pressure to meet consumer needs
• Period of consolidation leading to world class private healthcare, administration and managed care
• Sound regulatory framework
Past
• Bold vision to build on solid foundation• A sound balance between Competition & Co-operation
Create bold vision
July 20th 1969September 12th 1962
“We choose to go to the moon in this decade and do other things, not because they are easy, but because the are hard…”
10 million lives by 2010…
Tipping Point Variables
•Responsible co-operation whilst maintaining competition
•10 million lives by 2010
•Improve capital efficiency
•Encourage growth in low-income markets
•REF implementation
•Strengthen underwriting protection
• Flexibility of PMB’s• Co-operation of providers, funders & suppliers for high cost care
Capital
Bold Vision
Distribution
Risk Protection
Cost & Affordability
Tipping point leadership
Neville Koopowitz
CEO Discovery Health
top related