Tariff determination - The Competition Commission of … Structure –Conduct-Performance • Market structure informs spatial allocation of resources. • High concentration of resources

Tariff determination

Council for Medical Schemes

1

Contents

• Complex contractual relationships

• Expenditure trends

• Public-Private Sector Imbalance

• Market concentration

• Market structure

• Statutory pricing framework

• Recommendations

• Conclusion

2

Medical Schemes(Mutual funds- Pooling function)

Contractual relationships(Different reimbursement models, Designated Service Providers and

Network arrangements, risk transfer arrangements )

Contractual relationships(Purchasing benefit options, payment of contributions, application of

scheme rules , access and/or limitations/ exclusion of benefits)

Complex contractual relationships

Co

mm

un

ity ra

ting

/ op

en

en

rolm

en

t /so

cia

l

so

lida

rity

Medical schemes third

parties (Administration, managed care, brokerage,

Actuaries etc.)

Pre

sc

ribe

d M

inim

um

Be

ne

fits /

co

rpo

rate

go

ve

rna

nc

e /p

res

crib

ed

so

lve

nc

y le

ve

ls

Partial regulation:

Private health care

providers (Acute & sub-acute hospitals, PHC

centres, , day clinics, step down

facilities , doctors, pharmaceutical

industry, other health care providers

)

Medical schemes members/beneficiaries

Distribution of healthcare benefits paid

4

37

,4

15

,8

7,3

6,8

5,9

5,4

5,3

4,4

4,4

2,3

2,1

2,0

0,7

0,0

0,1

37

,1

16

,5

7,3

6,7

6,3

5,4

5,3

4,7

4,3

2,4

2,1

1,2

0,7

0,1

0,0

37

,0

16

,4

7,0

6,5

6,4

5,2

5,1

5,0

4,2

2,4

2,0

1,9

0,7

0,1

0,0

0,00

5,00

10,00

15,00

20,00

25,00

30,00

35,00

40,00

Ho

spit

als

Med

icin

es

Dis

pen

sed

Sup

ple

me

nta

try

and

Alli

ed H

eal

thP

rofe

ssio

nal

s

Med

ical

Sp

ecia

lists

Ge

ner

al P

ract

itio

ner

s

Pat

ho

logy

Surg

ical

Sp

eci

alis

ts

Tota

l ou

t-o

f h

osp

ital

man

age

d c

are

arra

nge

men

ts

Rad

iolo

gy

Den

tist

s

An

aest

het

ists

Oth

er

He

alth

Ser

vice

s

Den

tal S

pec

ialis

ts

Ex-g

rati

a p

aym

ents

Med

ical

Te

chn

olo

gy

Per

cen

tage

(%

)

Distribution of healthcare benefits paid 2015 and 2016

2016 2015 2014

Total payment by provider type

5

R369,20

R757,59

R842,83

R956,61

R991,75

R1 010,66

R1 318,52

R1 744,23

R2 030,56

R2 935,67

R0 R500 R1 000 R1 500 R2 000 R2 500 R3 000 R3 500

General Practitioners

Pathology

Medical Technology

Dentists

Supplementary and Allied Health Professionals

Medical Specialists

Dental Specialists

Radiology

Surgical Specialists

Anaesthetists

Total benefits paid per event (visit) 2015

2016 2015 2014

PMB expenditure

6

-2,3%

0,9%

2,4%

2,8%

0,8%

-0,1%

-1,7%

2,7%

1,5% 1,1%

3,1%

1,2%

4,5%

4,5%

5,7%

5,3%

7,3%

5,3%8,4%

-

100 000

200 000

300 000

400 000

500 000

600 000

700 000

800 000

900 000

(10)

490

990

1 490

1 990

2 490

2 990

3 490

< 1

Yea

r

1-4 5-9

10-1

4

15-1

9

20-2

4

25-2

9

30-3

4

35-3

9

40-4

4

45-4

9

50-5

4

55-5

9

60-6

4

65-6

9

70-7

4

75-7

9

80-8

4

85 +

Num

ber

of B

enef

icia

ries

PM

B E

xpen

ditu

re p

bpm

Age

PMB Expenditure by age band for 2016 and 2015

Beneficiaries 2016 Beneficiaries 2015 PMBs 2016 PMBs 2015 Average PMBs-2016 Average PMBs-2015

Public-Private Sector Imbalance

Market concentration

8

HEALTHCARE PROVIDER MARKET

STRUCTURE

Province 1 Province 3Province

2Province 4

Province

6

Province

5Province 7 Province 9Province 8

Market Structure – Conduct-Performance

• Market structure informs spatial allocation

of resources.

• High concentration of resources in some

Incentivizes supply-induced demand

• Quality health outcomes

Market Definition: Provincial Postal Code

Level

Indicators:

• Density & Ratios

Availability of healthcare providers per 10,000

beneficiaries.

• National Market Share of Providers

Provinces that capture the largest share of

providers

Provider

Postal Code

Beneficiary

Postal Code

Provider

Postal Code

Beneficiary

Postal Code

Provider

Postal Code

Beneficiary

Postal Code

Market Structure – Conduct-Performance

Market structure informs spatial allocation of

resources.

• High concentration of resources in some

centres, leaves others underserved.

• Incentivizes supply-induced demand

• Quality health outcomes

Market Definition: Provincial Postal Code

Level

Indicators:

• Density & Ratios

Availability of healthcare providers per 10,000

beneficiaries.

• National Market Share of Providers

Provinces that capture the largest share of

providers

Market Structure – Conduct-Performance

• Market structure informs spatial allocation

of resources.

• High concentration of resources in areas

leaves others underserved.

• Incentivizes supply-induced demand

• Quality health outcomes

Market Definition: Provincial Postal Code

Level

Indicators:

• Density & Ratios

Availability of healthcare providers per 10,000

beneficiaries.

• National Market Share of Providers

Provinces that capture the largest share of

providers

Market structure

10

Descriptive trend

(National and provincial outline)

HASA hospitals , Independent Hospital Groups, Clinix Health Group , Public hospitals, NGO hospitals &

Other

Ownership & Market Share (Provincial distribution of the total number of facilities owned)

Number & type of beds

High care

Surgical

Medical

Day ward

Maternity

Specialised ICU

Neonatal ICU

Other (clearly defined)

Facility types

• Acute hospitals (clear definition required)

• Sub-Acute hospitals (clear definition required)

• Step down facilities (clear definition is required)

• Unattached operating theatres / Day clinics

• Rehabilitation Centres

• Palliative care Centres

• Mental facilities

• Provincial facilities

• Travel clinics

Market structure

Market structure

• Barriers of entry for low levels of care:

- Sub-acute facilities, outpatient surgery other

forms of step-down facilities.

- With regards to same-day surgery, it has

been acknowledged that the following

barriers are widespread

• Group practice vs sole practice

11

Ways to influence supply side

behaviour • Enabling factors:

– PMB review- a move away hospi-centrict

– Efficiency discounted options – valuable lessons to be learned

– The existing “silo-type” benefit option framework for medical schemesallows for risk-related pricing for common benefits offered by medicalschemes. This contradicts the intention of the Medical Schemes Act, as wellas of health policy in general.

– Section 29(1)(n) of the Act limits the potential pricing configurations formedical schemes to variations in income or number of dependents. Thislimitation, for instance, prohibits the Council from registeringarrangements where pricing varies exclusively on the basis ofalternative provider contracts. This prohibition is inappropriate andprevents schemes from creating and pricing benefits in a manner thatpromotes reasonable provider competition.

– Interim measure – EDO exemption framework ,Section 8 (h) MSA

Statutory pricing framework

Commission

Management

of

negotiation

chamber

Technical

Review of

Prices

Advice to

Minister

Independent

Arbitration

Courts(review but

no appeal)

Should be completely

independent to achieve the

trust of all stakeholders

Research Arm

Compliance

Investigations

Enforcement

Should consider the

role of the RPL &

Pricing Committee

Provide information to other

agencies where appropriate

Pricing Authority framework

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• Impartial treatment - all affected parties

• Full transparency - all information supplied to,

used in, and produced by the process at all times

to all parties and the general public

• Opportunity to engage offered to all parties

• Evidence required for all positions taken by all

parties

15

Statutory pricing framework

Recommendations

• Function of tariff determination and OMRO to be considered under one authority– Efficient regulation- mindful of fragmentation

– Cost of private health care to demonstrated by quality health outcomes

• Synergies with HPCSA ethical tariff determination • CMS 2010 proposal on tariff determination

• Funding to consider tax burden:• Proposed OMRO funding

• CMS funding model

• Proposed NHI funding

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• CMS has engaged in discussions with various stakeholders to explore a process of tariff determination.

• Consideration of CMS role:– 2006 NHRPL

– 2011 price determination framework

– Guideline for contribution increase

– Cost assumptions analysis

– Discussion with the Competition Commission of collection, analysis and reporting data on contribution increase inflation

– Quality health outcomes 17

Recommendations

Recommendations

• Bilateral negotiations are not always practical or

feasible

• A framework has to be established for negotiations

that are not bilateral.

• Preference for a collective or multi-lateral negotiation:

– All affected parties need to participate in the process.

– Address all technical issues relating to code structures and

billing rules

• Material impact on costs and behavioural incentives

• need to be properly and fairly negotiated.

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• There are inequalities in accessing healthcare providers

• Inequality is larger for secondary care disciplines than primary care

disciplines

• Concertation of acute hospital services vs sub-acute care

– Anomaly – consider international trends

• Understanding where inequalities is important:

– Demonstrated through data from the tariff determination process

and quality health outcomes regulator

– Evidence can inform where networks should be encouraged; i.e.

network options, capitation options and EDO’s

– Approval of practice licensing

Conclusion

Conclusion

• Absence of Statutory Tariff Determination process

affects long term sustainability of the healthcare

sector:

– Maldistribution of financial and human resources

– Huge opportunity costs to the public & private healthcare

sector

– Welfare losses within the National Health System

– Limited impact affecting the economies of scale

20

Conclusion

• The OMRO and the Tariff Determination process will

create enabling environment for the following:

– Strategic purchasing

– Performance based reimbursement and contracting

– Quality health outcomes

– Review the impact of market concertation

– Provide an opportunity to explore and understand inefficient

supply and demand side factors

– Efficiency and equity within the national health system

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THANK YOU

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