Managed Care in South Africa Where to now? by drdoc on-line |
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In
the 1970’s managed care rose to prominence in the United States of
America with a realisation that health care costs were escalating
uncontrollably. Over the next 20 years the reduction of health insurance
premiums resulted in a surge in the industry, which posted record profits.
However in the late 1990’s with the saturation of potential new clients
and increased demand by patients for easier access to care, we are seeing
a decline of the industry and the posting of losses by managed care
companies. It was during the rise of the USA model that we saw the
introduction of managed care into South Africa with the imposition of
managed care models on providers in the early 1990’s. Managed care was
perceived as an assault on the profession, as the managed care companies
tried to impose reduction in fees for service, whilst at the same time
imposing administrative restrictions on practices and threatening to
remove the pool of patients accessible to these practices. The climate of
suspicion resulted in a laager mentality. Co-operation with and by doctors
was poor and as a result the industry has failed to meet the expectations
expected of it. We now see the imminent sale of one of the major players
– Southern JV and the posting by Sanlam Health of large losses.
However the concept of managed
health care is not going away. It is going to restructure, and pursue its aims,
as change is essential.
Let us consider a hypothetical solo-practice, specialist physician (internist) practice
in this scenario.
Where does he fit into the picture?
The impact in the short term
Our practice must realise that change has to occur, as the current
situation of uncontrolled costs cannot be continued. South Africa has seen
numerous changes over the last few years including tumultuous political
change and a population growth with increasing urbanisation, unemployment
and social instability. The economy has shown significant decline. This is
in the context of a depreciating rand and rising costs with inflation. The
Health Care Sector has been at the forefront of those difficulties and
there are many discrepancies in the provision of health care.
Two systems are in existence:
In the private sector it is noted that patients want to receive the latest in health technology but are themselves unwilling or unable to pay for that facility. In addition health care providers hope to provide the finest health care, but the payors are unable to afford this. Over the years the cost of health care has outstripped inflation and the funders cannot afford this trend.
The main reason for the spiralling health costs have been:
1. Complications of the
fee for service system with a lack of control of expenses by both health
care providers and the patient population.
2. Increasing costs of sophisticated medical technology.
3. An increasing number of health care providers in the private sector
4. Inflation
5. The general aging of the population
6. Increasing use of special investigations for fear of malpractice
suits.
Because of the spiralling health care costs, there has been an increasing need for revision of the Health Care System and following the American trend, we have seen the rise of the Managed Health Care Systems, with the ultimate aim of improving the use of scarce resources, whilst maintaining the highest quality of patient care.
This provides both threats
and incentives for existing or emerging practices.
The current system consists of mainly fee for service – health
care with largely guaranteed payment for services rendered under the Scale
of Benefit rate as set by the registrar of Medical Schemes (RAMS). There
is no restriction on utilisation and patients have free choice of
provider. Payment for practitioners charging the Scale of Benefit Rate
would be guaranteed payment by these Medical Schemes.
Under managed care members are generally restricted choice of health care provider to various degrees and through the "gatekeeper system", have restricted access to specialists and special investigations. Authorisation is required for referrals, tests and hospitalisation.
At this early stage, we must be able to deal with the coming changes.
The practice should gather data regarding practice profile.
Patient profile /
referral pattern
Turnover / Income / Sources of income
Utilisation review – regarding investigations / procedures /
hospitalisations.
Outcome measures
Only after this information is available can we enter into meaningful negotiation with managed care companies. This will enable us to determine procedure specific capitation rates as illustrated in table 1. We are then able to compare income generation from the current state to that projected by various managed care options.
We have to justify our effectiveness and be desirable partners on any future dispensation.
Any decision as to which direction to go depends on the availability of data on the practice. Various options exist:
a) Continue on a fee
for service basis
b) To explore avenues with the HMO organisations
c) To be proactive and pursue contracts with managed care
organisations.
Table 1
Service |
Procedure |
Procedure |
Procedure |
SAMA |
Procedure |
Rand value |
Expected daily frequency | Total procedure charges |
Total procedural charges | Estimated average monthly enrollment | Procedure specific capitation |
cpt-4 |
cpt-4 |
sama |
units |
sama - value |
per unit |
estimated per day |
presume 15 days / month |
rate per month |
|||
code number |
value |
code number |
|||||||||
Joint/ligament/tendon injection |
20550 |
For negotiation |
0661+ 0201 |
9 |
R 200.00 |
22.22 |
3 |
R 600.00 |
R 9,000.00 |
5000 |
R 1.80 |
New consult 3/4 - 1 hr |
99244 |
For negotiation |
101 |
27 |
R 347.76 |
12.88 |
3 |
R 1,043.28 |
R 15,649.20 |
5000 |
R 3.13 |
Follow up office 25 minutes |
99214 |
For negotiation |
108 |
18 |
R 231.84 |
12.88 |
2 |
R 463.68 |
R 6,955.20 |
5000 |
R 1.39 |
Follow up office 15 minutes |
99213 |
For negotiation |
108 |
18 |
R 231.84 |
12.88 |
5 |
R 1,159.20 |
R 17,388.00 |
5000 |
R 3.48 |
New consult hospital |
99222 |
For negotiation |
103 |
33 |
R 128.80 |
3.90 |
1 |
R 128.80 |
R 1,932.00 |
5000 |
R 0.39 |
Follow up consult hospital |
99231 |
For negotiation |
109 |
10 |
R 128.80 |
12.88 |
4 |
R 515.20 |
R 7,728.00 |
5000 |
R 1.55 |
Total |
R 3,910.16 |
R 58,652.40 |
R 11.73 |
The
impact in the medium term.
In the medium term we need to assess the different options available in managed care and establish communication with the managed care organisation. Several managed care options exist and caution must be exercised regarding entering into agreements without adequate study. The instinct to panic and to sign the first contracts rendered must be avoided at all costs. Consultation with necessary legal or financial advice must be considered.
The dilemma remains for individual specialists who want to support their colleague’s collective best interest, but do not want to be left behind as the process of managed care evolves.
The threat exists that the
specialist will have to participate in managed care schemes or risk
loosing access to the growing number of patients enrolled in these
schemes. The referral base will shrink and practitioners outside the
system may ultimately be forced to compete for a shrinking pool of
self-funding patients. Primary care physicians (PCP’s) will be employed
by the management organisations to act as "gatekeepers" aiming
to reduce access to potentially unnecessary services. In addition there is
reduced freedom to provide follow up care, admit patients to hospital or
prescribe medication freely. Late entry to the schemes will allow for
managed care to control costs by aggressive negotiation of specialist
payment arrangements. Limited place will be available to be appointed to
panels. Increasing competition from other providers will take place –
including that from general specialists, physical therapists,
chiropractors and primary care practitioners.
Managed care utilises a variety of organisation controls to achieve cost, volume and quality objectives.
This includes:
Discounted prices in
exchange for a guarantee of volume.
Encouraging cost effective providers by clinical audits of practice.
Gatekeeper control limiting access to the provider.
Use of cost effective medical services and practice guidelines, which
restrict practice managements.
Required authorisation of medicines, procedures or investigations or
referral to other practitioners.
Shifting of financial risk to the provider through capitation schemes.
Hence there is a transfer of financial risk to the caregiver in varying degrees.
The economic incentive of manage care therefore may lead to reduced access to care - potential under treatment of patients and hence there is a concern regarding deterioration of medical care quality.
Because of erosion of autonomy and potential income – it is important at this stage to assess the appropriate type of organisations to join or associate with. It is important not to over-restrict practice at this time.
Involvement can be either:
a: Open panel – where the
practitioner can participate in more than 1 scheme and can maintain his
existing private practice patients within his own rooms
b: Closed panel - where the provider contracts to the managed care
organisation and is not allowed to participate in other schemes or
practice.
The practitioner should avoid taking excessive financial risk, as managed care payment methods will attempt to shift the risk from the payers of health care to the provider. Various payment methods exist and generally those schemes with highest risk have the potential for greater compensation.
Reimbursement may be through:
a. Fixed salary with
incentives for lower utilisation built into the contract.
b. Fee for service with negotiated fee schedules
c. A capitation fee where a fixed amount is paid per member of
the scheme to each health care provider regardless of utilisation. The
latter effectively places maximum risk on the health care provider as
the provider may be held responsible for any additional costs,
including ancillary investigations and hospitalisation costs.
Therefore Insurance Schemes are required for the protection of the
doctor in the event of isolated high cost events where a single
patient might drain all the resources of that provider through one
illness event. Alternatively the use of "risk pools" may
require to be established - where funds are set aside by categories of
practitioners and administered by a Managed Care Plan as a protection
against such events. Any surplus at the end of the year may then be
channelled back to the relevant provider whereas short falls are met
from the pool and contributions required to make up any negative
balance.
Choice of managed care schemes:
The commonest and most
established and successful organisations that have evolved in the USA are:
1) The Health Maintenance Organisation HMO – Here there is an
arrangement between the organisation and the provider of health care to
deliver health care to a specific subscribed population.
The group model HMO consists of a practice or group of practitioners contracted by the HMO to provide part or all of the clinical services to its subscribers. Under this system there is a negotiated rate and the group generally compensates its participating providers accordingly. The practitioners may or may not be allowed to see non-HMO members and private patients in the Independent Practice Association – IPA model. The HMO contracts with an independent association of practitioners to provide health care services for a negotiated rate. Those practitioners in the IPA may continue to see there own patients and maintain their own offices and staff. In addition providers may negotiate separately with other managed care plans and may accept private patients.
The network model HMO - a group may contract with an HMO to be part of a network and is responsible to provide medical services to HMO members assigned usually on a capitation based system to that group. However a group practice is financially responsible for ancillary investigations, referrals and hospitalisation.
The direct contract model - the HMO contracts directly with individual practitioner either on a capitation or a fee for services basis with the practitioner usually able to maintain his private patients and see non-HMO patients.
2) The Preferred Provider Organisation – PPO. In the PPO there is a contract with providers of medical care. Patients are usually allowed to see other practitoners, but receive incentives to use the preferred providers. Panels of providers are drawn up with negotiated payment rates usually at a predetermined fee calculated as a discount from the standard service rates. Payment mechanisms to the provider are usually direct and rapid. Patient turnover is maintained because of referrals by the PPO, but utilisation restriction is required.
It is this model that I
would at this stage suggest our specialist join, as he is free to operate
his practice on the side and can be part of other panels and organisations.
Negotiation strength by allying with fellow colleagues becomes important
to ensure higher consultation fees, but peer review and utilisation review
is essential.
The introduction of CPT4 charging systems will ensure time based fees and
control abuse of services.
The monitoring of ICD-10 diagnostic codes will check that charging is
appropriate to diagnosis category.
3) Exclusive Provider Organisations EPO. These are similar to the PPO, but in general payment is not provided for the subscriber to attend providers not in the system.
Our specialist is likely to come under increasing pressure to limit fee levels either through fixed fee schedules or capitation contracts. However he will have accumulated considerable knowledge about his practice profile and will be secure in his cost effective practice methodology. It is at this stage that he can either chose to continue with the low risk PPO model or consider high-risk capitation schemes. These are inheritantly dangerous for the specialists in therapy of chronic disease as they allow over utilisation by the patient. Protection mechanisms outlined previously must be built into any contract and the contract must have a built-in termination time for renegotiations. Legal and accounting professionals must be consulted prior to signing the contract.
It must be remembered that any "goodwill" held by a practice will disappear when the referral base is lost to the managed care company as managed care plans divide and conquer the status of the physician.
Despite the overall threats of managed care, various opportunities exist and restructuring of the practice is required. This includes a review of staff, or sharing of staff with colleagues in groups.
The long-term impact presumes that managed care becomes viable and our practice either stays separate from it or joins in a mutually symbiotic relationship. The latter constitutes the best outcome, as only in this way will the whole system survive.
Dr David Gotlieb
MBChB FCP(SA)
Cape Town
August 1999
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