Presentation to the Portfolio Committee on Health Dr Jonathan Broomberg Dr Penny Tlhabi Discovery Health 2 June 2010

Transcription

1 Presentation to the Portfolio Committee on Health Dr Jonathan Broomberg Dr Penny Tlhabi Discovery Health 2 June 2010

2 Agenda 1 Introduction to the private healthcare funding environment 2 Key issues, challenges and opportunities in the funding environment 3 Discovery Health business and operating models

3 Department of Health Council for Medical Schemes Key role-players in the funding of the private healthcare system Sets healthcare policy Regulator of medical schemes Funding mechanism Not for profit organisation governed by board of trustees Delivery of healthcare Premiums Benefits Members and Employers Medical Schemes Medical services Claims Reimbursements Doctors and hospitals Administration fees Administration and managed care services Medical Scheme Administrator / Managed Care Organisation

4 3.5m principal members funding medical scheme coverage for 8m lives SA working age population by employment (millions of lives) Informally employed and uninsured 3.8 Unemployed 5.4 Approximately 8 million lives are covered by Medical Schemes in South Africa Formally emplyed and uninsured 5.2 Employed and insured registered schemes in South Africa - including open and restricted schemes Note : * Unemployed includes : unemployed but seeking employment and unemployed but discouraged Source: Council for Medical Schemes annual report 2008/2009, 2009 Genesis Analytics Discovery Analysis,

5 Legislation governing the operation of medical schemes No restrictions on who may join the medical scheme Membership restricted to a defined group or employer 33 Open schemes 77 Restricted schemes Key elements of the Medical Schemes Act: Open enrolment Guaranteed acceptance Community rating Prescribed Minimum Benefits Reserve requirement Anyone can apply and join Cover cannot be declined or conditions permanently excluded Premiums may only be rated by family composition, plan type and income level Schemes must cover the cost of 271 diagnostic and treatment pairs and 26 chronic conditions Schemes must hold 25% of gross contributions as statutory reserves to pay claims

6 Member / Employer contributions The flow of member contributions in the Discovery Health Medical Scheme Claims Administration costs Managed care Intermediaries Statutory reserves Hospitals (36.5%) Other 30% GPs 19% Health Professionals (30.4%) Dentists 17% Specialists 34% Medicines (12.2%) Other (5.1%) Admin (9.4%) Managed care (2.8%) Broker commission (2.5%) Reserves (<1%) Source: Discovery Health data, 2009 Revenue Less: Expenses Pay for all administration services: claims, call centre, risk management, advertising, CSI, sales etc.

7 Agenda 1 Introduction to the private healthcare funding environment 2 Key issues, challenges and opportunities in the funding environment 3 The Discovery Health business and operating models

8 2 Key issues, challenges and opportunities in the funding environment Maintaining affordability and sustainability of medical aid coverage Extending the reach of medical aid coverage to the uninsured

9 The challenge of controlling medical inflation Escalation of medical costs 220% 200% 180% 160% 140% 120% High and increasing demand Aging and ailing populations Technological advancements Scarcity of skills Asymmetry of information Irrational consumer behaviour Cumulative medical inflation (relative to 2005) Poly. (Cumulative medical inflation (relative to 2005)) Cumulative inflation (relative to 2005) Poly. (Cumulative inflation (relative to 2005))

10 Jan 2005 May 2005 Sep 2005 Jan 2006 May 2006 Sep 2006 Jan 2007 May 2007 Sep 2007 Jan 2008 May 2008 Sep 2008 Jan 2009 May 2009 Sep 2009 Jan 2010 May 2010 Jan 2005 May 2005 Sep 2005 Jan 2006 May 2006 Sep 2006 Jan 2007 May 2007 Sep 2007 Jan 2008 May 2008 Sep 2008 Jan 2009 May 2009 Sep 2009 Jan 2010 May 2010 Increasing prevalence of chronic diseases, oncology and HIV HIV Registered lives/1000 Chronics Registered lives/1000 Oncology Registered lives/1000 Increasing prevalence of disease is a major driver of medical inflation, and is compounded by increasing treatment costs

11 Undersupply of healthcare professionals places upward pressure on costs Physicians / population : SA private sector compared to other countries (public and private combined) France Germany Mexico USA UK Brazil SA private Colombia Malaysia Source: WHO World Health Statistics 2010

12 2 Key issues, challenges and opportunities in the funding environment Maintaining affordability and sustainability of medical aid coverage Extending the reach of medical aid coverage to the uninsured

13 Number of lives Coverage has grown slowly over the past decade Lives covered by medical schemes 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000, Year Open Schemes Bargaining Council Schemes Closed Schemes (excluding GEMS) GEMS Source : Council for Medical Schemes Annual Reports (from 1998 to 2008)

14 Discovery is focussing strongly on growing low income coverage KeyCare lives Most new KeyCare members are previously uninsured % previously insured 63% previously uninsured Mar-10 Source: 2008 Council for Medical Schemes report, latest Discovery data

15 KeyCare: Affordability is ensured by contribution from all stakeholders Hospitals (1) : 7-10% Administration (2) : 40-50% Healthcare professionals (3) : 15-45% Intermediaries (4) : 40-60% Note: 1. Based on KeyCare discounts 2. Based on administration fees for KeyCare plan options compared to other Discovery Health Medical Scheme plans 3. Based on actual KeyCare rates for GP, radiology, pathology and medicine dispensing fees 4. Based on average commission earned on KeyCare compared to commission payable on other plans

16 By combining the contributions of all stakeholders, affordable premiums are possible Someone earning R6,000 to R8,000 R692 Someone earning R3 750 to R6,000 R494 Someone earning below R3 750 R412 Someone earning R3 500 per month can access medical scheme cover for the cost of a can of coke a day if the employer pays 50%

17 Regulatory challenges Several schemes have poor 1 Risk Equalisation Fund urgently needed risk pools Prescribed Minimum Benefits 2 Consider Low Income Medical Schemes make cost of entry very high Anti-selection is undermining 3 the sustainability of schemes Review waiting period regulations 4 25% solvency requirement raises the cost of premiums Consider risk based capital approach to solvency

18 Agenda 1 Introduction to the private healthcare funding environment 2 Key issues, challenges and opportunities in the funding environment 3 Discovery Health business and operating models

19 Discovery Health business model 14 Restricted Schemes 1 Open Scheme lives Administration services Managed care services 2.1 million lives 7% 44% 2.3 million lives under management

20 Discovery Health operating model Benefit design Risk management Provider assets Insured benefits Medical Savings Account Clinical coding and classification Clinical and actuarial risk adjustment tools Health economics InForma fraud management Surgical classification Favourable tariffs and risk sharing Efficiency based hospital networks Pathology network Primary Care network Hospital utilisation management Pharmacy benefit management Disease management Specialist network Pharmacy Benefit Management Administration and operations management

21 Staff Compliment Volumes Service The Discovery Client Journey New Business Operations Managed Care Claims Processing Activate a new life every 45 seconds 32 Franchises nationwide 3,037 Independent financial advisors 33,500 calls per day R1,69 billion billed per month 19,315 employer interaction per month 4,834 clients seen in Walk-In Centres per month A member is hospitalised every 57 seconds A Discovery baby is born every 10 minutes 650 Chronic benefit applications received per day 6,170 GP s, 4,850 Specialists Pay R8,1 million per hour Process 120,000 claims per day Claims picked up at 700 points nationwide 190 Capturers and Underwriters 511 Call Centre Consultants 241 Administrators 72 Billing Specialists 44 Account Managers 125 Nurses 20 Pharmacists 12 Doctors 138 Pre Auth Consultants 20 CIB, HIV, Oncology Consultants 150 Capturers 35 Specialised Assessors 21

22 Discovery provides a wide range of administration services at high volumes and with high efficiency Billing Pharmacy Benefit Management Total premiums collected per annum * R28,610 bn Claims processed per month ** 1,526,477 Outstanding debits (Av. % of total billed) * -0.02% Overall claims TAT ** 4.39 Days Average turnaround time ** 3.78 Days New Business Volume of new lives processed daily ** 1,032 Membership pack issued in less than 2 days ** 93.67% Wellness Wellness Days and Voluntary Counselling and Testing events in ,53 Claims Event attendees in ,786 Claim volumes per day ** 123,751 % of claims submitted electronically ** 89.7% Value of claims paid per day ** R71.8 m Client and member service Hospital utilisation Admissions per month ** 60,637 Average Discovery Health calls per month * 639,249 * April 2009 March 2010 ** March 2010

23 Days Claims Processing System Significant improvement in claims processing times 2.5 Claims processing times

24 Internal service measures Accuracy and Member perceptions Client Services Error % & MBR 30% 25% 20% 15% 10% 5% 0% Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr Error % = Percentage of calls with at least one error (April currently being audited) embr = Member perception of service on a scale of 1 to 10

25 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Efficiency in operations: Administration fees continue to decline in real terms Administration fees as a percentage of gross contributions 12.5% 12.0% 11.5% 11.0% 10.5% 10.0% 9.5% 9.0%

26 Discovery Health operating model Benefit design Risk management Provider assets Insured benefits Medical Savings Account Clinical coding and classification Clinical and actuarial risk adjustment tools Health economics InForma fraud management Surgical classification Favourable tariffs and risk sharing Efficiency based hospital networks Pathology network Primary Care network Hospital utilisation management Pharmacy benefit management Disease management Specialist network Pharmacy Benefit Management Administration and operations management

27 Risk Management - key operating units Risk management team of 150 includes: Doctors 14 Actuaries and Actuarial Analysts 21 Pharmacists 6 Analysts and Clinical coding specialists 43 Clinical specialists 27

28 Operating model allows management of each element of the healthcare value chain Members GPs Specialists Hospital Disease management High cost member management Health and wellness Benefit design Pay for Performance projects with GP s and Specialists Network selection Manage significant outliers Admission rates Tariff negotiations LOS benchmarking Targeted interventions Network selection Fraud and efficiency management

29 High Risk Member Management Stratify the membership base Severity of condition Complex disease Functionality impaired Complex disease (outliers) Uncontrolled disease or unusual combination Significant but simple diagnosis Controlled combination (HIV, Oncology, ESRF) 0.25% of members 1.75% of members 8% of members 2% of lives result in 20% of total cost (R3bn) Well but at risk Due to lifestyle/somatic diagnosis (Obesity cholesterol HT) 10% of members Healthy Displays wellness promoting behaviour 80% of members Frequency of condition Source: Population Segmentation to Provide better Health Care for all: The Bridges to Health model. Joanne Lynn, Barry M Straube et al.

30 Integrated Care Unit- Pilot Project- holistically managed treatment program Home Home based care Hospital admissions reduced Acute Hospital Care coordinator Discovery Nurse Ongoing follow up Sub-acute unit Discovery invests in Centers of Excellence with providers.

31 Integrated Care Unit- Early results Heart failure Cerebrovascular disease R 80,000 R 140,000 R 70,000 20% R 120,000 R 60,000 R 50,000 58% R 100,000 R 80,000 49% R 40,000 R 30,000 R 60,000 R 20,000 R 40,000 R 10,000 R 20,000 17% R 0 Average cost 2008 Average cost 2009 R 0 Average cost 2008 Average cost 2009 Pilot program DHMS Pilot program DHMS 38 % savings 32 % savings Expected to intervene in an estimated third of cases

32 Operating model allows management of each element of the healthcare value chain Members GPs Specialists Hospital Disease management High cost member management Health and wellness Benefit design Pay for Performance projects with GP s and Specialists Network selection Manage significant outliers Admission rates Tariff negotiations LOS benchmarking Targeted interventions Network selection Fraud and efficiency management

33 Inefficiency Cost per Patient Source: Discovery internal data (2009) Discovery has developed increasingly sophisticated tools to understand GP spend Out-of-Hospital Costs Allocated to GPs - Actual vs Expected R 14,000 5% Least efficient doctors R 12,000 R 10,000 5% of doctors 2.7% of patients 14.6% of costs R 8,000 R 6,000 R 4,000 R 2,000 R 0 -R 2,000 -R 4, Number of Allocated Patients

34 The Discovery pathology form Members Members have an incentive to request the form Pathology labs Guaranteed payment, required to distribute Providers Use of the Discovery pathology form is a prerequisite for network GPs Covers 95% of providers, 20% uptake to date

35 Discovery Health Pathology Form : Buy-in from providers and usage of form increasing Lipid profile tests Thyroid profile tests R R R 210 R 275 R 205 R 200 R 195 R 190 R 185 R 270 R 265 R 260 R 255 R 180 R 250 R 175 Jan Feb R 245 Jan Feb Lipid test requests are on average R21 lower per request than expected. Against current volumes, this is a saving of R per month (or R7.2m p.a.) Thyroid Profile test requests are on average R16.5 lower per request than expected. Against current volumes, this is a saving of R per month (or R5.9m p.a.) Annual savings for the 3 major tests amount to R16 million

36 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 GP Network no member co-payment 90% 85% Restructure the GP benefit 86% 80% 75% 70% Average take-up: 75% 65% Source: Discovery Health data, 2009

37 Specialist Payment Arrangements no member co-payment: March % Discipline Eastern Cape Free State Gauteng KwaZulu Natal Province Limpopo Mpumalanga North West Northern Cape Western Cape Anaesthsiologists 91% 86% 98% % 90% Gynaecologists 98% 92% % % 80% 67% % 99% 92% 86% 99% 99% 73% % Ophthalmologists 85% % 96% Orthopaedic Surgeons % 97% 99% % 77% 72% 97% % % 86% Otorhinolaryngologists (Ent) 98% 74% 55% 96% % 96% 83% 93% % % 76% 91% Paediatricians % % % 100 % 94% 99% Physicians 94% 99% 95% 93% Psychiatrists 98% % 97% 90% 99% 96% 98% % % 83% % Surgeons 99% 99% 90% 84% 91% 100 % 83% 94% 71% % Urologists 100 % 88% 100 % 86% 92% % % % % 77%

38 Operating model allows management of each element of the healthcare value chain Members GPs Specialists Hospital Disease management High cost member management Health and wellness Benefit design Pay for Performance projects with GP s and Specialists Network selection Manage significant outliers Admission rates Tariff negotiations LOS benchmarking Targeted interventions Network selection Fraud and efficiency management

39 Rate per 1000 lives Admit Rate Managing the admission rate Back Surgery: Rhizotomy Low Back Medical Admissions Ongoing experience monitoring identified above the norm admission rates 2 Consultation with specialists identified primary care as more appropriate treatment for selected cases 3 Clinical entry criteria channel treatments to the appropriate areas

40 Efficiency score KeyCare hospital network design: Hospital efficiency 2.5 Hospital efficiencies relative to a benchmark of Identify and collaborate with outliers to maintain efficiency Hospital size Most efficient KeyCare hospitals Hospital name Efficiency Hospital name Efficiency Hospital A 0.42 Hospital F 0.72 Hospital B 0.45 Hospital G 0.74 Hospital C 0.48 Hospital H 0.78 Hospital D 0.65 Hospital I 0.79 Hospital E 0.69 Hospital J 0.80

41 ICU admission rates (%) Hospital efficiencies: ICU Utilisation 5% Comparison of top ICU outlier facilities by volume 5% Network B Hospital A The cost of a stay in the ICU is approximately 4 times the cost of a stay in a general ward 4% Average 4% Network A 3% The rate of hospital acquired infections is 3 times higher in ICU than in a general ward ICU length of stay (days)

42 Operating model allows management of each element of the healthcare value chain Members GPs Specialists Hospital Disease management High cost member management Health and wellness Benefit design Pay for Performance projects with GP s and Specialists Network selection Manage significant outliers Admission rates Tariff negotiations LOS benchmarking Targeted interventions Network selection Fraud and efficiency management

43 Informa case study: Biokinetics and overbilling Average amount paid per biokineticist 69 providers investigated R 12,000 Interaction with BASA Majority of responses with valid medical conditions (80%) R 10,000 R 8,000 Providers did not interpret rule 005 of NHRPL correctly Will supply documentation for approval in future R 6,000 R 4,000 R 2,000 R 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Estimated future savings R8m in 2010

44 Informa case study: Bill audit on gloves High cost powder free sterile gloves vs. standard latex gloves 6, , Intervention 4, , , , Requires ongoing monitoring - Source: Discovery Health data, 2009

45 Informa case study: analysis of theatre vs. anaesthetic time 45 Time difference = Anaesthetist Time less Hospital Time (in minutes) Anaesthetist < Hospital Anaesthetist > Hospital Procedure: Tonsillectomy Anaesthetist billed: 40min Hospital billed: 1401min Amount Recovered : R106,080

46 Billions Savings in healthcare costs arising from health risk management R 17 R 16 R 15 Risk management savings = R1.2 billion = 208% of the Managed Care fee R 14 R 13 R 12 R 11 R (without Risk Management) 2009 (with Risk Management)

47 Agenda 1 Introduction to the private healthcare funding environment 2 Key issues, challenges and opportunities in the funding environment 3 Discovery Health business and operating models

48 Presentation to the Portfolio Committee on Health Dr Jonathan Broomberg Dr Penny Tlhabi Discovery Health 2 June 2010