ADVERSE SIDE EFFECTS
Discovery’s shareholders have every reason to smile. The stock is up 27% over the past year, on a spectacular 62% run in 2017, as the insurance group’s myriad new business ventures here and abroad bear fruit.
Likewise, its Vitality-obsessed customers have enjoyed countless smoothies, coffees and, for the really committed, Apple watches on the house. Staff, meanwhile, get to work in Discovery’s brand spanking new Sandton headquarters, which reportedly cost R3bn to build.
Yet for all its wow factors — and Adrian Gore’s Discovery is undeniably impressive — the sector from which it derived more than a third of its profit in 2017, health care, is fundamentally broken.
And doctors, perhaps Discovery’s only dissatisfied stakeholder grouping, are growing increasingly frustrated with the corporatisation of private health care.
Large medical aid administrators and private hospital groups wield “undue influence” on private health-care practitioners, says Chris
Archer, a gynaecologist and CEO of the South African Private Practitioners Forum (Sappf), which represents specialists in private practice.
It’s not difficult to see why: Discovery Health, the administrator for the medical scheme of the same name, manages more than 3m lives across open and closed medical schemes. It collected R5.5bn in fees last year for doing this.
Medscheme is even larger, managing 3.6m lives, across medical schemes such as Bonitas and Fedhealth, as well as numerous closed schemes.
Large administrators unsurprisingly keep a tight rein on the purse strings of the notfor-profit medical schemes they manage.
Sappf is just one of dozens of organisations representing the rights of health-care practitioners on issues that have cropped up over the past two decades.
They aim to redress this seemingly unequal balance of power.
At the heart of the conflict between health-care professionals and medical aids appears to be a broken and out-dated pricing model, which does not take into account the true cost of medical care and leads to bad behaviour from both sides.
The reasons for the structure of the current model are complex, lengthy and historical. Briefly, department of health-commissioned cost studies undertaken in 2006/2007 did not yield the outcomes the department had been banking on.
The department, says Archer, thought these studies would force prices down. Instead, they showed that doctors were underremunerated. “The department refused to accept the results.”
A 2010 court ruling found in favour of health-care professionals on the legality of the so-called “reference price list” (RPL) of 2007-2009, a guide against which medical schemes can determine benefit levels.
Couple this with a competition commission-imposed ban on negotiations between doctor groupings and medical aids to set tariffs, and what you have left is a situation in which medical aids rely on a 2006 version of the RPL, with inflationary adjustments.
This, says Archer, is the “root cause of all the issues”. “What is needed is a nonbinding, guideline tariff based on input costs,” he says.
The current fee-for-service model, which contains very little evidence-based costing, leaves doctors feeling underremunerated and medical schemes suspicious that poorly paid professionals are overselling their services (some are).
Medscheme CEO Anthony Pedersen says the administrator recovered more than R108m for its medical schemes from providers who “acknowledged that the claim they submitted was not valid”. A further R300m was recovered through “forensic interventions”, says Pedersen.
In some cases, fraud was obvious: one doctor billed for patients who had already died, while another claimed to have worked 214 hours in a single day.
But what exactly constitutes “wasteful expenditure” is, at least in some instances, a matter of perspective.
“Doctors make clinical decisions. They are not actively keeping track of financial consequences. When treating a patient they do whatever is best for the patient. They are not thinking, ‘I’ve already sent five patients to hospital this month, if I admit another one it will push me over the national average’,” says Henru Krüger, chief operating officer at the Alliance of SA Independent Practitioners