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Funding for private healthcare sector in crisis

Nov 03 2016 14:33
Carin Smith

Cape Town - Private healthcare in South Africa is structured so that doctors work alone rather than in teams and are remunerated for the quantity of services they deliver rather than for quality of the outcome, according to Dr Brian Ruff, founder and CEO of healthcare management company PPO Serve.

“Rather than competing with individuals, teams should compete with teams, with the goal to avoid unnecessary hospitalisation,” said Ruff.

In his view, the primary driver is a growing excess of private hospital beds in South African metros.

“We are now approaching four private hospital beds per 1 000 medical scheme members. In some parts of the country we have as many as six beds per 1 000 people. This is twice or three times higher than the ratios seen in efficient systems with good community delivered healthcare services," said Ruff.

“Unlike other goods, where costs go down if there is an oversupply, in healthcare oversupply leads to cost increases. When an insurer pays, it is just too easy to spend money without worrying about the value."

Between 2005 and 2014, medical aid contributions in SA jumped at a pace 50% higher than the inflation rate. In 2016 and 2015, the average premium rate hike of South Africa's seven largest schemes ranged between 7.26% and 10.92%, exceeding the inflation rate of 6% over the two-year period.

“Schemes should embrace an integrated team-based healthcare model in which specialists, general practitioners, nurses, and other practitioners such as psychologists, proactively work together to look after a patient collectively,” said Ruff.

"We need to give medical practitioners the means to generate sufficient income, while providing patients with quality, multi-disciplinary care, free from over-servicing.”

Restructuring will lead to lower premiums, which will make private medical aid more accessible to more people, in turn re-invigorating an industry in crisis, in his view.

Ruff told Fin24 where there is a will there is a way.

"Most healthcare services in the world have organised better models. We must just decide how to create something more organised and more structured to produce the right outcome at the right price," said Ruff.

"If you end up every year coming to market with reduced benefits, making protocols tighter and making it harder for patients and medical practitioners, it increasingly discredits the health system. We rather want to make the market competitive in the right kind of way," said Ruff.

"The building block is to create teams within systems and create the right kind of competition. Creating teams will be the only way to produce the right outcome for patients. Patients are frustrated by our broken and fragmented system and the ridiculous expectation that they, the patients, can navigate IT."

In his view, the real problem is that at the level of the national Department of Health there is no policy framework for the SA private health sector, "so nobody is saying there is a terrible crisis".

"At a national plenary I said we are in a crisis and help is not coming. Being brave means embracing innovation and embracing pilot projects and putting money behind team care and paying for value and not for services," said Ruff.

"We have been talking about value-based contracting for ages, but not doing anything about it. I am hoping people will wake up and see there is a crisis. We know what the solutions are, so let's jump in and get cracking at it."

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medical aid  |  health  |  hospital costs


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