Health Sector Reform in South Africa

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Health Sector Reform in South Africa
focus on the Supply Side issues Dr Brian Ruff
MB.BCh. FCP (SA)
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Agenda

• Introduction to health sector reform
• Supply side issues
• Possible responses reform experiences

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Agenda

• Introduction to health sector reform
• Supply side issues
• Possible responses reform experiences

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Intro Health Sector value

• 3 critical measures
• Access
• Equity
• Efficiency
• For society, there are always trade offs between
  these.
• Economics 101
• Demand control varies from being in individual
  consumers hands or may be concentrated in
  organisation or state hands
• Supply of services is either private /
  independent or by the state
• This paper explores these variables in regard to
• the SA private health sector.

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Intro Health Sector value

• Definitions
• Access ability of a sick person to gain entrée
  to the system to establish a diagnosis plan
  therapy. Also the ability to move between
  differing levels of the system i.e. primary care
  to specialist / highly specialised care. Funding
  is critical.
• Equity provision of the same care based purely
  on their medical problem unaffected by income
  or influence.
• Success is achieved when the demand side is
  controlled by structures / processes ensure
  effective demand. I.e.
• Unnecessary care is denied (3rd party funding
  issue)
• Necessary care is provided (both supplier induced
  demand, and denial of care is avoided)
• Evaluation at an individual level is required.

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Intro Health Sector value

• Efficiency two definitions concern us
• financial efficiency i.e. relative cost / price
• quality
• They may be combined as value.
• On the Supply side, there are
• trade offs between cost and quality
• but in healthcare, over time, good quality is
  more cost effective than bad quality, since
  unresolved problems recur and incur new costs

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Seven principles from McKinsey
Principles
actively manage demand for the healthcare
products and services
1. Prevent illness and injury
2. Ensure value conscious consumption of
services, treatments
To facilitate decisions that promote equity,
quality and cost effectiveness, and service
sustainability, a health care system leader or
intermediary must
3. Promote efficient creation of capacity for
labour, infrastructure, innovation
ensure that healthcare supply matches quantity,
quality and price demanded by the market
4. Safeguard the delivery of quality by providers
5. Promote cost competitiveness
6. Promote sustainable financing mechanisms to
collect and redistribute funds
7. Build and organise capabilities of
intermediaries to enable them to effectively
manage the system
The McKinsey 2007 No.1 Universal principles for
health care reform
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Principles
1. Prevent illness and injury

• Demand
• Prevent illness and injury
• Promote wellness and safety
• Value conscious consumption
• Information / flexibility support rational
  choice current transparency re price and
  quality not sufficient
• Overcome 3rd party funding problem by increase
  consumer accountability

2. Ensure value conscious consumption of
services, treatments
3. Promote efficient creation of capacity for
labour, infrastructure, innovation
4. Safeguard the delivery of quality by providers
5. Promote cost competitiveness
7. Build and organise capabilities of
intermediaries to enable them to effectively
manage the system
6. Promote sustainable financing mechanisms to
collect and redistribute funds
The McKinsey 2007 No.1 Universal principles for
health care reform
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Principles

• Supply
• Analyze capacity under / over?
• Physical capacity and capital
• Skills labour supply
• Technology
• Quality of suppliers
• Clinical practice standards
• Available information re organisational
  performance
• Risk based monitoring audits, including
  supplier self reporting
• Cost competitiveness
• Enhance productivity (but not by excess capacity
  over servicing)
• Purchase effectively

2. Ensure value conscious consumption of
services, treatments
3. Promote efficient creation of capacity for
labour, infrastructure, innovation
4. Safeguard the delivery of quality by providers
5. Promote cost competitiveness
7. Build and organise capabilities of
intermediaries to enable them to effectively
manage the system
The McKinsey 2007 No.1 Universal principles for
health care reform
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Principles
2. Ensure value conscious consumption of
services, treatments

• Improve finance mechanisms
• Efficient financing mechanisms match supply and
  demand
• Align reimbursement mechanisms with providers
  that best manage risk DRGs capitation
• Pay suppliers for performance cost and quality

3. Promote efficient creation of capacity for
labour, infrastructure, innovation
4. Safeguard the delivery of quality by providers
5. Promote cost competitiveness
7. Build and organise capabilities of
intermediaries to enable them to effectively
manage the system
6. Promote sustainable financing mechanisms to
collect and redistribute funds
The McKinsey 2007 No.1 Universal principles for
health care reform
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Principles

• Implementation
• Build awareness align consumer and supplier
  interests or
• Provide financial incentives assumes non
  alignment or
• Impose mandates - if awareness and incentives
  fail

2. Ensure value conscious consumption of
services, treatments
consumer ism
incentives
3. Promote efficient creation of capacity for
labour, infrastructure, innovation
regulation
4. Safeguard the delivery of quality by providers
5. Promote cost competitiveness
7. Build and organise capabilities of
intermediaries to enable them to effectively
manage the system
6. Promote sustainable financing mechanisms to
collect and redistribute funds
The McKinsey 2007 No.1 Universal principles for
health care reform
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Agenda

• Introduction to health sector reform
• Supply side issues
• Possible responses reform experiences

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GDP PPP 5 000 - 10 000
SA supply / 1000 population GP
0.34 Specialists 0.15 Beds used 2.8
Low versus peers
Discovery research Monitor database
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Medical Education
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The supply of Medical Professionals in SA

• Nurses
• Production of new nurses has failed to keep up
  with the increase in population, let alone with
  the shortages created by the emigration exodus
  and the need for new nurses as a result of the
  HIV pandemic.
• Medical Education
• Medical schools enrolments unchanged 1996
  2003 except Limpopo
• Demographics of 2003 enrolment
• Black 41 White 34 Indian 18 Coloured 7
• 54.6 female worldwide phenomenon and issue re
  Specialisation
• Prof Carol Black President of Royal College of
  Physicians noted that female graduates tended to
  specialise in areas such as geriatrics and
  palliative care and avoid cardiology and gastro
  because of their long hours.
• Others identified that women are deterred from
  hospital practice by its inflexible training and
  practice
• UCT case study 2003 undergrad 63 MMed 37
  
• favoured Paediatrics Anaesthetics Psychiatry
  OG Public Health.

Doctors in a Divided Society (HSRC) Breier
Wildschut
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Structural issues
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GDP PPP gt 20 000
Similar supply
Within income stratified countries, supply
numbers alone dont predict utilisation patterns.
V low US beds after 25 years of DRGs
Discovery research Monitor database
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Is there a relationship between supply of beds in
a region and complexity (case mix) of cases
admitted?
Discovery Health
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Pretoria hospital top 20 of admissions by
volume
Top 5 admission types unusually low complexity
and significantly more costly than expected
Discovery Health
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SADFM study 2004

• 24 acute public hospitals alpha and beta
  functional scores applied to 5,243 inpatients
• Results
• 34 required acute care
• 43 sub acute care
• 9 rehab services
• 5 palliative care
• 10 home care

Structural issue absence of facility alternatives
Dr H Loubsher SADFM
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Supply side summary

• Hospital beds
• selective oversupply e.g. Pretoria, JHB
  supplier induced demand
• dearth of day hospitals step down facilities
  (structural issues)
• Professionals supply norms low in SA overall
• Underinvestment inadequately managed
  demographic transition is leading to an
  undersupply of doctors and specialists
• Worrying number of older specialists, not enough
  younger specialists in practice also effects
  mentoring
• private sector now has growing waiting lists
• Inefficiently structured referral system
• care delivered at inappropriately costly levels
  (especially hospitals)
• health professional practice highly
  individualistic rarely in teams e.g.
• senior specialist supervising GPs clinical
  nurses with a doctor
• fee for service remuneration incentive to
  perform high priced services

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Supply side summary

• Measures
• Access
• good access for those who can afford it
• unmanaged access to beds wasteful oversupply
  over-servicing
• specialist numbers in transition declining
  long waiting lists
• Equity inequitable by affordability not need.
  
• historically benefit packages vary greatly
  especially access to new Rx (PMBs, Circular 8
  may be address this)
• managed care links patient to needed care
  costly to administer
• Efficiency
• fee for service over servicing high cost
• high quality care, but expensive
• Structure is wasteful, with excessive services
  delivered at inappropriate and unnecessarily
  sophisticated levels of care.

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Agenda

• Introduction to health sector reform
• Supply side issues
• Possible responses reform experiences

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McKinsey Implementation choices
The McKinsey 2007 No.1 Universal principles for
health care reform
Unfettered Market
Contract for Value
Regulation
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McKinsey Implementation choices
The McKinsey 2007 No.1 Universal principles for
health care reform
Unfettered Market
Contract for Value
Regulation
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Supply side structural reforms 1. Unfettered
Market Fee for service Managed Care

• Increase value by making the market work
• Supplier transparency throughput prices
  compliance with evidence quality and outcomes
• Tariff reform to fairly reward efficiency,
  especially promoting appropriate referral
  arrangements, e.g.
• Same tariff for same service or lower tariffs
  for below scope procedure by a clinician?
• Generous team codes encourage team leadership
  e.g. specialists manage team of GP surgeons, GPs
  manage clinical nurses and pharmacists

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Interactions between member and Scheme
administrator Fee for Service vs. Contract for
Value
annualised expert opinion
Arms length Managed Care is costly to
administer
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Supply side structural reforms 3. Regulation

• Rigid regulation may result in unintended
  consequences?
• Further distort referral chain undermine
  quality or drive inappropriate care
• Indication creep re billing
• Helpful regulation in areas of positive
  externalities which market wont / cant
  address
• Mandatory cover for employed
• Preventing monopoly behaviour
• By creating framework, may be enabling of market
  and contracting
• Mandate transparent minimum level reporting on
  results of contracts

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Supply side structural reforms 2. Purchaser /
Provider contract for value

• Aim to promote selective contracting to bring
  value to the system
• Selectively increase beds in strategic areas
• Day and Step down facilities
• Licenses
• Sell some Public hospital stock?
• Clinician supply HPC(SA)
• create transitory increase in specialist supply,
  promote entry for foreign specialists
• permit hospitals to selectively employ doctors in
  strategic areas to improve efficiency ICU ER
  night cover etc
• Pay for performance quality and cost

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Purchaser / Provider contract for value

• Competent authorities purchase services from
  independent providers on a capitated basis for a
  contracted period.
• Model represents the consensus of international
  reform efforts.

• Demand side reform
• based on a limited number of large efficient
  purchaser funds, whose available funds are
  population risk adjusted i.e. link overall need
  to funding.
• purchaser role is to
• purchase services from suppliers on a capitated /
  budget basis
• provider funding linked to predicted need of
  population segment to be served
• constant measurement robust management of
  contracted independent providers of care to meet
  budget and quality aims
• supplier failure contract termination
  replacement of managers / providers
• purchasers must be
• sufficiently large to deploy predictive data
  tools and manage contracts
• sufficient in number to compete on value (price
  and quality) for members
• mandatory environment but choice of fund with
  transparent tools e.g. HQA
• Making risk profit attract brightest minds

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Contracting includes

• Evidence based medicine
• identify which procedures (drugs, surgical
  interventions, processes of care) produce best
  results relative to cost
• reward those procedures with providers.
• Appropriate level of skill
• Service rewarded at appropriate expertise level
  i.e. move patients down skill gradient
  Specialist to GP to nurse, as necessary.
• Process redesign / reconfiguration
• reward integrated service delivery (team
  approach)
• incentivise a new model of primary (first
  contact) care with bigger practices, more
  specialists, more equipment
• encourage the transfer of inpatient functions
  to primary care
• separation of emergency and elective / chronic
  care (different specialisation mix requirements)

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Purchaser provider contract for value

• Measures
• Access good may use selective co-payments
• Equity
• Provider links services to individual need
  supported by adequate funds
• Incentives deliver appropriate type volume
  quality of services within framework
• Efficiency purchaser / supplier separation is
  most successful in producing efficiency
• Purchaser tools link funds to efficiency
  quality, as their major managerial concern (i.e.
  not running services)
• Provider / supply side is internally incentivised
  to primarily respond to the customers (market
  competition) equity, efficiency and quality
  needs.
• Managers know that their available funding is
  population risk adjusted i.e. under spending
  implies denial of care and over spending implies
  wastage.

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Comparing Structures Measures

• Purchaser / Provider Contract
• Access
• good selective co-payments
• Equity
• Provider links illness to services adequate
  funds available
• appropriate type volume quality of services
• Efficiency
• most successful in producing efficiency
• Commonest reform structure

• Current Structure
• Access
• good access based on affordability but cost
  increases mean real decline in South Africans
  covered
• access also being compromised by supply issues
  including inefficient referral arrangements
• Equity
• benefits based on affordability, and drive access
  to services not illness
• costly managed care links patient to needed care
• Efficiency
• high quality care, but expensive
• Wasteful structure

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US experience Doctors coordinating care

• Comparison UK NHS with California Kaiser
  Permanente
• Similar per capita cost but Kaiser far better
  comprehensive and convenient primary care and
  access to specialists and hospitalisation. Age
  adjusted hospital admissions 1/3 lower than NHS
• Kaiser / 1000 supply OH specialists double no
  GPs in single practice, most in large group
  practices
• Kaiser performance underpinned by good
  integration efficient hospital use benefits of
  competition, investment in IT.
• BMJ January 2002

• Medicare pilot
• By coordinating care and keeping their patients
  out of hospital, doctors can help reduce overall
  health care spending, Medicare officials said
  yesterday in announcing the results of an
  experiment that allowed doctors to share in cost
  savings.
• New York Times 2007

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Contracts

• Success factors in Contracts
• Incentives provided by payment mechanisms
• Adequacy of the accompanying monitoring and
  information systems
• Readiness and suitability of the service the
  market and the key actors
• Public Purchaser-Private provider Contracting
• for Health Services Inter-American Development
  Bank

• Preconditions for market mechanisms in Hospitals
• Funding related to patients treated incentive
  to be productive
• Selective contracting i.e. feasible alternatives
  with capacity exists
• Hospital information to measure cost and quality
• Anti-competitive issues include
• Mergers planning licenses system wide
  negotiation joint hospital and physician
  negotiations hospital exclusive / favoured
  supplier contracts
• Competition in the provision of
• hospital services OECD Oct 2006

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Risk adjusted purchasing

• DRG implementation by country
• USA 1983
• Sweden 1985
• Finland 1987
• Portugal 1989
• Canada 1990
• UK 1992
• Australia Ireland 1993
• Italy Belgium 1995
• France 1997
• Denmark Norway 1999
• Singapore early 2000s
• Netherlands Germany Japan 2003
• Others countries with pilots or investigations
• China Russia Brazil etc

Analysing Changes in Health Financing
Arrangements in High Income countries Busse et
al 2007 World bank HNP
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Predicting outcomes
Discovery Health
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?
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Summary health sector reform in SA

• Align supply with need supply is both capacity
  and how the system is structured
• NB of separating procurement from supply
• NB to manage and incentivise providers to balance
  quality and costs
• Need tools to monitor and manage the balance

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Thank you