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Schemes regulator to publish interim list of medical costs

August 28, 2010
PERSFIN
By Laura du Preez 

After the recent High Court ruling against the Reference Price List, the Department of Health is looking at other ways of drawing up guideline tariffs that medical schemes can use to set the rates at which they will pay healthcare providers.

The Council for Medical Schemes plans to publish a list showing the average cost of medical services paid for by schemes in order to help schemes set benefits for you next year, the Registrar of Medical Schemes says.

The measure will assist schemes in the absence of the Reference Price List (RPL), Dr Monwabisi Gantsho, the registrar, told the Board of Healthcare Funders conference in Sun City this week.

He says his office will not rule out applying an inflation-linked increase or a formula to calculate an increase in the costs on its interim list.

The RPL, the guideline tariffs that schemes use to set the rates at which they reimburse healthcare providers such as doctors, was struck down by a High Court ruling last month.

Gantsho says the interim cost list the council publishes will be withdrawn when the Department of Health comes up with a new pricing system.

Dr Anban Pillay, the chief director for the financial planning and health economic cluster at the Department of Health, told the conference that the department is considering two possible options as a medium-term solution to the RPL, and has not yet decided which option is better. "This is a decision that needs to be made," he says.

The quickest option, Pillay says, would be to amend the regulations under the National Health Act in terms of which the RPL is drawn up in order to deal with the issues raised by the recent judgment.

Acting Judge Piet Ebersohn set aside the RPL as null and void after the publication of the RPL by the Department of Health was challenged by the South African Private Practitioners Forum, 20 other associations that represent medical professionals, the Hospital Association of South Africa, and emergency services providers ER24 and Netcare 911.

They argued that the health department had not followed the correct processes in publishing the RPL, and that the department had been unfair when it rejected practice cost studies submitted by various doctor and other provider groups or associations.

Find another way
Pillay says stakeholders are likely to continue to challenge the guideline tariffs the health |department publishes if the prices do not suit them, so the department needs to find a|solution that suits all parties.

An alternative to the current RPL process - one in which tariffs are negotiated within a framework set down in law - appears to be successful in other countries, he says, but would require changes to existing laws.

Pillay says bargaining chambers for medical tariffs are used in countries - such as Belgium, the Netherlands, Switzerland and Portugal - where multiple entities pay for healthcare services.

Medical service tariffs have not been negotiated since 2003, when the Competition Commission put a stop to annual negotiations between medical schemes and organisations that represent hospitals and doctors, claiming that such negotiations were anti-competitive. The Council for Medical Schemes then produced a guideline tariff list, but this was later taken over by the Department of Health.

The department called on practitioners and other healthcare providers to supply information about the costs of their ser-vices, but it was unhappy with the information it received.

Price list challenges
Pillay says the RPL process faces a number of challenges:

• The voluntary responses to the Department of Health's request for cost information that came via independent consultants were biased towards higher costs, were not statistically significant and were not general to the industry.
• Healthcare providers paid consultants "huge amounts of money" to produce practice cost studies, to collate the information and summarise the data, Pillay says. However, the information submitted differed from that which the department's auditors found when they attempted to verify the information.
• The outcome of the process was a single price, whereas a range would have been more appropriate. When the guideline tariff is a single price, providers tend to charge that price only, Pillay says.
• There were problems with the codes used for services.
• The Department of Health did not have the resources to process the information and produce the RPL in time for medical schemes to use it for their benefit schedules, Pillay says.
• The value of the RPL was questionable, because the RPL tariff tends to become a multiple in the market price.

Pillay says if tariffs are negotiated, a pricing authority would oversee the negations between medical schemes and providers, and would assess the affordability and sustainability of the tariffs. The negotiated price would become the maximum price a healthcare provider could charge, he says.

Individual providers could opt out of the system, but then they run the risk of not being paid directly by medical schemes, Pillay says.

All providers would have to supply the negotiating authority with confidential and transparent information about the cost and utilisation of the services they offer, Pillay says. This could be achieved by making supply of the information mandatory, and this would eliminate the bias in the information supplied on costs, he says.

Pillay says the long-term solution to setting tariffs for healthcare services will be found in the reimbursement arrangements that form part of the national health insurance system.

Renaissance liquidators lodge claims for R88m
The liquidators of Renaissance Health Medical Scheme have lodged an R80-million claim against the scheme's former administrator, principal officer and trustees and an R8-million claim against the court-appointed curator who ran the scheme before it was declared insolvent in 2008.

The claims have been lodged in the North Gauteng (Pretoria) High Court.

According to a statement by the Council for Medical Schemes on its website (www.medical schemes.com), the lead joint liquidator, Reuben Miller, is alleging that the scheme's former administrator, Prosperity Health, submitted management accounts for 2007 containing inaccurate information to the council. This misled the council into believing the scheme had by the end of that year incurred losses of R27.3 million when in fact it had incurred losses of R55.8 million by then.

Furthermore, the council's statement says, Miller is alleging that the trustees did not maintain the scheme in a financially sound position and did not ensure it was able to meet its liabilities at all times.

The scheme was placed under curatorship in May 2008 and wound up in October 2008. Miller believes that as many as 10 000 members could have outstanding claims.

The parties are opposing the application, the council's statement says.