Dr P Ramlachan

Prof MN Chetty

• For a long time it was assumed that the correlation between GDP-per-Capita levels and per capita Healthcare expenditure, which is significant, was the only important relation as far as expenditure growth was concerned.

• We need to look at the segments within Healthcare that account for cost escalation to mange cost with more focus.

2

A look into what drives costs.

• Contribution increases are a function of PRICE and UTILIZATION.

• Price increase – consistent with inflationary pressure: – CPI: 6.3%

– Tariff increases: 0.5%

– Demand side utilization: 2.9%

– Supply side utilization: 1.7%

– Claims utilization (sum of above): 11.4%

• Supplier induced demand.

3

Demand Side

• Increase 4 NCDs: Respiratory, Diabetes, Cancer, CVD Increase NCDs – Responsible for 60% of deaths worldwide.

• By 2030: 17% - 20% increase in deaths in Africa

• Prediction in USA by 2023 – expect 42% increase adding $4.2 trillion to treatment costs.

• Other Factors: – Increased Life Expectancy

– % chronic diseases

– Serious illnesses – co-morbidities

• Multiple sclerosis – R 120 000.00 / patient / annum

• Rheumatoid Arthritis – R 97 000.00 / patient / annum

4

Supply side • Fragmented supply of healthcare

• Sickest patients:

– Higher burden of Disease

– Cost the most

– Are most exposed to system fragmentation

– Further increasing cost and reducing quality of care

• Provider Prices:

– FFS

– Volume vs Value

– Co-pays / Levies

– Balance billing

– Spit billing

• Hospital Costs

• Pharmaceutical Costs - in general

- ? Appropriate pipeline drugs for 3rd world needs.

5

Cost Drivers – New entrants

• Biologics – Adcetris – Rx for lymphoma – R 2.2 million / 7 months course

– Keytruda – Rx for Melanoma – R 1.4 million / 6 month course

• Ultracost claimants

• Robotic prostatectomy 87% increase in costs over 4 years.

6

Impact on costs of New hospitals

• 25 New Facilities

• 2653 New beds

• R 1.1 billion excess costs

Regional analysis Durban

• 2010 – New hospital 1 – 14% higher occupancy

• 2011 – 19.8% higher

• 2014 – New Hospital 2 – 29.7% higher

New hospitals contribute to higher admission rates.

7

Hospital Trends

0.00%

0.02%

0.04%

0.06%

0.08%

0.10%

0.12%

0.14%

0.16%

2010 2011 2012 2013 2014 2015

Admission Rate - Casualty

5807891 Arwyp Medical Centre 5808502 Linksfield Park Clinic

5807743 Life The Glynnwood 5808138 Unitas Hospital

5808324 Lenmed Clinic Limited

Increasing proportion of admissions via casualty at specific hospitals

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

5807891Arwyp

MedicalCentre

5808502LinksfieldPark Clinic

5807743Life The

Glynnwood

5808138Unitas

Hospital

5808324Lenmed

ClinicLimited

Proportion of admissions via casualty

2010 2011 2012 2013 2014 2015

• Fraud / Abuse / Waste Contribution to Cost Escalation

• Cost Escalation emanating from ER Departments: – Increased Admissions by FPs via ER

– Increased Investigations in ER

9

10

Visits to ER rooms PER 1000 LIVES

Visits per 1000 lives to ERs remains unchanged (accounting for scheme growth)

10,00%

11,00%

12,00%

13,00%

14,00%

15,00%

16,00%

17,00%

18,00%

19,00%

-

100 000

200 000

300 000

400 000

500 000

600 000

2010 2011 2012 2013 2014 2015

vis

its

pe

r 1

00

0 l

ive

s

Vis

its

ER Visits Claimants/1000 lives

11

Top 20 ER Diagnoses

ICD10 Code DIAGNOSIS_DESCR ICD10 Code DIAGNOSIS_DESCR

Z000 General medical examination J069 Acute upper respiratory infection, unspecified

J069 Acute upper respiratory infection, unspecified A099 Gastroenteritis and colitis of unspecified origin

I10 Essential (primary) hypertension Y3499 Unspec event,undet intent,unspec place,unspec act.

J209 Acute bronchitis, unspecified R104 Other and unspecified abdominal pain

J111 Influenza with oth resp manifestation virus not identified N390 Urinary tract infection, site not specified

J029 Acute pharyngitis, unspecified R074 Chest pain, unspecified

J019 Acute sinusitis, unspecified J209 Acute bronchitis, unspecified

J00 Acute nasopharyngitis [common cold] K297 Gastritis, unspecified

K297 Gastritis, unspecified J039 Acute tonsillitis, unspecified

A099 Gastroenteritis and colitis of unspecified origin R11 Nausea and vomiting

J068 Other acute upper respiratory infections of multiple sites W0199 Fall on same level from slipping, occ at unspec place, unspec act

E119 Type 2 diabetes mellitus without complications W1999 Unspec fall, occ. at unspec place, unspec act

J039 Acute tonsillitis, unspecified H669 Otitis media, unspecified

E785 Hyperlipidaemia, unspecified R509 Fever, unspecified

F329 Depressive episode, unspecified R51 Headache

N390 Urinary tract infection, site not specified J180 Bronchopneumonia, unspecified

J40 Bronchitis, not specified as acute or chronic K529 Noninfective gastroenteritis and colitis, unspecified

K529 Noninfective gastroenteritis and colitis, unspecified J22 Unspecified acute lower respiratory infection

R104 Other and unspecified abdominal pain A090 Other and unspecified gastroenteritis and colitis of infectious origin

L309 Dermatitis, unspecified K590 Constipation

GP Rooms Emergency Rooms

• Diagnoses attended to in ERs is similar to GP Rooms • Significant overlap • ER rooms highlight some trauma/emergency related care

12

ER Trends 2010-2015

R400M cost of admissions above expected levels in 2015

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2010 2011 2012 2013 2014 2015

Medical Surgical

19.00%

20.00%

21.00%

22.00%

23.00%

24.00%

25.00%

26.00%

27.00%

-

100 000

200 000

300 000

400 000

500 000

600 000

2010 2011 2012 2013 2014 2015

Ad

mis

sio

n r

ate

Vis

its

CASUALTY_VISITS Admission rate

• ER Visits per 1000 remain fairly

flat over the period

• However large increase in

admission rate from ER ~ 20%

increase over the period

• Largely driven by medical

admissions

• Surgical and trauma related

admissions remain consistent

Categories of Waste

• Failure of care delivery

– Lack of execution of, or adoption of Best Practices – e.g. preventive care etc.

• Failure of care coordination

– Fragmented and disjointed care

• Overtreatment

– USA – 2011: overtreatment added between $158 billion to $ 226 billion in wasteful spending

– Defensive medicine

– Over diagnosis

– Use of higher priced services

• Administrative complexity

• Pricing failures – Poor functioning markets

– Cost of production plus a reasonable profit.

13

• USA – wasteful spending accounts for between 1/3 and ½ of Healthcare spending.

• PWC – calculates that up to $1.2 trillion or ½ of Healthcare spending is the result of waste.

• IOM – estimated unnecessary healthcare costs totaled $ 750 billion in 2009 alone.

• Darthmouth Institute for Health Policy and clinical practice: – Explained that 30% of all medical care spending could be avoided

without worsening health outcomes.

14

Some statistics

• In South Africa – waste is estimated to be about 30% of healthcare spend.

• Areas of Wasteful Spending: – Defensive medicine

– Redundant

– Inappropriate / unnecessary tests and procedures

• Other factors contributing to wasteful spending: – Non-adherence to Medical Advice and prescriptions

– Smoking, obesity, Alcohol abuse, lack of exercise.

15

Fraud Statistics

• GEMS: Zero Tolerance to Fraud Allocated increased resources for detection, prevention, elimination of fraud

Since 2010, nearly 5000 cases of Fraud, Waste and abuse have been investigated. • One hospital utilization: psychologists was nearly 5 times that of norm.

• Solo Family Practitioner – 311 Gems patients in a single day

• Ambulance claims without corresponding facility claims for care.

• Prevalence / geographical / syndicates

• Admission with no pathology / radiology – but in hospital (Hospital plans)

16

Wide range of strategies to combat all types of medical scheme fraud

17

3

5

6

8

4

9

Dis

cove

ry u

niv

erse

(hig

h t

o lo

w)

False claims 1 Claiming for services not rendered

Pharmacies sell non-healthcare merchandise but claim for

healthcare services

Doctor submits false claims and provides cash to patients

Members lend membership cards to non members

2 Hospitals do not bill in accordance with Discovery’s and the

Industry’s billing guidelines and protocols.

Manipulation by doctors of billing rules to increase revenue

Members obtaining false sick notes to justify absenteeism;

increases claims costs

Pharmacies dispense generic medicine but claim for higher cost

original medicines

Doctors and members collude to arrange unnecessary

admissions to hospital

Merchandising

“ATM” scams

Card “farming”

Sick notes

Dispensing fraud

Hospital Cash Plan fraud

Hospital Billing Rules

Code Gaming 7

Types of fraud

False Claims | Healthcare provider claiming for services not rendered

18

4,861

12,068

118,695

96,329

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

201502 201503 201504 201505

0

5

10

15

20

25

30

35

20

14

/0

4/

20

20

15

/0

1/

19

20

15

/0

2/

03

20

15

/0

2/

21

20

15

/0

3/

05

20

15

/0

3/

21

20

15

/0

4/

02

20

15

/0

4/

14

20

15

/0

4/

25

20

15

/0

5/

07

20

15

/0

5/

19

20

15

/0

5/

30

20

15

/0

6/

13

20

15

/0

6/

25

Significant increase in visits per day Significant increase in total paid

Discovery Health recovered R200k from the provider, removed them from the provider list, and

reported them to the industry body

884%

36 x increase Visits per 1000 lives

Feb 2015

Mar 2015

Apr 2015

May 2015

Code Gaming | Speech therapist submits pain management codes

44% of this Speech Therapist’s ICD Codes are for Pain Top 3 Procedure Codes Billed vs. Peers

5% 4% 2%

76%

16%

8%

National % This Dr %

Comprehensive

evaluation of total

person

30 min

consultation

15 min

consultation

Unspecified Pain

[PERCENTAGE]

[CATEGORY NAME] [PERCENTAGE]

[CATEGORY NAME] [PERCENTAGE]

[CATEGORY NAME] [PERCENTAGE]

[CATEGORY NAME] [PERCENTAGE]

[CATEGORY NAME] [PERCENTAGE]

19

15X

4X 4x

Hospital Cash Plans | Using detailed analytics to develop a strategy to

manage fraudulent hospital cash plan claims

20

Issue identification:

High admissions

unexplained by risk

analytics

Modelling Approach:

Partnered with

Clientele

Application to

Discovery Health’s 3

million lives

Approach Avg. admission rate for Hospital Cash Plans up to 5 times greater than for

DHMS

0.44%

0.54%

0.37%

0.09% 0.10% 0.15%

Hospital 1 Hospital 2 Hospital 3

5.2 4.7

4.2

3.2 3.3 3.0

Hospital 1 Hospital 2 Hospital 3

Avg. length of stay for Hospital Cash Plan admissions exceed DHMS

admissions by between 40% and 60%

Cash Plan DHMS

Cash Plan DHMS

X4.8 X5.4

X2.5

61% 42% 39%

Predictive Modelling

identified Risk Factors

Sick Notes | Routine analysis of trends to identify doctors issuing

fraudulent sick notes

21

[VALUE]

17%

6%

17%

3% 0% 0%

MON TUES WED THU FRI SAT SUN

• Analysis identified spike in patients seen on

Monday’s

• Also receive tip offs from employers flag

specific GPs for further analysis

Proportion of Patients

This GP sees 58% of all his patients on a Monday Doctor was investigated using Provider Risk Rating

Tool

Action Taken: 1) Send probes to confirm findings;

2) Report to relevant industry body;

3) Claw back any monies owed to scheme

R117m was recovered by forensic investigation into providers in

2015

Over 95% of fraud is committed by providers Gauteng is the largest region for fraud recoveries

followed by KZN

22

Provider

[VALUE]

Member/Policy

Holder

[VALUE]

Employees

[VALUE]

Provider TypeProvider

Count

% Providers

with Valid

Cases

% of

Providers

with >R5K

Recovery

Total Paid

to All

Providers

(millions)

Total

Recovered

(millions)

% Recovery

of Total

Paid

General Practitioner 7,318 4.6% 1.9% 2,929R 18R 0.6%

Public Day Clinic 87 2.3% 1.1% 404R 9R 2.2%

Urologist 216 51.9% 45.4% 279R 8R 2.9%

Gynaecologist 794 18.3% 13.7% 747R 7R 0.9%

Orthopaedic Surgeon 613 9.6% 6.7% 861R 7R 0.8%

Clinical/Medicaltech/Biokinetics 361 6.4% 5.3% 554R 6R 1.1%

Anaesthetist 1,003 12.1% 6.6% 1,280R 6R 0.5%

Psychologist 3,509 1.2% 0.6% 380R 5R 1.3%

Physiotherapist 2,808 1.7% 1.3% 668R 5R 0.7%

Pharmacy 2,890 6.7% 1.0% 7,049R 4R 0.1%

Other 29,795R 42R

TOTAL 44,946R 117R

• The Remedy to cost crisis does not require Medical Science breakthrough or new Government regulation.

• It simply requires a new way to accurately measure costs and compare them with outcomes.

• When policy makers and politicians talk about cost reduction and “bonding the cost curve”, they are talking about how much is paid to providers.

• Not the costs incurred by providers to deliver healthcare services.

• Cutting payor reimbursement does not reduce the bill paid by insurers and lowers provider revenues, but it does nothing to reduce the actual costs of delivery healthcare.

23

THANK YOU

24