The Health Market Inquiry panel has its work cut out to determine the true state of pricing in the private healthcare sector. This week’s public hearings concluded with submissions from the Radiological Society of South Africa (RSSA) and Mediscor PBM. The RSSA put forward a view that radiologist are price takers, contrary to views advanced in earlier submissions while Mediscor PBM focused primarily on Prescribed Minimum Benefits. Public hearings continue on 17 May 2016 in Durban. Bankmed and Medscheme are expected to make oral submissions.

The RSSA’s submission kicked off with a question from the Chair of the Panel, former Chief Justice Ngcobo who asked why the RSSA had not come forward to participate in the public hearings prior to being requested to do so by the Panel. The Executive Director of the RSSA,  Dr Richard Tuft, responded that the hearings were voluntary and  that at the time the society had nothing to add to its written submission. Dr Tuft led the presentation with inputs from Mr Martin Versfeld of Webber Wentzel Attorneys.

The RSSA was described as a professional association of radiologists in South Africa, Namibia and Zimbabwe comprising 805 members. In South Africa, 913 radiologists are registered with the Health Professions Council of South Africa. The primary concern of radiologists is the well being and health of patients through accurate and timeous diagnosis. Radiologists are specialist doctors whose proficiency is interpreting images such as x-rays, ultrasound, CT, MRI’s and others. In response to a question put by the Panel, Dr Tuft explained that while it is expected that all doctors have a working understanding of reading scans, radiologists are trained and have a specialised knowledge in interpreting images and produce the definitive report on the results.

Radiologists pay rental space to the hospitals in which they practice and mostly rely on referrals form other health professionals. Dr Tuft made it clear that radiologists pay hospitals market rentals, which is unrelated to the turnover. This was in reply to a question which had previously been raised by Dr Bhengu regarding lease agreements between specialists and hospitals. Dr Bhengu sought to understand whether any perverse incentives exist in these agreements. Dr Tuft added that their members were not part of any multi-disciplinary practise groups as this heightened the risk of over referring. Also, that they have no ownership in hospitals nor do they share fees with any third parties.

Private Radiology in South Africa

Most radiologists are hospital-based because their work is largely generated by hospitals. At present there are 85 major radiology practices and there is usually one practice per hospital. Radiologists provide a 24 hour service to hospitals, emergency units and general practitioners, and there is no fee differentiation for after hour services. According to Dr Tuft, radiologists are price-takers and will often charge medical scheme rates because the schemes will often reimburse the member directly if the radiologist charges more than the scheme rate, leaving it to the radiologist to collect the entire fee from the member. This is difficult because, unlike other practitioners, radiologists seldom see patients on an on-going basis.

Peer review process

The RSSA has exercised two peer review processes– one through Verirad and another with a major medical scheme.  The purpose for the processes was to look at billing methodology and to look at the way radiologists are practising. Dr Tuft explained that in the review with the major medical scheme, 20 practises were identified for evaluation. Five radiologists assessed the billing profiles without any knowledge of the identities of practises involved. From this process, coding challenges were identified. During questioning from the Panel, the representatives of RSSA conceded that they could move to the next level of review to make the process more appropriate, as it is currently lacks sufficient interrogation to determine the correctness of norms.

Coding and Fees

Dr Tuft took the Panel through the coding and fee structure which radiologists have used since 1969, concluding with a brief mention of the 2010 High Court ruling which set aside the National Health Reference Price List. Since 2010, radiologists have conducted cost studies internally and apply the CPI increase to benchmark fees.  He stated that they are looking to the Inquiry to provide avenues for collective bargaining.

Mr Martin Versfeld of Webber Wentzel Attorneys was on hand to address questions about the legal history of the National Health Reference Price List and other matters. Mr Versfeld was the attorney for HASA in the 2010 case that set aside the NHRPL. He suggested that since the Competition Commission rulings, the provider groupings cannot discuss what would and would not be appropriate to charge patients for health services, which has resulted in some fees that are too high and indeed some that are too low (with specific reference to GPs). He indicated that the health provider groupings, some of which are his clients, were never opposed to a NHRPL process in principle. The main contention was around the process undertaken. Mr Versfeld addressed the existing statutory framework, in particular section 90 of the National Health Act, which provides the Minister of Health with certain powers in respect of pricing of health services. Mr Versfeld, in answer to a question from Chief Justice Ngcobo about what such a process should entail, outlined the following:

  •         The drafting of regulations in terms of section 90 to create a framework for determining pricing of health services
  •          Guidelines to facilitate the process
  •          A timetable that sets out timeframes for the entire process
  •          Submissions on a zero based costing model
  •          Practice Studies
  •          A proposal on the basis of submissions and studies and other inputs
  •          An opportunity for the interrogation of the proposal
  •          An outcome which is effectively a non-binding tariff for each practice area

He concluded that all of the above should be a transparent and consultative process to enable the greatest possible buy-in from the stakeholders.

Response to Previous Submissions

Dr Tuft also wanted to respond to some of the statements which have been made during the course of the public hearings. In particular, RSSA wanted to correct and clarify the information which was presented by the National Department of Health (NDOH) and Prof Justus Apffelstaedt.

According to Dr Tuft, the data relating to the number of CT scanners used by the NDOH was incorrect. He added that CT and MRI scanners are basic tools for radiologists. The NDOH argued that this equipment was overused or misused by radiologists. However, the true numbers do not reflect such a trend, nor has this been picked up by the RSSA, which monitors the utilisation of all diagnostic tools. Outliers are investigated by the RSSA. While a practice might be an outlier, it is not necessarily a result of unethical conduct but could be a result of, for example, a practitioner serving an area with over burden of disease.

Panellist, Mr Van Gent asked about the instances where radiological tests where repeated as different levels within the hospital system. Dr Tuft suggested that radiologists communicate to patients what processes have been done and so it is unlikely that they would allow another doctor to re-do the tests unnecessarily. This is curious considering that one of the issues which have been brought to the Panel is that patients are not always aware how and for what they are charged.

Dr Tuft spoke to several issues that had been raised by breast surgeon, Professor Justus Apffelstaedt. Regarding the scope of practice and accreditation, Dr Tuft clarified that radiology specialists are trained and accredited by the HPCSA, and this is critical to ensure that users can be confident that they are being treated by a qualified professional. He said that the RSSA supports a multi-disciplinary approach made up of various specialists but that RSSA does not support other professionals conducting work outside of their scope of practice.

Finally Dr Tuft compared the fees charged by Professor Apffelstaedt in his cost study to Discovery’s radiology benefit for 2016, suggesting that the surgeon’s assertion that his fees were more affordable was incorrect.

The RSSA was questioned intently on possible perverse incentives and the assertion that radiologists are price takers. This was interesting because radiology has been cited in previous submissions as the one of the most expensive specialties. RSSA maintained that radiologists were price takers and that since 2004, no mechanisms have been available for collective negotiation to determine what a reasonable fee might look like.

Mediscor PBM

Mediscor PBM is a pharmaceutical benefit management company. Mediscor’s presentation was led by its CEO, Mr Rademan, who began by comparing the company’s function as akin to a credit card, which is presented for payment at a till, and payment is effected after a number of check have been done (available balance, security etc). Mediscor’s system conducts hundreds of checks in a few seconds, happening in the background of a pharmacist’s computer, before a medicine is dispensed and paid for by a medical scheme, with or without co-payments.

Mr Rademan described the company as independent from the medical schemes, administrators and all other stakeholders. The medical schemes, administrators, managed care organisations, health insurers and labour sick funds are its clients and it is itself an accredited managed care organisation.

Mediscor provides an electronic interface that operates between its clients and the pharmacy when a member is buying medicine at a pharmacy. It conducts the real time claims processing, designs the medicine formularies and protocols and adjudicates issues. The software is sophisticated and can handle multiple rules within each scheme, and picks up on clinical factors related to individual patients to avoid contra-indications.

The effect of the Mediscor’s involvement in the market has been to encourage the use of generic medicines, which currently stands at 57% in South Africa. In comparison, Namibia has barely achieved 30% and Botswana is under 25%.

Prescribed Minimum Benefits

The Prescribed Minimum Benefits (PMBs) have been discussed a great deal during this hearing. Mr Rademan suggested that one of the negative consequences of the PMB framework is that it prevents to some extent the development of low cost benefit options. Presumably because a low cost scheme would have to offer the same cover as the current schemes.

The Panel sought to understand how the introduction of PMBs affected chronic conditions. Mediscor said that since the inception of PMBs, an increase in overall expenditure of chronic medicines has been observed, but was unable to comment on what that means in terms of health outcomes because of the nature of chronic conditions.

Role of Council for Medical Schemes (CMS)

The CMS currently retrospectively reviews the contracting arrangement of administrators and managed care organisations. Should the CMS have any concerns about the contracts, the conclusion of the contracts is delayed and can be subject to legal processes that are costly. Mr Rademan suggested a solution, which would require a change to the legal framework to allow for the CMS to review tender allocations for administration and managed care services prior to their finalisation. The suggestion was that greater oversight is needed by the CMS but also that such oversight would reduce the potential for legal processes, which are costly for the CMS.

Also relevant to the CMS and its jurisdiction, Mediscor complained that other managed care organisations bundle their services so that it becomes difficult to identify the layers of services so that the client can determine the value of the managed care component. In answer to a questions from Dr Bhengu about the influence of administrators, Mr Rademan said that Mediscor has lost their managed care business to the administrators. When pressed for an example, Mr Rademan said that it had lost two large clients when Discovery took over as the administrators.

For more information contact:

Umunyana Rugege at rugege@section27.org.za or Luvo Nelani at nelani@section27.org.za