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Medical specialists: cost cowboys or just given a bad rap?

Specialists say pricing guidelines aren’s cost-based, DoH wants a closer look.

 Medical specialists seem to be the cowboys on the cattle field, charging high fees and guiding patients into the wide open gates of expensive private hospital groups.

They are of particular interest to Health Minister, Dr Aaron Motsoaledi.

“Profit-maximising specialists and hospitals are able to exert their dominance through price increases and price discrimination with relative impunity, and currently have no need to compete on either price or quality in order to attract patients,” he states in the Department of Health’s (DoH) submission to the Health Market Inquiry.

Together with private hospitals, they are viewed as the drivers of price changes as well as the utilisation of services, as their diagnosis and treatment recommendations direct patients to hospitals where treatment is provided.

“Specialists are, therefore, the main drivers of demand for all expensive services, including hospital, medicine, devices and diagnostic services,” says Professor Alex van den Heever, Chair of Social Security at the University of the Witwatersrand, in his Review of Competition in the South African Health System.

Medical schemes expenses on specialists and hospitals have indeed increased significantly over the past decade. Total healthcare benefits paid per beneficiary per month increased by 42% from R623 in 2000 to R882 in 2011 in real terms.

It appears to be largely driven by the increase in benefits paid for private hospitals (an increase of around 82% since 2000) and medical specialists (an increase of around 74% since 2000).

Submissions from the role-players however differ markedly on the underlying reasons for the high expenditure.

The South African Medical Association (Sama) says it is not doctors who are driving up healthcare costs. A closer look at the expenditure of medical schemes shows that hospitals, allied health professionals and non-healthcare costs consume together 54% of medical scheme risk pool funds.

When radiology and pathology costs are removed, specialists represent 12.7% of medical scheme risk pool expenditure and consumed R12.2 billion in 2011, which is close to the R12.1 billion spent on non-healthcare expenses by medical schemes.   

“Specialists have been maligned in the medical and lay press for being the major cause of healthcare inflation, but have only gained 10% market share from 18.3% to 20.3% from 1997 to 2013 (including radiology and pathology costs) thereby disproving these allegations,” Sama argues.

Medical scheme rates

Most specialists charge a higher fee than medical scheme rates, with medical scheme members paying the difference out of their own pockets.

The Board of Healthcare Funders says specialists are charging up to 300% more than the amounts medical aid schemes allow, but according to the South African Private Practitioners Forum (SPPF) over 80% of practices in the specialist disciplines of physical medicine, psychiatry, radiotherapy, cardiology and oncology, charge no more than 120% of scheme rates.

Specialists with the highest overheads and malpractice premiums are plastic surgeons – of these practices 44.9% charge between 100% and 120% of medical scheme rates; orthopeadic surgeons (53.5%); and gynaegologists (60.3%).

The reason for this difference is inappropriate pricing guidelines, according to the specialists.

They have argued now for years that pricing guidelines were not cost-based. In 2010 the Reference Price List of the DoH was set aside by a high court ruling. It is now in the hands of the Health Professions Council of South Africa (HPCSA), and not the DoH to provide guideline tariffs, and this is still an ongoing process.

“In the past there has been a tendency to focus on containing medical scheme expenditure (costs) and to ignore the fact that medical practioners themselves experience costs in the service. Medchanism prices must enable doctors to make a living,” says the SPPF.

They don’t mind a pricing mechanism, but it should be cost-based, “free of political interest and influence”.

‘Perverse provider incentives’

Hospitals compete in a variety of ways to attract doctors to establish practices at their facilities. These include providing consulting rooms; facilities and equipment; hospital shareholding opportunities; and relocation incentives.

The DoH asks that a closer look should be taken at what it calls “perverse provider incentives associated with reimbursement structures”.

Life Healthcare (LHC), Mediclinic and Netcare have shareholding relationships with doctors. Doctors are required to conduct this in accordance with the Ethical and the Professional Rules of the HPCSA.

Rule 23A of the HPCSA, which relates to Financial Interests in Hospitals, provides that:   “A practitioner may have a direct or indirect financial interest or shares in a hospital or any other health care institution: Provided that – such interests or shares are purchased at market-related prices in arm’s length transactions;… (c) the returns on investment or payment of dividends is not based on patient admissions or meeting particular targets in terms of servicing patients;… (f) such practitioner does not engage in or advocate the preferential use of such hospital or health care institution”.

“HPCSA initially imposed a cap on doctor shareholding but later removed the cap as it found that the shareholding did not function as a perverse incentive,” LHC says.    

Mediclinic for instance offer shares to doctors who use the hospital’s facilities, to be purchased at market value. No single doctor may hold more than 2% of the total issued shares relating to the relevant hospital, although it inherited existing, higher shareholding structures due to the acquisition of some hospitals.

A doctor may only hold shares in one Mediclinic hospital at any one point in time and are no conditions on the doctor shareholder to admit patients to the hospital in which he holds shares.

Shortages

While many people can’t afford specialists, South Africa also cannot afford to lose their skills.

The country suffers from a chronic shortage of specialists across all categories in both the public and private sectors.

It has around 20 specialists for every 100 000 people. This is one of the lowest ratios of doctors (GPs and specialists) to population of the BRICS countries (Brazil, Russia, India, China and South Africa), shows research from Econex. 

Reasons include emigration and medical school constraints, but their scarcity also gives the specialists market power, says the DoH.

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Specialist skills are transferable globally and priced in hard currency. The ultimate portable asset to give one’s kids. The Minister should rather focus on addressing the root causes for specialists choosing to leave SA. The exodus has reached the point where certain skills are not only unavailable to most patients, but can no longer even be taught to the next generation of doctors.

To put practice fees and costs into one simple perspective. A nil return on a provisional tax return completed by an accountant firm costs me R285.00. (I believe that is quite cheap but requires no professional input.) The standard base rate for a consultation with a doctor that can take up to an hour paid by medscheme one of the biggest administrators is R303.20. And discovery pays R340.60. It does not end with a consultation as there may be a referral for x-rays, pathology, a script and a letter to the patient and the referring GP.

It is not economic for a doctor to set foot in an operating theatre for less than R5000.00 per procedure. And yet the vast majority of bread and butter procedures such a carpal tunnel release are paid at a fee much less than this. (Medscheme pays a mere R1101.60 incl VAT.)

Many doctors appear to make money but they don’t. Many come from families that are wealthy, many are smart in other investments, many have good lines of credit from banks, some marry into money and many marry professional working spouses. What really matters is that if you specialize you will work double time (80 hours a week) for at least 10 and possibly even for 20 years.

I once calculated that it took me up to age of 34 as an orthopaedic specialist prorated for hours worked to equal the earnings of a nurse who started at the age of 18 when I first went to university.

None of our 3 children studied medicine. Enough said.

Better get your hip replaced and your cataracts done soon because in the not so distant future the services of medical specialists will become even more expensive.

1. The number of well qualified medical specialists will steadily decline over the next few years. Irrespective of politician’s rhetoric the University of Pretoria and Free State University already have numerous departments in the medical faculties that are starting to collapse/already have collapsed. Free State is struggling to retain it’s HPCSA accreditation as a training institution. I am tempted to name specific departments but will restrain myself. It is common knowledge amongst those in the industry.
2. The number of young specialists relocating abroad will increase over the next few years. Believe you me, the topic overshadows any other in theater tea rooms all over the country. A lot of guys are getting their ducks in a row to move abroad.
3. Simple supply and demand principles will make specialists increasingly expensive.
4. I foresee a time where South Africans seeking 1st world medicine will need to travel to neighboring countries or overseas to access it.

I just hope the minister of health, the competition commission and the very clever actuaries will realize that medical specialists are not simply power point presentations or mathematical models but normal people that want a fair chance to make a decent living from balancing the needs of the community and the needs of their families.

The scale of medico-legal risks, big-brother oversight, medical aid interference in professional decision making, government threats, long hours away from family, the general decline in the democratic state, poor security of business and person, is currently tightly balanced by the right to charge a fair fee.

When this fair fee is taken away the scale will be tipped and unfortunately the general public will be the long term losers in a country that once boasted with quality medical care few developed nations can claim.

It is not a threat. It is a sad sad reality.

… following from my previous post:

If the minister of health and/or the competition commission plan to fix fees and do so at unfair levels (as perceived by the profession and not the minister/HPCSA/CC/clever actuaries), they will be well advised to also amend the constitution to firstly force those with medical expertise to actually work as medical specialists and/or prevent medical specialists from emigrating, because that is simply what the medical specialists will do – emigrate or switch profession.

End of comments.

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