1Vol 3. 2009

Vol 3. 2009

02. The NHI in perspective

06. The PMB quagmire

12. The value of managed healthcare in controlling hospital costs

18. Caesarean births – a health risk management perspective

Contents22. To screen or not to screen?

26. Proactive adherence monitoring: Making the case for prevention of virologic failure, drug resistance and saving of direct healthcare costs in HIV infection

32. A tale of two cities: July 2008 to June 2009

1Vol 3. 2009

Despite a spate of recent articles predicting the end of private medical schemes due to the phased introduction of a National Health System within five years, Medscheme believes that the private sector has a crucial role to play.

The ANC’s 2009 election manifesto specifically states that: “health reforms will involve mobilisation of available resources in both private and public health sectors to ensure improved health outcomes for all South Africans” and that government will “work together with all key sectors in our society to transform healthcare.”

In this context Medscheme welcomes the government infrastructure revitalisation programme as this concerted intervention will restore the ability of the public health sector to provide quality healthcare to the South Africans who currently rely on it.

While we know we are headed towards a National Healthcare System, we also know that the current tax base is limited and that the public health sector has a challenge in terms of its resources and thus cannot go it alone.

Medscheme and its shareholders, AfroCentric Investment Corporation, are therefore convinced that the private healthcare industry not only has a future, but is crucial in bringing into being government’s vision to make quality healthcare accessible to all South Africans.

We also believe that the private sector must find ways to engage with government and contribute constructively to the legislative process while also developing innovative solutions that will improve accessibility to healthcare.

“Finding the solution to providing South Africans with greater access to healthcare is at the heart of healthcare issues in South Africa, whether one represents the private or public sector. Both parties need to be prepared to understand, as well as accommodate the other’s point of view, join forces and collaborate on finding solutions.”

On a lighter note, this is the third edition of Xpert. Previous issues have attracted much positive comment due to the depth of the content and my hope is that this issue adds value to you as one of our valued business partners.

SincerelyAndré Meyer CEO

André MeyerA word from

2 Vol 3. 2009

Recent developmentsTaking stock of the latest developments in healthcare one cannot but take into consideration the political shift that started in Polokwane and was brought to fruition in our recent election.

The ANC election manifestoHealth was listed as one of the five priorities of the African National Congress for the next five years in their 2009 election manifesto. The manifesto pointed out that the ANC Freedom Charter commits the party to:

• A preventative health scheme run by the state,• Free medical care and hospitalisation for all, with • Special care for mothers and young children.

The manifesto goes on to state that the ANC government will aim to reduce inequalities in the health system and that health reforms will involve mobilisation of available resources in both the private and public health sectors to ensure improved health outcomes for all South Africans.

The manifesto explains that in practical terms, the ANC government will, amongst others: “Introduce the National Health Insurance (NHI) system, which will be phased in over the next five years. NHI will be publicly funded and publicly administered and will provide the right of all to access quality healthcare, which will be free at the point of service. People will have a choice of which service provider to use within a district. In the implementation of the NHI there will be an engagement with the private sector in general, including private doctors working in group practices and hospitals, to encourage them to participate in the NHI system.”

The media debate Earlier this year, speculation that the darting of a National Health Insurance (NHI) system was taking place behind closed doors gave rise to stakeholders from the private healthcare sector airing their views using the media as platform. In the absence of a suitable forum, extensive and very public debate

perspectiveThe NHI in

Louise BothaBCom (Accountancy), BCom Hons (Financial Management), ACIMA

CFP Specialist: Business Development, Medscheme Health Louise has two BCom degrees and has qualified as an Associate of the Chartered Institute of Management Accountants and as a Fellow of the Financial Planning Institute (FPI). She has 14 year’s experience in the healthcare industry and is currently a Specialist in the Business Development area of Medscheme.

3Vol 3. 2009

around what form the NHI should take and its potential pitfalls took place.

A leaked NHI task team concept document escalated the debate to the level of headline news and caused further concern, focusing particularly on the estimated impact NHI, as envisioned in the leaked document, would have on the South African economy. However, the document focused mainly on policy framework setting and had not reached an advanced stage of economic impact assessment.

The ANC responded firmly to the speculation. An article by Dr Zweli Mkhize, ANC NEC member, Chairperson of the ANC subcommittee on Education and Health and member of the Task Team on NHI was published on the ANC’s website and stated as follows:

“We are aware of the debates in the media which are obviously not based on facts because no details of such plan have been officially announced by government. The debates are not only ill-informed but are also highly speculative. We are also aware that the debates are coming from a few individuals from specific sectors of the private sector, who have vested interests in maintaining the status quo in which the majority of our people continue to struggle in accessing quality healthcare a Constitutional and a basic human right. Accusing the Task Team of pursuing an ideological agenda robs the country of a balanced debate in search of a lasting solution which a strictly market oriented approach cannot solve. We need to acknowledge the role of each of the sectors but seek a solution to correct the shortcomings. For that we require a sober and evidence-based debate, not an alarmist and confrontational discourse that currently characterises the debate in the media.“The work of the National Task Team on NHI will be formally

released to the public through appropriate channels when it is complete. We appeal to the public to be patient and wait for the release of the formal NHI plan in the near future. The plan will include processes of consultations with all key stakeholders to ensure that the voices of the public, private sector, labour, civil society and others are heard and considered in the finalisation of the plan.”

Bottom line: Wait for the formal NHI plan and there will be a process of consultation.

Clarifying the NHIThe vacuum created by the industry anticipating the release of formal documentation by the government has led to proposals being put forward by private sector parties. In the interim, the ANC has also published a pamphlet to clarify its vision of a NHI which provided the following insights:

NHI funding• Government spending (including a removal of a tax

subsidy for medical schemes).

• Mandatory contribution (lower than current medical scheme contributions) split equally between employer and employee; low income workers to be exempted.

The changes facing the private healthcare industry today are an attempt to undo the results of historically entrenched institutional racism an effort to alleviate medically induced poverty and are driven by a sincere desire for social change.

Do such noble intentions make it easier to face challenging times? Not always. Should they further inspire the pursuit of equitable solutions to our South African healthcare dilemma? Indeed, they should.

4 Vol 3. 2009

Key features of the NHI• A publicly administered and publicly funded

National Health Insurance Fund (NHIF) – a single-payer, purchaser of services for the entire population.

• No financial barrier to access comprehensive, quality healthcare – free at point of use.

• Comprehensive coverage provided on a uniform basis – primary care, inpatient and outpatient care, dental, prescription drugs and supplies.

• Publicly and privately delivered healthcare – accreditation, prior to NHIF funding to ensure improvement in quality standards.

• Social Solidarity – Those who can afford to pay for healthcare to subsidise those who cannot; access based on need.

• Savings on “excessive administrative costs” of the current multi-payer medical schemes system to be applied to healthcare spending to the extent that no increase in healthcare spending as a percentage of GDP is anticipated.

• Cost controls – capitation payment of doctors, global budgeting for hospitals and bulk purchasing of drugs and supplies.

Role of the private sector“One of the main concerns that have been raised by various commentators on the NHI is the future role of the private sector. We have stated clearly in past engagements and various forums that the policy of government and the ANC is that the private sector is an important role-player in the delivery of healthcare.”

The public sectorThe public health sector is fundamental to the successful implementation of any NHI system and the government infrastructure revitalisation programme is to be welcomed as it is hoped that this concerted intervention will restore the ability of the public health sector to provide quality healthcare to the South Africans who currently rely on it.

While we are headed towards a National Healthcare System, the current tax base is limited and the public health sector has a challenge in terms of its resources and thus cannot go at it alone.

Change is essentialWhile the private healthcare landscape will change over time, the industry has been publicly assured that there will be a formal process. The private healthcare industry must pay close attention to developments, participate and collaborate constructively in the debate and be prepared to develop innovative solutions.

While it is clear not all stakeholders agree fully with the experts cited by the ANC, there can be little debate that the health sector generally is not efficient and that currently, access to quality healthcare in South Africa is inequitable. This situation must be addressed urgently.

Dr Zweli Mkhize places the situation in context in the article referred to earlier:

“The NHI has been proposed to create a mechanism to level the playing field and create equitable distribution of resources resulting in high quality of health services for all the people. Universal access to a basic package of services for both the rich and poor will be achieved by the NHI. With such a well developed private health sector South Africa needs to ensure a regulated coexistence of the two sectors to find a balance between the two extremities. This must include the increased funding for the public health sector and regulating the medical aids industry to pool the resources available for the whole country and create a common platform for improving health outcomes.”

The ANC pamphlet encourages our constructive participation:

“Once the White Paper process has started, we urge ANC members and the public to study government proposal on the NHI, engage in debates and contrib-ute resources, skills and expertise to the final product that will emerge after consultations.”

The ANC pamphlet ends with the following message:

“We dare not fail to bring about a better and integrated national health system that benefits all South Africans. Working together we can do more.”

5Vol 3. 2009

6 Vol 3. 2009

Central to the facilitation and achievement of a more equitable and efficient quality healthcare system in South Africa appears to be the concept of a minimum level of care. The National Health Act mandates that “the Minister must, within the limits of available resources ensure the provision of such essential health services, which must at least include primary healthcare services and equitably prioritise the health services that the State can provide”. The inquiry into a system of social security for South Africa concluded that government policy needs to provide a framework that “results in cover for a minimum level of essential health benefits irrespective of whether it is provided in the public or the private sectors”. Although there have been various government initiatives that have defined essential services, the Prescribed Minimum Benefits (PMBs) as provided for by the Medical Schemes Act and which define the minimum level of care that has to be funded by all private medical insurers have probably had the greatest prominence. Not only are these minimum services legislated thus defining a legal entitlement to care – but any change

to their ambit directly impacts budget allocation, as well as the total budget. Long term they were the envisaged platform for any social health insurance package to be pre-funded by all earning above a given threshold, defining the entitlement for any person contributing towards such insurance. Although the possible relationship, if any, with benefits of the national health insurance fund remains an enigma, it is deemed unlikely that the PMBs will not continue to form a core component of healthcare reform, at least in the short to medium term. Given this, it is in the best interest of all stakeholders in the healthcare industry to understand the muddy waters relating to PMBs. Such understanding should also facilitate constructive debate relating to the current PMB review process which dates back to the beginning of 2008.

Historic overview of the PMBsOriginally the PMBs were collated by Soederlund et al with the key objective of preventing free use of public services by those who could afford to pre-fund their medical care, thus protecting public

Dr Bettina Taylor MBChB (UCT), Int Dip Res Eth (UCT/US National Institute of Health) Group Functional Specialist: Clinical Policies

Medscheme Health Risk SolutionsAfter starting her career as a clinician, lecturer and researcher in academic practice, Bettina joined Medscheme to pursue her interests in health policy. During this time she has furthered her studies in health economics and bioethics and has served as clinical reviewer for the Medicines Control Council, participated in the design of the LIMS minimum package and served on RETAP.

The PMB quagmire

7Vol 3. 2009

At this point in time, Prescribed Minimum Benefits are a quagmire. Not only is there significant uncertainty as to what care is and is not included, but the insidious growth of the package over the previous years – especially in view of the current PMB review draft proposal and the lack of meaningful financial subsidies of lower income earners is creating a funding landscape that has the gloomy appearance of a marsh. Whilst the present PMB review process is facing many uncertainties, it is nevertheless important to clearly define the PMB current purpose, as well as their monetary boundaries, and focus on creating a clear and logical framework of what is indeed covered and at what price.

hospitals from having to fulfil the role of “minimum insurer”. Such an approach was aligned with the Department of Health’s social health strategy applicable at the time.

To this end hospital-based care was ranked within proposed budgetary constraints to include first and foremost care that was regarded as non-discretionary (or urgent). Cost-effectiveness of care was considered as a secondary factor. Resulting from this was a proposal for a list of diagnosis-treatment pairs (DTPs) that included most emergency care, as well as hospital-based care for life-threatening conditions, some urgent care of non-life-threatening conditions, maternity care and palliative care for the terminally ill. Specifically excluded from the recommended package were very high-cost or ineffective treatments, and those for non-urgent, non-life-threatening conditions (eg cataract surgery, elective arthroplasty), as well as primary care services and out-of-hospital medicines relating to the DTPs.

Regulations and subsequent amendments in terms of the Medical Schemes Act (Act No 131 of 1998) in chronological order.

8 Vol 3. 2009

20 October 1999 The original PMB recommendations were eventually legislated in terms of 271 DTPs which were defined in broad diagnostic and therapeutic categories (eg epilepsy – status epilepticus, initial diagnosis, candidate for neurosurgery: medical management, ventilation, neurosurgery). However, there were some noteworthy, yet unexplained, differences between the seminal work and the final regulations. Despite broad adaptation of the principle that minimum care was limited to urgent, cost-effective hospital-based care in public facilities, some isolated highly discretionary services, as well as primary care interventions had been added to the minimum benefits package (eg screening for breast cancer and cervical cancer; hormone replacement therapy; treatment of infertility). Of note is also that the key objectives of the PMBs were expanded to encourage improved efficiency in the allocation of private and public healthcare resources, and to protect medical scheme members against loss of insurance cover during time of greatest need.

4 November 2002 Other than limited expansion of some primary care services relating to HIV infection and the inclusion of all emergency services, the most relevant early development of the PMBs was the apparent de-linking of the 271 DTPs from the concept of a hospital-based package, thus including ambulatory services for these diagnoses as well. It is postulated that such a shift

resulted from the concern that limitation of the PMBs to hospital-based care would exacerbate inefficiencies in the allocation of private resources as members seek specialised care that could equally be delivered in a primary care setting. The expansion of PMBs to include delivery of services in the private sector where these are not reasonably accessible in the public sector is also noteworthy.

6 October 2003 In line with government’s updated strategy on the implementation of social health reform, PMBs were expanded further to include the care of chronic conditions. Such reform was aimed at removing residual risk-selection by schemes and increasing medical scheme coverage. To this end, therapeutic algorithms for 25 chronic diseases previously identified (also referred to as the Chronic Disease List or CDL) were published. Diagnosis descriptions for these particular conditions were based on ICD-10 coding, and treatment was described as a stepwise approach to pharmacological management. The rationale for propagating a disease-based approach (as for example opposed to a drug-based approach) with regard to the management of chronic conditions is unknown. Furthermore, although prevalence, disease burden, cost-efficiency and disease severity were mentioned as criteria that contributed to disease selection, the rationale for selection of one disease

9Vol 3. 2009

over another remains obscure. It is also unclear why the standard of care reflected within therapeutic algorithms was not consistently bench-marked against public sector practices, but instead included treatments not readily available at State facilities (eg angiotensin-2-receptor blockers for hypertension, more liberal use of statin therapy).

3 December 2004 Following the public sector’s commitment to the roll-out of antiretroviral therapy for the management of HIV infection, such care as outlined in national treatment guidelines was added to the PMB package.

11 February 2005 Despite poor efficacy and high cost of treatment, as well as non-availability in the State sector, beta-interferon was added to the therapeutic algorithm for multiple sclerosis for patients with frequently relapsing and progressive disease. The rationale for such a decision is not publicly available.

PMB reviewSince 2005, no changes to the PMB package have been published. A formal review process has, however, been ongoing since March 2008. Such review is mandated in terms of the regulations of the Medical Schemes Act and must make recommendations on the changes to PMB legislation on the basis of:

• Inconsistencies and flaws in the current regulations;• the cost-effectiveness of health technologies or

interventions;• the consistency with developments in health

policy; and• the impact on medical scheme viability and its

affordability to members.

Whereas the main objective of the PMBs in the past was:• to avoid incidents where individuals lose their

medical scheme cover in the event of serious illness and the consequent risk of unfunded utilisation of public hospitals

• to encourage improved efficiency in the allocation of private and public healthcare resources

The primary objectives now include:• protection against catastrophic healthcare expenses;

and• promotion of risk-based cross-subsidies.

In an effort to protect their financial risk, schemes typically design benefits in a manner that would force sick members into higher (often unaffordable) benefit options. Such a practice is deemed to undermine the constitutional imperative to give effect to the right of access to healthcare and for this reason, mechanisms must be found to ensure risk-pooling of ‘insurable’ groups with those that are typically regarded as uninsurable. Legislation of a broad set of benefits that are typically needed by those with significant pre-identifiable healthcare risks would affect such a development.

Given this context, the appropriateness of the most recent PMB proposal (draft 3) is questioned:

1) First and foremost, the addition of dental and optometry, as well as preventative services, is obscure.

• Expenses relating to these services can neither be regarded as catastrophic, nor does their inclusion enhance risk-cross-subsidisation within schemes,

10 Vol 3. 2009

ie need for these services by individuals is not strongly predicted by their ‘sick’ status. Although it has been suggested by some that the introduction of risk equalisation without the expansion of PMBs would reduce the positive effects of the former, such expansion would only be meaningful if it focused on benefits that would typically have to be accessed by those with pre-existing disease (eg chronic medicines).

• Although no mention is made of what cost of a PMB package would be deemed acceptable, it is generally accepted that the PMBs in their current version (despite inadequate implementation, especially of the DTPs) are too expensive for meaningful expansion of the medical scheme industry, where contributions are voluntary and where there are no tangible signs of any form of financial subsidies, including income cross-subsidisation. For this reason, expansion of the package without limitation of other existing minimum benefits would be problematic.

It is likely that section 3(1) of the National Health Act which specifically requires the Minister to ensure the provision of essential health services and which must include at least primary healthcare services to the population, has had undue influence on the PMB review process in this regard.

2) Although the review document acknowledges the fact that the lack of clarity within the legislated package – especially the DTPs – must be addressed, there has been no tangible progress in this regard. It is stated that specific BDs (benefit definitions) should be included. (These would incorporate condition-specific standardised entry and verification criteria, defined baskets of services and goods associated with this entitlement, formularies, as well as treatment protocols that would include specification of the most appropriate setting and level of care for the provision of such service). However, this is an ambitious project with no plausible signs of meaningful progress in the near future. Instead, the emphasis should be on improved clarity in the short term. There should, for example, be an explicit statement as to whether chronic medicines are or are not included in the mandated care of DTPs. Whilst the regulator suggests that these should be

covered as part of the said entitlements, it appears that a significant portion of the funding industry limits PMB access to chronic medication outlined in the Chronic Disease List (CDL). After all, there has never been an explanation as to why certain chronic diseases were carved out in the CDL if the intention was always that all medication for potentially chronic diseases as listed in the DTPs should be covered as a minimum benefit. Not only does the current status quo lead to confusion – and with that antagonism between different stakeholders – but it also promotes significant inefficiencies in the system. Some simple explanations could go a long way in creating a more efficient and levelled playing ground.

3) Changes to address major inconsistencies in the current legislation have at best been cosmetic.

• Relevant incongruities in the DTPs (likely to have been influenced by political intervention) remain. Whilst the PMBs originated as a hospital-based package with a focus on non-discretionary, urgent, cost-effective care, some isolated and highly discretionary primary care services were nevertheless included (eg screening for cervical and breast cancer; hormone replacement therapy; treatment of fertility; otitis media).

• Although the regulations state explicitly that ‘the interpretation of the PMBs should follow the predominant Public Hospital Practice’, the algorithms relating to the CDL are not consistently benchmarked against such a standard. In fact, they are increasingly deviating from this principle. For example, biological drugs and many of the preventative services listed in the current version are not part of State care.

• Whilst some chronic diseases are increasingly incorporating all possible care as per modern world standards, other diseases (of similar severity) remain excluded. From perspectives of fairness, it would be more equitable to broaden the chronic disease list but keep the standard at a more affordable level. However, as there is no doubt an important place in therapy for some of the biological medicines, alternative mechanisms of funding should be investigated (eg a mandatory income-based central fund).

11Vol 3. 2009

ConclusionAlthough the original approach to the definition of PMBs was systematic, transparent and goal-directed, the process has become increasingly muddied. At this point in time, the minimum benefits are a quagmire:

1) There is no common view as to what is included and excluded:• this results in patients being left in the dark when

they are in greatest need of care;• it promotes major administrative inefficiencies;• it fuels antagonism between various stakeholders.

2) They have resulted in a package that is viewed as increasingly inequitable. Whilst some patients reap the benefits of comprehensive care, irrespective of what benefit option they choose, others – with similar needs – cannot purchase a similar level of care even on the most expensive scheme options.

3) The lack of focus on financial implications of changes to the PMBs, as well as synchronisation with healthcare financing reforms is increasingly threatening access to medical schemes by low-income earners.

4) How they fit into the broader healthcare reform intended for the country, both from perspectives of funding, as well as the delivery thereof, is obscure.

For us to move forward in a way that is in the best interests of patient care in South Africa, the PMB process must be guided by its own acronym:

Purpose, Monetary realities and reform, Benefit clarity

This will require a clear national strategy for healthcare reform, as well as strong political and managerial leadership.

References1. Taylor B, Taylor A, Burns D, Rust JD, Grobler P. Prescribed

Minimum Benefits – quagmire or foundation for social health reform? S Afr Med J 2007; 97: 446 450

2. PMB review consultation document, third draft. 25 March 2009. Available at http://www.medicalschemes.com/publications/Zip-Publications/PMB%20Review/3rd_Draft_PMB_20090325.pdf. Accessed 20 June, 2009

12 Vol 3. 2009

• Compare the utilisation and costs of comparable medical schemes, in the same market, where similar schemes are managed and unmanaged;

• measure the costs saved by the different managed care interventions, over one year of management;

• measure the cost and utilisation trends of medical schemes over several years of management, after adjusting for annual changes in inflation and the underlying risk profile(s).

These potential ways of measuring are, however, significantly hampered by a number of issues, including the following:

• one seldom if ever finds a medical scheme in South Africa that is not managed (or which has stopped its utilisation management activities);

• there is not enough information in the public domain to enable sensible comparison of schemes from different managed care providers with one another;

• comparing South African results to those in other countries is not really comparing apples with apples. Differences in regulation, market conditions, training and practicing patterns of healthcare professionals, coding and classification systems, and many other differences, render such comparisons almost useless.

This article will attempt to answer some of the questions about the value of utilisation management, taking into consideration these shortcomings.

1. International findingsStudies in the USA found that hospital utilisation

The value of

in controlling hospital costs

managed healthcare

Dr Hein Botha General Manager: Hospital, Dental

Optometry Risk Management MedschemeHein has achieved a BSc (Maths and Psychology), MSc (Clinical Psychology) and a PhD (Clinical Psychology). After qualifying and practicing as a clinical psychologist, he lectured at the University of Stellenbosch. Moving to Sanlam, Hein worked as management consultant and chief consultant organisational development. Eventually he joined the healthcare business as a manager in 1997. Since then he has been responsible for the management of many aspects of medical scheme administration and managed care functions within Sanlam Health and Medscheme. Hein currently heads up Medscheme Health Risk Solutions’ Hospital, Dental and Optometry Management Programmes.

Pieter Grobler General Manager: Health IntelligencePieter started his career in life insurance. He has been working in healthcare since 1997, first at Sanlam Health and currently at Medscheme. He was the General Manager: Actuarial for seven years before taking up his current position of General Manager: Health Intelligence. Pieter headed up a team that submitted a technical report on Risk Equalisation in South Africa in 2003. Much of this work was used as a basis in the subsequent consultative process. He chaired the sub-team looking at Risk Factors to be Used in the Formula as part of the Formula Consultative Task Team process and was integrally involved in developing the original REF contribution table. He has been a member of the Risk Equalisation Technical Advisory Panel (RETAP) since its inception. Pieter was also a member of the Low Income Medical Schemes (LIMS) task team.

13Vol 3. 2009

Trustees of medical schemes have the statutory obligation to question the value provided by their managed care interventions. However, it is not a question easily answered. Theoretically, the value of managed healthcare in controlling hospital costs can be established in several ways.

review (UR) reduced hospital admissions by 12 to 13%, inpatient days by 11% and overall hospital costs by 7 to 10%. Even though UR reduced the level of utilisation and expenditures, it did not appear to influence the rate of change in these areas over time.

The effect of UR appears to have been greatest during the quarters immediately following implementation of the review activity. This underscores the need to analyse longitudinal data.

UR further appears to reduce expenditures mainly by reducing admissions. Denial rates for guideline-based utilisation reviews seem to be somewhat higher than in South Africa, at just over 7%. Hospital inpatient expenditures per admission were unaffected by the review activity in the USA.

2. Comparing managed and unmanaged schemesRarely in South Africa does one find an unmanaged medical scheme to enable comparison to managed schemes. MHRS was fortunate though that it got contracted by a previously unmanaged scheme which enabled exactly such comparisons.

In spite of rather limited data available prior to intervention, our initial analysis suggested that the

average Length of Stay (LOS) of members in that unmanaged scheme was 23% longer than our average for managed schemes. We were therefore confident that UR would provide significant savings to that scheme, based on this finding.

During the first month of managing this scheme, the Board became concerned about competitors, who might use the introduction of managed care in their scheme to lure members away from the scheme. They therefore instructed us not to decline any pre-authorisation requests for hospitalisation of their members, but still to continue with UR. After six months members, hospitals and healthcare professionals became used to the UR process, the threat from competitors had disappeared, and the Board instructed us to, from then onwards, implement all our clinical policies and funding guidelines, to ensure maximum benefit to the scheme.

14 Vol 3. 2009

Seventeen months after we have started we found the following results (after allowance for claims run off):

The results show a decline of 18.5% year-on-year in cost per life per month, even while prices increased by 7.65% for that year. The results were also 28% better than the budgeted cost per life per month. This is three to four times better than the published USA findings for utilisation management.

One very pertinent finding in these results was the effect on one of the options of the scheme, namely their hospital plan, which offers no day-to-day benefits. The costs on that option were reduced by no less than 50%. Our interpretation was that utilisation management kept members out-of-hospital who were previously admitted to hospital to access benefits which they didn’t have in the out of hospital setting. This interpretation was put to healthcare providers who did not confirm it, but also did not challenge it. In our opinion it holds an important lesson for scheme options with no or limited out-of-hospital benefits. Without effective utilisation management, in-hospital costs could be excessively high.

3. Quantifying savings from utilisation and claims management interventions

From time to time our client schemes request us to demonstrate the value of our interventions for their schemes. To do that, we define savings in the following way:

• Pre-authorisation: The estimated rand value of all pre-authorisation requests declined.

• Case management: The estimated rand value of further reductions in level of care and length of stay, as well as alternatives to hospitalisation.

• Claims management: The estimated rand value taken off the billed amount of claims because of clinical auditing.

Year Cost per life per monthTotal cost (‘000)

Average membership

2006 R 122,34 3,378 27,613

2007 R 99,73 2,947 29,554

15Vol 3. 2009

This approach unfortunately under-reports significantly the value of utilisation management because it fails to quantify the value of:

• partially declined pre-authorisation requests; • managing unproven new health technology

(including procedures, drugs and surgical disposables);

• managing level of care; and • managing length of stay.

It can furthermore be argued that this approach is often more a measure of compliance (by members, healthcare professionals and hospitals) to complex scheme rules and billing requirements than savings for schemes. It therefore also means that over time, as compliance improves, savings decline. But would that mean that the value of utilisation management also reduces? The only way to know for certain would be to completely stop utilisation and claims

management and to see if hospital costs stay at the current levels.

In spite of the above-mentioned shortcomings, above approach suggests the following savings for schemes:

Estimated savings Per member per month

Pre-suthorisation R11,23

Case management R5,81

Claims management R14,54

Total R31,58

16 Vol 3. 2009

4. Comparing utilisation trends over years, after adjusting for annual changes in risk profileIn order to compare utilisation sensibly over time, one needs to adjust for the factors that influence the utilisation that is not constant over time. In our analysis we have adjusted for differences in the age and gender profiles, the type and number of chronic conditions that members have as well as for differences in the type of admissions that patients were admitted for. By adjusting for these factors one is able to derive an expected value. The expected value gives an indication of what the experience in the year under investigation would have been had these factors and the experience been the same as in the base year. The difference between the actual and expected values in the year under investigation is an indication of the improvement or not in the utilisation between the base year and the year under investigation.

By using this methodology and comparing the utilisation in 2008 to 2006 across all schemes under management we found that the admission rate decreased by 0,3% per annum relative to what we expected. Days per 1000 lives decreased by 1,3% per annum. This suggests that for these schemes, managed for more than 10 years now, utilisation is well controlled. In fact, small gains are still being made.

ReferencesFlynn KE, Smith ME and Davis MK. From Physician to Consumer: The Effectiveness of Strategies to Manage Health Care Utilization. Medical Care Research and Review, Vol. 59, No. 4, 455-481 (2002)

Glied S. Managed Care. Working Paper 7205. National Bureau of Economic Research. July 1999

Kapur K, Gresenz CR, and Studdert DM. Managing Care: Utilization Review In Action At Two Capitated Medical Groups. Health Affairs. Project Hope-The People to People Health Foundation Inc. 2003

Wickizer TM. The effects of utilization review on hospital use and expenditures: a covariance analysis. Health Serv Res. 1992 April; 27(1): 103–121

Wickizer TM, Franklin G, Gluck JV and Fulton-Kehoe, D. Improving Quality Through Identifying Inappropriate Care: The Use of Guideline-Based Utilization Review Protocols in the Washington State Workers’ Compensation System. Journal of Occupational & Environmental Medicine. March 2004, 46(3):198-204

Wickizer TM, Wheeler JRC and Feldstein PJ. Does Utilization Review Reduce Unnecessary Hospital Care and Contain Costs? Medical Care June 1989, Volume 27(6)

17Vol 3. 2009

18 Vol 3. 2009

Caesarean births

perspectivea health risk management

Michael Edge BBusiness Science (Honours)

Fellow of Actuarial Society of South Africa (FASSA)Michael joined Medscheme Health Risk Solutions as a consulting actuary on 2 January 2008. The schemes he is currently consulting to are Bonitas, Sasolmed and SABC Medical Scheme. Prior to joining Medscheme, Michael worked in the product development department at Metropolitan Odyssey from April 2005 to November 2007. Before that Michael worked as a creditor pricing manager at Pinnacle Insurance, a specialist credit life insurance company based in London for two years. Before moving to England, Michael co-founded a small company which did specialist pension consulting work for UK clients for a period of two years. Michael’s first job after university was in product development at Southern Life where he worked from February 1996 to January 2001.

Dr Mike Marshall MBChB

Specialist: Clinical Coordinator, Medscheme Health Risk SolutionsMike graduated from the University of Cape Town Medical School in 1989. He has since gained wide clinical experience both locally and abroad, as well as in the public and private healthcare sectors. Before joining Medscheme in early 2005 he practiced as a general practitioner for seven years. Within Medscheme his work predominantly focuses on provider relations. He is particularly interested in finding ways to collaborate with healthcare professionals in order to find solutions to the funding challenges that exist within the private healthcare sector.

19Vol 3. 2009

Hospital costs associated with childbirth represent about 3,5% of total medical scheme healthcare expenditure. Childbirth will always be a predominant cost driver within the funding environment. It is, however, the responsibility of a medical scheme to provide best value to beneficiaries within a mutuality funding environment. Specifically concerning childbirth it is important to understand where inefficiencies exist (in terms of cost and quality) and find solutions to address these.

The controversy over rising caesarean birth rates has raged for decades. Thirty years ago the caesarean birth rate in most of the world’s nations was 5% or less. During the past 30 years an astounding transition has occurred. Caesarean birth rates have increased more than eightfold in some countries and major surgery has become the most common method of birth at many private hospitals. The graph above compares the caesarean birth rates of health systems in various countries with Medscheme’s caesarean birth rate.

It is evident from the above graph that:

1. The caesarean birth rate is rising in all countries and is generally above the World Health Organisation target in all cases.

2. The caesarean birth rate in Medscheme adminis-tered schemes is significantly higher than the rate in the rest of the developed world. This most likely reflects the caesarean birth rate for South Africa’s private healthcare industry as a whole. It needs to be considered that some private hospitals in Latin America have a similar or higher caesarean birth rate. In Australian private hospitals the current caesarean birth rate is approximately 41%.

From a health risk management perspective it needs to be considered that the average total hospital cost of a caesarean birth is R20 775 versus R12 200 for a normal vaginal delivery. The financial impact on a

medical scheme of reducing the caesarean birth rate could be significant.

At first glance the sky-rocketing caesarean birth rate could be termed an epidemic with negative connotations. In reality the situation is somewhat more complex in that many individuals, including both mothers and doctors, welcome the change. Furthermore there is significant clinical debate, which is by no means resolved as to what constitutes a normal caesarean rate. Notwithstanding this, it is not surprising that the high and rising caesarean rate (performed for what is supposed to be a natural process) is a concern internationally. The 70% caesarean rate seen within the private sector in SA seems to exceed most international rates by far. This has significant financial implications within a funding environment. As such funders needs to unpack what is driving this so that from a risk

0%

10%

20%

30%

40%

50%

60%

70%

1990 1995 2000 2005

Ceasere

an

Secti

on

Rate

US - public & private

UK - public only

NZ - public & private

Aus - public &privateSA - public only

WHO Target

Medscheme

20 Vol 3. 2009

management perspective appropriate interventions can be implemented to address this.

Understanding the causes for a rising caesarean rate in the South African private healthcare sectorThe reasons are complex and multifactorial. Some of the main reasons are discussed briefly below.

At a systemic level the “birthing process” has become increasingly “medicalised” and almost exclusively occurs in hospitals that are generally geared to treating sick patients. Furthermore in the South African private sector deliveries are predominantly performed by specialists who have training in a surgical discipline (obstetrics and gynaecology). The current HIV epidemic would also account for some increase in the caesarean rate but certainly can’t account for the rates we are currently seeing.

At a patient level women are increasingly requesting caesarean births. The reasons given tend to focus around the “downside” of natural birth (eg pain, episiotomy, pelvic floor complications, etc). It needs to be stated that there can be significant complications associated with caesarean births both to the mother and to the neonate. How women view the care they want in labour has probably changed. In today’s fast paced world where it is generally the norm for both partners to work one cannot overlook the convenience of a planned elective procedure. Consumers of healthcare demand the use of new technology. Specifically advances in anaesthetic techniques have made caesarean delivery much more attractive to mothers in recent times.

At a healthcare professional level obstetricians are increasingly promoting caesarean births. Some reasons for this are listed below:

• Fear of litigation is often cited as a key reason for doctors encouraging caesarean delivery. Doctors feel more in control with caesarean deliveries and are more likely to be taken to task for not doing a caesarean versus doing an unnecessary caesarean delivery. Currently specialist obstetricians and gynaecologists pay R109 240,00 per annum to the Medical Protection Society

for malpractice insurance.• The changing preferences of patients make it

difficult for doctors to ignore patient demands. This is even more relevant given that there is little solid evidence on the risks and benefits of caesarean delivery versus vaginal delivery.

• It is more convenient for the doctor to deliver by caesarean section as the timing of the birth is predictable and can be incorporated into the doctor’s schedule.

• The doctor will earn more per unit of time for a caesarean section than a normal delivery.

• Many doctors believe caesarean births have become a safer operation and cause fewer complications for both mother and child.

• Women who have had a caesarean delivery will mostly have a caesarean delivery for subsequent pregnancies. There are no clear guidelines on vaginal birth after caesarean delivery and not surprisingly most doctors will favour a caesarean delivery in this scenario.

Exploring some solutionsEthical issues related to individual patient choice (where there is proper informed consent) are important to consider. In a funding environment where mutuality funds are used to purchase healthcare, consideration must be given to the needs of the collective. This means that schemes have the responsibility not to fund or partially fund healthcare interventions for which there is no clear indication or where there is an alternative procedure that is cheaper with the same or better outcome. The application of this philosophy for many healthcare interventions may be relatively straightforward. For the reasons given above the application of this for caesarean deliveries is somewhat more complex.

Member education and support in order to facilitate an environment where informed decisions can be made concerning childbirth are important. More recently the use of doulas (who provide continuous emotional support during labour, delivery and beyond) has been shown to reduce the caesarean delivery rate. There are very few doulas in South Africa and medical schemes generally do not fund this intervention. The use of midwives for education and deliveries is also associated

21Vol 3. 2009

with a lower caesarean rate. In the South African private healthcare environment there has been little support for private independent midwives from specialists, private hospitals and members. Medscheme received claims from only 27 midwives in 2008.

Alternative reimbursement models for confinements have been explored. A global fee model where the doctor takes financial risk (with a lower caesarean rate priced in) is an example. These models are unlikely to be accepted by doctors on a large scale as they do not address all the reasons for a high caesarean rate. The

same principle would apply to paying doctors more for performing vaginal deliveries. Furthermore, doctors are generally reluctant to take and manage financial risk.

Despite all the challenges mentioned above there are a number of doctors that have caesarean rates that are closer to accepted international norms. The table above illustrates the caesarean rates of obstetricians who have done more than 50 deliveries in 2008 for Medscheme administered schemes.

There are a number of obstetricians in private practice who have a more acceptable caesarean rate. Through the appropriate use of incentives and information sharing funders could increase utilisation of these specialists and lower the caesarean rate. It would be important to ensure that adequate access to obstetricians remains. In addition these obstetricians must have the capacity to cope with additional volume.

ConclusionThe high caesarean rate remains a complex and thorny issue in the private healthcare environment. Whilst there is little agreement on what an acceptable caesarean rate is, most would agree that a 70% rate is somewhat concerning for what is after all supposed to be a natural process. The causes for this are complex and any solutions would need to address these issues within the context of available resources. Ultimately any solution must:• ensure that beneficiaries have access to information

and the necessary support to empower them to make the best decisions regarding their confinement;

• identify and preferentially purchase services from healthcare professionals that provide best value to beneficiaries by practicing according to best practice guidelines.

Whilst the practical application of this may be somewhat daunting, medical schemes as purchasers of healthcare are in a position to make a difference.

Practice caesarean rate

Count of practices

% of total

22 Vol 3. 2009

Screening in medicine refers to the performance of clinical tests aimed at detecting a disease in individuals without symptoms or signs of that disease. The intention of such interventions is to detect disease early, thus enabling more effective management in the hope of reducing associated morbidity and mortality. In the Westernised world, the screening industry is booming and in some countries, expenditure on primary preventative tests is growing more rapidly than any other component of the healthcare budget. Not only do patients believe intuitively that by submitting themselves to regular testing, their quality of life, as well as their longevity, will benefit, but funders of healthcare are increasingly embarking on programmes whereby screening for specific diseases amongst their covered beneficiaries is promoted actively. This trend not only applies to governmental bodies, but also private funders of healthcare, including employer groups. There is an implicit assumption that early detection of disease must have significant downstream financial benefits

as less people become severely ill. Given these developments, it is opportune to ask whether screening is really all it is made out to be?

Examples of screeningCommon screening programmes that may be funded and/or promoted by third-party payors include the following:

• Cancer screening such as regular breast examinations and mammography for breast cancer in women; regular rectal examinations and prostate-specific antigen (PSA) levels to detect sub-clinical protstate cancer in men; flexible sigmoidoscopy and colonoscopy to prevent and identify early colorectal cancer; regular skin examinations to detect ominous changes suggestive of malignancy; PAP smears to identify early cervical changes.

• Screening for cardiovascular risk factors such as dyslipidaemia (abnormal blood levels of cholesterol and other fats), diabetes and pre-diabetes

Dr Bettina Taylor MBChB (UCT), Int Dip Res Eth (UCT/US National Institute of Health) Group Functional Specialist: Clinical Policies

Medscheme Health Risk SolutionsAfter starting her career as a clinician, lecturer and researcher in academic practice, Bettina joined Medscheme to pursue her interests in health policy. During this time she has furthered her studies in health economics and bioethics and has served as clinical reviewer for the Medicines Control Council, participated in the design of the LIMS minimum package and served on RETAP.

To screen

screenor not to

23Vol 3. 2009

Worldwide the screening industry is booming. Patients are increasingly rushing for their annual check-up in order to stay healthy. Funders are also jumping on the screening bandwagon, often in the hope of saving costs. But is screening really all it is made out to be?

(abnormal blood glucose levels) and hypertension.• Genetic screening to detect carrier status of abnormal

genes that may cause disease in off-spring or in those affected.

• Screening for infectious diseases such as sexually transmitted diseases (STDs), including HIV, to provide appropriate treatment and to prevent transmission to others.

Given these examples, it is evident that - from a clinical perspective - screening may either be focused on the welfare of the individual and/or the health status of others (eg possible offspring, sexual partners). Although the knowledge of one’s HIV status does not necessarily prevent transmission of this virus to other parties, it allows for targeted, high-intensity educational programmes that encourage safe sexual behaviour by those infected. As screening with the intention of community benefits is a subject on its own, the focus henceforth will be on that aimed at promoting the well-being of the individual being tested.

The patient’s perspectiveCommon belief is that screening must be good for one’s health. Prominent critics, however, argue that the true benefits are often exaggerated. Similarly, possible adverse effects are commonly ignored. This is particularly so in the field of cancer screening. To use the example of mammography to detect early breast cancer for illustrative purposes:

If 2 000 women are screened every two years for ten years:

• One will avoid dying of breast cancer. It should furthermore be noted that there is no evidence

24 Vol 3. 2009

that screening for breast cancer reduces overall mortality (ie whilst one death as a direct result of breast cancer is avoided, patients may die of an alternative cause instead during the said period).

• Ten healthy women will become unnecessary cancer patients, ie they will have a part or all of their breast removed, receive radiotherapy and/or chemotherapy, when this is not in fact necessary.

• Two hundred healthy women will experience a false alarm with severe resultant psychosocial strain which often continues after women are declared free from cancer and which manifests as anxiety, despondency and sleeping problems.

Furthermore, there are women for whom the time of suffering is simply prolonged. Some cancers are so slow-growing that they would never cause a problem in a person’s lifetime (ie the individual is expected to die with the cancer rather than of the cancer). For other tumors, treatment and treatment outcome does not differ as a result of earlier diagnosis. It is, of course, hoped that some tumours identified as a result of screening do indeed require less intense therapy, but the quantum of this is unknown.

Contrasting with these figures that are based on available evidence are those relating to women’s perceptions. A survey of American and European women found that:

• 68% believed that screening reduced their risk of contracting breast cancer!

• 62% believed that screening at least halved mortality• 75% believed that ten years of screening saved

1:100 participants (an overestimate of twenty times)

• Only 8% were aware that participation can harm healthy women

Regarding active identification of riskfactors for cardiovascular diseaseThis is only meaningful if patients are prepared to change their lifestyle as a result of the findings, and take medication, where indicated. Although harmful effects are generally limited, they can occur. For example, patients may be diagnosed

25Vol 3. 2009

with hypertension and commenced on life-long medication when in fact they have so-called “white coat hypertension” (ie their blood pressure increases as a result of anxiety associated with visiting the doctor). Or, the results of their blood investigations testing for fats and cholesterol are misleading, given that they did not fast adequately prior to the test. In medicine one refers to such results as “false positives” (ie they suggest an underlying clinical abnormality when in fact there isn’t one).

The funder’s perspectiveThe widespread misconceptions about the true benefits and harms of screening can also be found amongst funders of healthcare. Indeed, there is a disconcerting blanket belief amongst some policymakers that screening programmes must result – at least in the medium to long term in cost saving. Although this may be true for very targeted screening that is linked to effective intervention programmes, the active promotion of injudicious screening is more likely to be highly cost-incremental! Also, the real benefits to the well-being of members are often overstated. Given this, funders must exercise circumspection when considering the implementation of any type of screening initiatives. When embarking on these, the objectives must be clearly understood. In general, any active promotion of screening should be focused on high-risk individuals. If specifically aimed at cost control, they should be linked to targeted interventions (eg intense education, as well as incentives based on targets for those with newly identified cardiovascular risk factors).

ConclusionEnthusiasm for screening programmes is sweeping across the globe. The concept of preventing unnecessary complications by identifying disease early is no doubt appealing, both to patients, as well as funders. However, the propaganda relating to such initiatives has been ominously one-sided. Whilst fuelled by those with direct commercial interests, it is increasingly also being adopted as a political scorecard. Indeed, the true facts about the benefits and risks relating to screening are often absent, or worse, ignored. For patients to make the best value judgement about what is best for them, they need access to objective, factual information. For funders to provide the most appropriate healthcare within defined budgets, they must be guided by evidence rather than eminence.

References 1. Peter C Gotzsche, Ole J Hartling, Margrethe Nielsen, John

Brodersen, Karsten Juhl Jorgensen. Breast screening: the

facts – or maybe not. BMJ 2009; 338:b86

2. Domenighetti G, d’Avanzo B, Egger M, Berrino F, Perneger

T, Mosconi P, et al. Women’s perception of the benefits of

mammography screening: population-based survey in four

countries. Int J Epidemiol 2003; 32:816 – 21

3. Schwartz LM, Woloshin S, Fowler FJ Jr, Welch HG.

Enthusiasm for cancer screening in the United States. JAMA

2004; 291: 71-8

26 Vol 3. 2009

Measuring adherence using pharmacy claims or refill records Although adherence is of critical importance, it is only recently that adherence measures have been examined empirically. Common methods of adherence measurement include pill counts, electronic monitoring, pharmacy record reviews, and self-report measures. However, each method has distinct advantages and disadvantages including cost, complexity, accuracy, intrusiveness and bias. To date, there is no gold standard, and the selection of a method varies depending on availability and feasibility.

Pharmacy data have been used extensively to calculate medication adherence. Pharmacy refill is defined as the number of times that medicines have been dispensed, whereas pharmacy claims refer to the number of times medicines were dispensed and subsequently claimed to gain reimbursement.

The most common method of pharmacy refill adherence measurement examines the number of

prescriptions picked up, although some investigators have studied medication gaps or treatment interruptions. In its simplest form, medication availability is calculated as either the number of months, or days’ supply obtained divided by the total number of months or days in the period or the number of refills obtained divided by the expected number of refills in a given time period.

Proactive antiretroviral Ttherapy adherence monitoring prevent virologic failure and is cost-saving

Research work conducted by Aid for AIDS in collaboration with the University of Cape Town showed that adherence to HAART is strongly associated with virologic response in a dose-dependent manner and with survival in developing and developed countries (Figure 1). Furthermore, among patients on first-line therapy, lapses in adherence usually precede immunologic declines, and, unlike CD4 counts pharmacy refill or claim adherence data are readily

Proactive adherence monitoring:

saving of direct healthcare costs in HIV infection

Making the case for prevention of virologic failure, drug resistance and

Dr Leon Regensberg Specialist: Aid for AIDSLeon is a specialist physician who, after practicing in the public sector for some 20 years, left to pursue a career in the new field of managed healthcare. He joined Medscheme in 1994 and has been responsible for the clinical management of the Aid for AIDS programme for the past ten years. He has written or co-authored a number of presentations and publications in the field of HIV/AIDS disease management.

27Vol 3. 2009

Proactive adherence monitoring:

saving of direct healthcare costs in HIV infection

Aid for AIDS (AfA) recognises the importance of treatment adherence in order to gain the maximum benefit from highly active antiretroviral therapy (HAART). Monitoring of adherence presents a number of challenges and AfA has collaborated in a number of research projects with the Universities of Cape Town and Stellenbosch which looked at both this and the benefits of optimal adherence in preventing drug resistance and containing healthcare costs.

Within the South African private sector both the CD4 count and in particular the viral load are routinely used to monitor patients after treatment initiation to ensure optimal suppression of viral replication and try and preserve the benefits of less costly first line regimens for as long as possible. Outside the private sector and in developing countries these sophisticated tests are not always readily available.

Quantifying and monitoring adherence levels to HAART using pharmacy claims data is a potentially useful and low-cost method of monitoring patients at high risk for virological failure, particularly in resource limited settings.

accessible to clinics that dispense HAART, require little to no technical sophistication to compile, and directly measure a variable on which providers can intervene.

Although CD4 count monitoring in patients on HAART is deeply ingrained in HIV care, if adherence assessments are as accurate as CD4 count changes for identification of patients with virologic failure, sites currently performing or planning measurements for treatment monitoring could instead monitor adherence, thereby preserving scarce resources for triaged virologic monitoring or for other treatment-related activities. This research is particularly important in areas where healthcare resources are limited.

Indeed, additional earlier work using pharmacy claim data from the Aid for AIDS cohort, our collaborative research group found that adherence levels outperformed CD4 count changes in the first year after HAART. When used to detect virologic failure, adherence and CD4 counts were equally accurate. The results did not change if virologic failure was defined as >10 000 copies/ml. One can therefore consider that pharmacy-claim adherence assessments are as accurate as the CD4 count for identification of virologic failure on HAART. Our recommendation would be that WHO guidelines for antiretroviral therapy scale-up in resource-limited settings should include an adherence-based monitoring approach.

28 Vol 3. 2009

Efavirenz and nevirapine-based antiretroviral therapyAs recommended by WHO, NNRTI-based HAART regimens (using efavirenz or nevirapine) are the cornerstone of initial antiretroviral therapy in Africa. Among the specific findings of our research was the association of efavirenz-based initial HAART regimens with superior virologic and clinical outcomes, compared to nevirapine-based regimens, even when accounting for treatment adherence. This suggests efavirenz might be the preferred NNRTI for initial HAART in resource-limited settings, but its higher cost and potential teratogenicity are important considerations in implementation.

Adolescence as a vulnerable population at risk for non-adherence and virologic failure

Adolescents have lower adherence levels than adults enrolled in Aid for AIDS according to preliminary work. This finding underscores the need to study adherence levels in a larger group of adolescents and to investigate barriers to adherence in this special population. Although some barriers might be the same as those faced by adults (cost, infrastructure problems, fear of stigma, etc), culturally appropriate interventions to address barriers need to be developed specifically for adolescents and for adults and evaluated in each population. Pharmacy-data adherence should offer a low-cost and straightforward way to establish baseline adherence and to measure the effect of adherence interventions in both developing and developed countries. Importantly, the effect of interventions could be tracked individually, if necessary, and not just cohort-wide.

29Vol 3. 2009

Cost-effectiveness of ART adherence interventions

Research conducted in AfA showed that pharmacy-claims adherence levels are indirectly related to total, non-HAART direct healthcare costs (Figure 2). Because there are so few studies published on the association between costs and HAART adherence, this finding, too, is cause for further study both from private and public sectors, in both the developing and the developed world.

These critically needed data will be helpful to conduct cost-effectiveness evaluation of adherence interventions in sub-Saharan Africa using real world data.

Furthermore, to apply pharmacy-claim adherence outside of research or particular cohorts will require work to solve barriers to operationalising systematic monitoring of adherence using pharmacy refill and/or claims data. For example, there must be ready access to drug refill information as well as conversion of these data into an adherence metric at the time a patient is seen, which may be difficult in some settings at this time.

One approach might be to link pharmacy and patient care records by computer, so the pharmacy refill adherence calculation would be automatically provided to the clinical medical record when a patient is seen. But provision of adherence data to patients at the point of care doesn’t have to rely on computer technology. In Botswana, for example, patients present to providers a paper pharmacy card on which dates of medication dispensing (and pill counts) are noted.

Providers can calculate adherence directly using these cards. It is clear that widespread application of pharmacy data adherence monitoring would take at least some scale-up, but it is reassuring that the technological requirements for this approach are flexible and can be simplified.

The research work conducted at AfA established the usefulness of pharmacy - claim adherence in the

Aid for AIDS cohort, and application of this method revealed its usefulness in addressing research questions. In particular, we were able to show that pharmacy-claim adherence is strongly associated with virologic and clinical outcomes in adults in a linear dose-dependent manner, that it can be used to reveal differences in treatment efficacy (with efavirenz being more effective in initial HAART than nevirapine), and that adolescents have significantly lower pharmacy-claim adherence than adults.

We also showed that high adherence significantly reduces hospitalisation and healthcare costs while increasing total cost due to HAART (Figure 3). Efforts to decrease HAART cost should therefore also be a priority on the agenda of private and public HIV programmes and partnerships. Registration on AfA at an earlier stage of the disease (baseline CD4 count >200) is also associated with lower overall costs.

30 Vol 3. 2009

References:1. Nachega JB, Hislop M, Dowdy DW, Lo M, Omer BS, Regensberg L, Chaisson RE, Maartens G: Adherence to Highly Active Antiretroviral Therapy As Assessed by Pharmacy Claims Predicts Survival in HIV-infected South African Adults. Journal of Acquired Immune Deficiency Syndrome. 2006; 43(1):78 - 84

2. Nachega JB, Hislop M, Dowdy DW, Chaisson RE, Regensberg L, Maartens G: Adherence to Non-Nucleoside Reverse Transcriptase-based HIV Therapies and Virologic Outcomes. Annals of Internal Medicine. 2007:146(8):564 - 73

3. Bisson G, Gross R, Hislop M, Bellamy S, Chittams S, Frank I, Regensberg L, Maartens G, Nachega JB: Pharmacy Refill Assessment Compared With CD4 Count Monitoring for Predicting Virologic Failure Among HIV-Infected Patients on Highly Active Antiretroviral Therapy. PloS Medicine 2008, 5(5): e109

Figure 1 Figure 2

Figure 3

4. Nachega JB, Hislop M, Dowdy DW, Gallant J, Chaisson RE, Regensberg L and Maartens G: Efavirenz versus Nevirapine-based Initial Treatment of HIV Infection: Clinical and Virological Outcomes in Southern African Adults. AIDS, 2008. Oct 18;22(16):2117 - 25

5. Nachega JB, Hislop M, Nguyen H, Dowdy DW, Chaisson RE, Regensberg L, Cotton M and Maartens G: Antiretroviral Treatment Adherence, Virologic and Immunologic Outcomes in Adolescents Compared With Adults in Southern Africa. Journal of Acquired Immune Deficiency Syndrome. 2009 May 1;51(1):65 - 71

6. Nachega JB, Leisgang R, Hislop M, Nguyen H, Cleary S, Regensberg L, Maartens G: Antiretroviral Therapy Adherence and Direct Health Care Cost in An HIV/AIDS Disease Management Programme in Southern Africa. Submitted to Annals of Internal Medicine

31Vol 3. 2009

32 Vol 3. 2009

Dieter BriechleBBus - Sci (Hons) Executive Director Investments: Medscheme Asset ManagementDieter studied at the University of Cape Town where he qualified with a BBus - Sci (Hons) in Actuarial Science and Marketing. Dieter has been working in the investment arena for the past 15 years where he has specialised in developing solutions for the institutional market. Dieter is currently Executive Director Investments in Medscheme Asset Management.

A tale of

July 2008 to June 2009two cities:

Investment performance

Index 6 months to Dec 08 6 months to Jun 09 12 months to Jun 09 5 years to Jun 09

ALSI (TR) -27.8% 4.1% -24.9% 20.3%

ALBI (TR) 25.3% -4.9% 19.25% 9.3%

Cash .0% 5.1% 11.3% 8.9%

Property 27.6% -6.7% 19.1% 15.7%

Rands/USD -20.6% 18.3% 1.5% -4.6%

Sector

Technology -22.2% 20.6% -6.2% 13.0%

Financials -3.8% 1.6% -2.3% 10.2%

Telecommunications -13.7% 7.8% -6.9% 27.3%

Basic materials -48.4% 3.5% -46.6% 12.1%

Consumer goods -0.1% -4.0% -4.2% 19.8%

Consumer services 4.7% 7.7% 12.7% 19.1%

Healthcare 12.% 29.5% 45.2% 19.3%

Industrials -12.1% -2.8% -14.6% 17.6%

Oil and Gas -39.3% -3.6% -41.4% 16.8%Figure 1. Source: Reuters

33Vol 3. 2009

Investment committees of medical schemes have had a very interesting, potentially nerve wracking, investment experience in the twelve month period up to June 2009. This difficult situation has been compounded by the worsening economic condition of South Africa which has potentially resulted in some members terminating their membership. In addition claims patterns have increased well above expectations, particularly in 1H09. The Boards of Trustees of medical schemes have set investment objectives which typically include: paying claims and expenses as they fall due, preservation of capital, managing various financial risks, remaining compliant to the Act, building reserves and maximising returns over the long term. The robustness of investment strategies were severely tested during the period under review.

July 2008 to June 2009

‘A tale of two cities’ aptly describes the events of the last year. The six months to December 2008 were characterised by a severe devaluation of the equity market (-27,8%), a very strong performance of the bond and property market (25,3% and 27,6%) coupled with a rapid weakening of the ZAR to the USD (20,6%). The six months to June 2009 were essentially the opposite with equities producing a positive return (4,1%), bonds and property retreating (-4,9% and -6,7%) while the ZAR strengthened to the USD by some 18,3%.

In analysing the twelve month investment performance, bonds and property were the star asset classes with returns of 19,3% and 19,1% respectively. Cash produced a higher than average performance with 11,3% while equities lost some 24,9%. The equity sectors that destroyed the most value were Resources (-46,6%), Oil and Gas (-41,4%) and Industrials (-14,6%). In stark contrast, the Healthcare sector produced a massive return of 45,2%. The construction sector produced a more modest return of 12,7%. In reviewing the

34 Vol 3. 2009

investment performance of medical schemes for this period, any ‘cash only’ strategy would have left the scheme with a return of 11 to 12%. In a tax free, risk free environment, this undoubtedly represents an attractive return. However, Boards of Trustees with a long - term investment strategy see something different. They believe that building reserves for the medical scheme is an important component in managing a medical scheme and exposure to asset classes such as equities, bond and property can help them achieve this objective.

This point is clearly illustrated in reviewing the five year performance to June 2009 which shows equities (20,3% p.a.), bonds (9,3% p.a.), property, (15,7% p.a.) and cash only managed (8,9% p.a.). It must be said at this juncture, that all benefits come at a price, the price being volatility. This is very evident in the last twelve months leading up to June 2009. The fine line between risk and reward is a delicate act between balancing the weighting towards equities, bonds and cash given the schemes’ financial characteristics, investment objectives and appetite for risk. Depending on the weight distribution, Trustees will have paid close attention as to whether

capital was preserved over shorter periods of measurement. Once again, a key investment objective was tested.

Interest rates and inflationInterest rates and inflation are much like the chicken and the egg. What is important is that the interest rate and inflation cycles follow each other closely (Figure 2). During the period under review, the top of the interest rate cycle came to an end.

On 12 December 2008, the Governor of the South African Reserve Bank announced an interest rate cut of 0,5% (Figure 3). This was after interest rates remained at the top of the cycle with 12,0% for five months. The previous top was 13,50% and lasted from September 2002 to May 2003. The Governor also announced that this would be the first of a series of cuts. He went one step further by introducing additional meetings of the Monetary Policy Committee schedule. He now has a monthly opportunity to review and change the interest rates and this reflects the level of concern given the severity of the downturn of the global economy. For the period under review, the Governor’s interest rate decisions are summarised:

-

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

Jan

- 20

01

Jul -

200

1

Jan

- 20

02

Jul -

200

2

Jan

- 20

03

Jul -

200

3

Jan

- 20

04

Jul -

200

4

Jan

- 20

05

Jul -

200

5

Jan

- 20

06

Jul -

200

6

Jan

- 20

07

Jul -

200

7

Jan

- 20

08

Jul -

200

8

Jan

- 20

09

Repo

CPI

Figure 2

35Vol 3. 2009

Inflation, on the other hand, broke out of the 3 to 6% target range in March 2007 driven by rising food, fuel and electricity costs and reaching a high of 13,7% in August 2008 and then falling to 6,2% in June 2009, albeit a lot slower than initially expected by most economists from a year ago. Medical schemes (and other institutional investors such as retirement funds) would use inflation to describe the long - term return benchmark, eg CPI +4%.

With inflation rising further than expected and asset valuations testing low levels last seen a long time ago, investment committees and Boards of Trustees were staring at actual investment performances measured over one and two year periods that were well below benchmark.

This creates the perfect situation for a knee-jerk investment decision which potentially has significant financial consequences in the long run. As for the Trustees, the investment world ‘dealt a very bad hand’, and the Trustees

were tested in their commitment to investment professionals who could get the best out of a ‘very bad hand’.

Consumer Price Index: Key changes 2009

Statistics South Africa (Stats SA) is responsible for measuring the total South African consumption and to determine the Consumer Price Index (CPI). The Income and Expenditure Survey (IES) is used to measure goods and services consumed. The IES is a national survey in which households are asked questions about what they spend their money on. The CPI seeks to reflect changing economic trends. In January 2009, Stats SA re-weighted and re-based the CPI. The new CPI is presented according to the ‘Classification of Individual Consumption by Purpose’ system, which is the accepted international standard for classification of goods and services measured in a CPI. A comparison of the weights of the ‘Old headline CPI’, ‘Old CPIX’ and New headline CPI, are shown in figure 4:

Meeting New repo rate Change Prime rate

June 2008 12,00% 0,50% 15,50%

August 2008 12,00% 0,00% 15,50%

October 2008 12,00% 0,00% 15,50%

December 2008 11,50% -0,50% 15,00%

February 2009 10,50% -1,00% 14,00%

March 2009 9,50% -1,00% 13,00%

April 2009 8,50% -1,00% 12,00%

May 2009 7,50% -1,00% 11,00%

June 2009 7,50% 0,00% 11,00%

Figure 3. Source: Reuters

Category % CPI “Old” CPIX “Old” CPI “New”

Food and non-alcholic beverages 22,09 26,92 15,68

Alcoholic beverages and tobacco 2,54 3,05 5,58

Clothing and footwear 3,25 4,06 4,11

Housing and utilities 25,36 15,55 22,56

Household contents, equipment and maintenance 7,39 8,37 5,86

Health 5,72 6,13 1,47

Transport 14,50 15,01 18,80

Communication 2,98 3,19 3,22

Recreation and culture 3,70 3,79 4,19

Education 3,48 3,77 2,19

Restaurants and hotels - - 2,78

Miscellaneous 8,99 10,16 13,56

Figure 4. Source: Stats SA

36 Vol 3. 2009

The CPI index was also re-based which means resetting indices to a common starting point, ie 100. The previous base year was 2000 and the new base period is 2008, which means the average index level for 2008 is equal to 100.

The most significant change to the CPI involves the introduction of an owners’ equivalent rent (OER) as a measure of costs of owner-occupied housing. Home owners’ costs used to be measured through interest on mortgage bonds (which was excluded from the CPIX). OER is the opportunity cost caused by the owner living in his/her home rather than renting it out.

Figure 5 compares the CPI and CPIX using a three-year moving average and indicates that they became almost the same. It therefore suggests that medical schemes that used CPIX as a base for their benchmark could replace it with CPI going forward.

ConclusionThe world of investments is complex and typically ever - changing, with the last 12 months clearly reminding us. However, Trustees who employ a clearly defined investment policy statement combined with a rigorous investment process are more likely to reward the medical scheme which in turn will allow the Trustees to reward its members by way of improved benefits and/or less onerous contribution increases.

-

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

Mar

-07

Apr-

07

May

-07

Jun-

07

Jul-07

Aug-

07

Sep-

07

Oct-0

7

Nov

-07

Dec

-07

Jan-

08

Feb-

08

Mar

-08

Apr-

08

May

-08

Jun-

08

Jul-08

Aug-

08

Sep-

08

Oct-0

8

Nov

-08

Dec

-08

3 year average CPI 3 year average CPIX

Figure 5. Source: Stats SA

37Vol 3. 2009

Editorial committee

Disclaimer

Dieter Briechle BBus - Sci (Hons) Executive Director Investments: Medscheme Asset ManagementDieter studied at the University of Cape Town where he qualified with a BBus - Sci (Hons) in Actuarial Science and Marketing. Dieter has been working in the investment arena for the past 15 years where he has specialised in developing solutions for the institutional market. Dieter is currently Executive Director Investments in Medscheme Asset Management.

Charles Ranger BCom - MBA General Manager – Medscheme HealthAfter receiving his BCom, Charles began his career as an assistant accountant in the agricultural sector before moving into financial services. Having completed his MBA, he took up a career in the healthcare industries before accepting a position at Medscheme. He was appointed General Manager, Fedhealth in 2006 and currently looks after Fund Management, Sales and Marketing as well as Operations for the scheme.

Mike Duly CFP Senior Manager: Marketing & CommunicationsMike obtained a dual Fellowship in Healthcare and Employee Benefits from the Financial Planning Institute (FPI) before studying strategic marketing and communications at Wits Business School. He has extensive marketing and communication experience in the healthcare and financial services industries and has been instrumental in implementing Medscheme’s communication and branding strategies.

Medscheme Holdings (Proprietary) Limited does not assume and hereby disclaims any and all liability to any entity for any claims, damages (direct, indirect, consequential or otherwise) or other loss including, without limitation, any liability for injury or other damages resulting from any use of or reliance on the information contained in this publication

Produced by Future Publishing