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Deloitte review - Background
• Most recent review commenced in November 2011 • Also requested by AGM motion in June 2012
• Deloitte commissioned by DHMS to perform independent review
• 9 months • 20+ local and global experts • 5 100 professional hours • Independent peer review by Health Monitor
• Deloitte was tasked to consider • The effectiveness of the Board of Trustees of DHMS in overseeing the outsourcing of
services to Discovery Health • The value received by DHMS in return for the administration and managed care fees
paid • The appropriateness of a single provider for both administration and managed care
services
DHMS governance model subject to periodic independent review
Deloitte review – Key findings
Deloitte findings
DHMS is led by a strong and competent Board with no
governance failures
1
2
3
6
5
4
DHMS outperforms all benchmarked schemes
in the Deloitte Performance
Model
For every R1 spent on admin and managed care fees, a return of
R1.77- R2.02 is generated for DHMS
Members are R147 better off each month
due to the DHMS value proposition
DHMS benefitted from 27% reduction in admin fees over past
5 years
Integrated model costs less and delivers better
performance
Available at www.discovery.co.za
DHMS action Date Improve assurance model
Dedicated compliance manager Assigned 2012
Dedicated risk manager Assigned 2012
Revised risk management process Implemented 2013
Independent audit of risk management Scheduled 2013
Enhance stakeholder engagement Enhance framework and strategy In progress
Independent communications consultant Appointed 2013
Enhanced marketing reporting Implemented 2013
Enhance oversight capacity of Scheme office Succession planning In progress
Assessment of needs Completed 2012
Appointment of Chief Financial Officer Appointed 2012
Appointment of Chief Risk Officer Under consideration
Appointment of Chief Stakeholder Relations Officer Under consideration
Administration and Managed Care contracts Align with best practice In progress
Align service level agreements In progress
Outsourcing managed in line with Act and Rules
-
DHMS fully compliant with the Act
DHMS led by competent and independent Board
Power of balance maintained by Trustees
Scheme office is experienced and highly competent
Information provided by DH is detailed and of high quality
Assurance model to be improved
Stakeholder engagement model to be enhanced
Oversight capacity of Scheme office to be enhanced
Continuously align contracts and SLA with DH
- - -
The effectiveness of DHMS in overseeing the outsourcing of services to Discovery Health
None
Positive Failure - Recommendation Legend:
DHMS action Date
Evaluation of economies of scale Ongoing ; Annual
Evaluation of non-healthcare expenses Ongoing ; Annual
Evaluation of value-for-money model Ongoing ; Annual
Outsourcing delivers value to DHMS
Note: Formal review of all categories commenced 2011
-
DHMS does receive value-for-money from DH
Members benefit from scale, skills and experience of DH
Fees paid to DH not a significant outlier to peers
DHMS does benefit from economies of scale
DHMS outperforms all peers in Deloitte Performance Model
Continued evaluation of benefits of economies of scale
Continued evaluation of non-healthcare expenses
Continued evaluation of value-for-money outcomes
- -
Transactional Governance
None
Positive Failure - Recommendation Legend:
DHMS outperform all benchmarked peers in Deloitte Medical Scheme Performance Model
Assess five main performance areas:
1. Financial strength 2. Growth and sustainability 3. Non-healthcare expenditure 4. Compliance, governance and
reputation 5. Quality and value for money
Data sources: CMS Annual Reports Medical scheme annual reports, statutory returns and public information
Administration and managed care fees are above average, but “not considered a significant outlier”
Solvency level below 25% seen as compliance issue, despite highest
possible marks for financial strength
Non-healthcare expenses relative to performance rank
Better performing schemes have higher non-healthcare expenses
Discovery Health delivers significant value to DHMS
0
50
100
150
200
250
300
Costs Return
Services Out-of-pocket savings
Impaired loss savings PBM
Non-quantifiable benefits
Every R1 spent on administration
and managed
care generates a return of
between R1.77 and R2.02 for DHMS and its
members
R84.92 pabpm to R120.34 pabpm value added to DHMS
Discovery Health enhances value for DHMS members
-
200
400
600
800
1 000
1 200
Industry DHMS
R11.43 pabpm NHE differential
R158.24 pabpm lower total contribution
R11 higher investment in administration and managed
care fees
results in R158 lower cost of contributions for members
Member contributions
Members are R147 better off
DHMS has an admin and managed healthcare fee target of 10% of total annual GCI to be reached by the end of 2014
12.7% 12.5% 12.0% 11.7%
11.0%
10.0%
2009 2010 2011 2012 2013 2014
2009
2014
Total administration and managed care fees as % of GCI
Actual
Target
Deloitte found that the Scheme benefited from a 27% reduction in administration fees in the 5-year period to end of 2011.
Since then, administration fees have reduced further, and is on track to reach the 10% of GCI target by 2014.
DHMS integrated operating model delivers best value for members
-
Integrated outsourcing model incurs on average 15% lower NHE than fragmented model
Integrated outsourcing model results in better scheme performance than fragmented model
Maintain integrated operating model
Operating Model
None
Positive Failure - Recommendation Legend:
DHMS action Date
Continue to enhance operating model through collaboration with DH
Ongoing
Continue to align with outsourcing best practice
Ongoing
Maintain balance of power through governance best practice
Ongoing