Chapter 5 - Healthcare

Question 1

Healthcare

Answer 1

Healthcare refers to the diagnosis, treatment and prevention of disease, illness, injury and other physical and mental impairments in human beings

Question 2

Requirements for a well-functioning healthcare system according to the WHO

Answer 2

1. robust financing mechanisms
2. a well-trained and adequately-paid workforce
3. reliable information on which to base decisions and policies
4. well-maintained health facilities and logistics to deliver quality medicines and technology

Question 3

3 groups of healthcare

Answer 3

1. primary care
2. secondary care
3. tertiary care

Question 4

Primary care

Answer 4

Refers to the work of health professionals who act as a first point of consultation for all patients within the healthcare system. Would usually be one of the following:

• a primary care physician, such as a GP or a family physician
• a licensed, independent practitioner such as a physio
• a non-physician primary care provider such as a physician assistant or nurse practitioner

Question 5

Secondary care

Answer 5

• Refers to the healthcare services provided by medical specialists and other health professionals who generally don’t have first contact with patients (e.g. cardiologists, urologists)
• Includes acute care and skilled attendance during childbirth, intensive care, and medical imaging services
• allied health professionals (such as physical therapists, respiratory therapists, occupational therapists, speech therapists) also generally work in secondary care

Question 6

Tertiary care

Answer 6

Tertiary care is specialised consultative care, usually in-patients and on referral from primary or secondary healthcare professionals, in a facility that has personnel and facilities for advanced medical investigation and treatment, such as a tertiary referral hospital.

e.g. cancer management, neurosurgery, cardiac surgery, plastic surgery, treatment for severe burns

Question 7

Supply-side key providers

Answer 7

• doctors
• nurses
• support medical personnel and clinical associates
• hospital
• upstream service providers (pharmaceutical manufacturers, medicine distributers, suppliers of medical equipment)

Question 8

Structure and ownership of private hospitals

Answer 8

1. Not-for-profit: Faith-based hospitals
2. Not-for-profit: Mining hospitals
3. For-profit private hospitals

Question 9

Funders of healthcare

Answer 9

1. the government
2. non-government organisations and donors
3. out-of-pocket expenditure by the users themselves
4. trade-related employer groups
5. commercial insurance products
6. employers

Question 10

Three forms of out-of-pocket medical expenditure

Answer 10

1. Payment of invoiced medical services by users of commercial health insurance products who are required to:
   - make co-payments
   - fund the difference between the actual and the covered price of services or procedures
   - pay for services if threshold payments have been met
2. Payments by those who do not have any commercial health insurance products. These may include:
   - the young and healthy who have elected not to buy any insurance products on the grounds that they do not add sufficient value
   - the wealthy who choose to self-insure
   - lower income groups who have elected to use private services or facilities above public sector facilities or services
3. Payments for medical services that are not invoiced, This may include suppliers in the medical sector such as surgeons and midwives, as well as more traditional treatments such as herbalists and faith healers.

Question 11

Trade-related employer groups

Answer 11

• trade-related employers or groups often join to form bargaining councils
• bargaining schemes may establish and manage schemes or funds to benefit their members. This could include funds allocated to pay for certain healthcare expenditure.
• generally low-income schemes with benefits limited to primary care and managed care options (doesn’t generally cover hospitalisation)

Question 12

Commercial insurance products - insurance policies designed to fund healthcare can be divided into four groups:

Answer 12

1. Optimal alternative - for person who opted not to use public services and took out insurance to cover expenses in the private sector
2. Optimal complement - a person who took out a “waiting policy” designed to pay for elective procedures sooner than the State would otherwise provide
3. Compulsory alternative - this may be used in an environment in which there are people that the government considers can afford to buy comprehensive cover
4. Compulsory complement: compulsory top-up plans would be used in an environment where individuals are compelled to buy policies to pay for dental plans and other services not provided by the state

Question 13

How can employers contribute to the financing of employee health?

Answer 13

1. full or part payment of commercial insurance products such as medical scheme contributions
2. full or part payment of bargaining council premiums
3. payment for off- and on-site services
4. wellness programmes
5. payments to healthcare providers for acute medical treatment
6. payment towards social security funds such as UIF and workmen’s compensation fund

Question 14

Managed care organisations

Answer 14

• often the patient/user is not the one paying for the service - this results in additional risks e.g. third-party payer problem
• can use managed care organisations and administrators to address these problems
• for-profit entities (typically owned by shareholders) that combine both clinical and statistical techniques to manage risk, reduce cost and improve quality by encouraging the delivery of cost-effective, high-quality healthcare.

Question 15

Reasons for increase in cost of healthcare

Answer 15

• misalignment of incentives between provider and payer
• medical technology advancements combined with user expectations, resulting in high cost treatment
• cost increases resulting from a fairly static population
• fraud

Question 16

Objectives of managed care

Answer 16

1. reducing the cost of medical events
2. improving the quality of care provided
3. ensuring that medical services are delivered in an appropriate setting
4. ensure that high-risk members are managed and receive appropriate care
5. reducing the number of unnecessary medical services

Question 17

Risks in managed care

Answer 17

1. price risk - the fee received by the provider doesn’t cover variable costs or makes an inadequate contribution to overhead and profit
2. intensity risk - more services are needed in the encounter than anticipated
3. severity risk - cases are more severe than anticipated
4. frequency risk - more people need treatment than anticipated
5. actuarial and marketing risk - actuarial risk is that demographics are not as anticipated, thus pricing is not correct; marketing risk is that enrolment is not as anticipated, thus demographics are not as anticipated, which contributes to the actuarial risk

Question 18

Strategies used by managed care organisations to meet objectives and minimise risks

Answer 18

1. provider networks
2. reimbursement methods
3. risk sharing
   - natural response vs desired objectives
   - provider control
   - provider involvement
   - simplicity
   - equitable risk sharing
   - realistic goals
   - education and support
4. risk adjustment
5. formularies and controls in managed care

Question 19

Provider networks

Answer 19

costs can be managed by:

• securing volume discounts
• securing an agreement with providers to practice cost-effective medicine according to a defined set of clinical protocols and cost benchmarks

Question 20

Successful operation of reimbursement methods

Answer 20

Successful operation of an alternative reimbursement operation requires:

• the availability of adequate and reliable clinical data to allow the risk taker to ensure that treatment complies with the specified clinical protocols and cost benchmarks
• the control cycle to ensure that clinical protocols are modified based on feedback following an analysis of the outcomes achieved

Question 21

Risk sharing: Principles of designing provider incentives

Answer 21

1. natural response vs desired objectives
2. provider control
3. equitable risk sharing and sense of partnership with the funder
4. simplicity
5. provider involvement
6. realistic goals
7. education and support

Question 22

Risk sharing: Negative incentives

Answer 22

• provider “withholds”
• a fee schedule or other payment rate is negotiated with providers. The initial provider payment is then set at a lesser amount
• some or all of the withheld amounts will be paid if adequate funds exist at the end of an accounting period

Question 23

Risk sharing: Positive incentives

Answer 23

• bonus or surplus sharing where surplus, generated as a result of costs being reduced below target levels, is shared on a formula basis between funders and providers.
• target generally set based on prior plan experience, regional norms, or some percentage above optimal levels.

Question 24

Risk adjustment

Answer 24

• Under alternative reimbursement arrangements, a risk-adjustment mechanism should be used to ensure that providers are remunerated appropriately for the health risk of their patients. Instead of encouraging providers to compete based on the health status of their patients, providers should be incentivised to compete on the basis of efficiency and quality of care provided.
• attempts to reduce negative financial impact for providers that attract above-average number of high-risk and reduce positive impact for those that attract low-risk

Question 25

Formularies and protocols

Answer 25

• managed care organisations use prescribed formularies and protocols to ensure that appropriate cost-effective drugs are prescribed and appropriate levels of care are given to patients
• the parties developing these instruments will bring their own biases

Question 26

Patient concerns with managed care

Answer 26

1. provider network may restrict access to care
2. providers may resent external parties imposing clinical protocols and influencing the way in which they practice medicine
3. managed care may compromise the quality of care provided to patients by encouraging under-servicing
4. the use of formularies and other financial-based managed care may result in the additional cost being transferred from the scheme to the member with no overall cost reduction

Question 27

Measures that can be compared with appropriate benchmarks ]to assess the quality of care provided under an alternative reimbursement arrangement

Answer 27

1. patient mortality rate
2. specialist referral rate
3. hospital admission rate
4. procedure complication rate
5. chronic medication adherence
6. patient questionnaires