The idea behind National Health Insurance (NHI) is that it will operate as a single publicly financed and administered fund to which all South Africans will make compulsory contributions, based on their ability to pay. It would therefore promote cross-subsidisation on a bigger scale than is currently the case with individual medical aid schemes.
“The intention behind the NHI is said to provide free access to healthcare at the point of service for all South Africans and legal residents,” says Christel van Wyk, South African Institute of Chartered Accountants (Saica) project director: tax. “The primary long-term objective is to provide access to healthcare based on individual need, instead of financial ability, and to cover unplanned health events for everyone.”
The 2018/19 Budget outlines a number of transitional arrangements, although not as many as was originally anticipated in the run up to the speech.
Medical tax credits
In the meantime, whilst the plans for implementing the NHI are being streamlined, taxpayers have for the past few years been given some benefit in the form of medical tax credits, which have been the topic of much controversy in itself. This takes the form of rebate and has provided some tax relief for defraying expensive medical costs. It was always known that this would be an interim measure until such time that the NHI is fully operational, but there have even been talks of a complete scrapping of this rebate in the months before leading up to the Budget, but there were no such drastic measures, which is somewhat of a relief for the moment.
It was noted in the Budget, in relation to these medical tax credits, that some individuals are excessively benefitting from the medical schemes contribution rebate, specifically where multiple taxpayers contribute toward the medical scheme or expenses of another person. The example used is where adult children jointly contribute to their elderly mother’s medical scheme and where each contributor currently enjoys a full rebate, although the joint cost is for a single beneficiary. The Budget proposes that in such cases the medical tax credit should also be apportioned between the various contributors.
Increase
The monthly medical scheme fees tax credit will, from 1 March 2018, be slightly increased from R303 to R310 per month for the first two beneficiaries. For each additional beneficiary, the increase will be from R204 to R209. It is important to note that these increases are by design below inflation, the purpose being that government has earmarked the additional revenue that will flow from the below inflationary rebate to contribute towards funding of the NHI.
The expected impact is additional revenue of R700m in 2018/19, R640m in 2019/20 and R586m in 2020/21, and these benefits are therefore projected over a three-year period. While this proposal is in line with the proposals made in the NHI White Paper released in June 2017, it seems that this will not have a significant impact on the NHI cost, given that the 2025 estimated cost is in the region of R256bn. In the 2017/18 Budget, the then Minister of Finance, Pravin Gordhan set aside R5.2bn for the NHI fund, which although much more than this year, is still not significant considering the overall funding need,” concludes Van Wyk.
The NHI is therefore still pretty much a work in progress and significantly more work needs to be done before it goes live.
‘South Africa is heading for a disaster if the number of people living with chronic lifestyle diseases does not change.’ That’s what both the Human Sciences Research Council (HSRC) and the Medical Research Council warned two years ago. The Council described the problem of these non-communicable diseases as an ’emerging epidemic’.
If you look at the exponential growth of chronic lifestyle diseases then it is not difficult to understand why Health Minister, Dr Aaron Motsoaledi, maintains chronic diseases such as hypertension and diabetes are putting a huge strain on the country’s health care system.
Obesity and being overweight are major risk factors for the development of chronic diseases.
Testing for lifestyle diseases such as diabetes and heart disease is essential in the face of a steadily deteriorating health status in our country. Gerhard Van Emmnenis, Principal Officer of Bonitas Medical Fund says, ‘Get tested, know your numbers and take action now!’
The Bonitas Clinical Team explain why you need to keep your finger on the pulse of your ‘big four’ wellness numbers and what they are.
1. Cholesterol
What is cholesterol?
It is a soft, waxy substance – one of the blood fats made naturally in the body. It helps to form cells, hormones and bile (that helps us digest food). Cholesterol is found mostly in animal products such as meat, cream and butter.
What is high cholesterol?
This is when you have too much ‘bad’ cholesterol in your blood. This, in turn, can cause narrowing and blockages of the arteries – the blood vessels that carry blood to your heart muscle and to other parts of your body. In time, the narrowing of the arteries to your heart can lead to a heart attack, while blockages in the arteries of your brain can cause a stroke.
The test
Called a fasting lipogram it measures the exact amount of different types of cholesterol you have.
Good to know
If your total cholesterol is greater than 5mmol/L on your fasting lipogram this indicates raised cholesterol
Your low density lipoprotein (LDL) – the ‘bad cholesterol’ – should not be greater than 3mmol/L. LDL causes the build-up of cholesterol in the arteries which means a greater chance of heart disease
High density lipoprotein (HDL), if less than 1.2mmol/L, means you don’t have enough good cholesterol which prevents build up in the arteries and transports cholesterol to the liver
If your triglycerides (fat stored in the body) are higher than 1.5mmol/l, this is also indicative of a possible cholesterol problem.
2. Weight and BMI
Your Body Mass Indicator (BMI) calculator checks if you’re at a healthy weight.
The test
You can calculate yours by:
Dividing your weight in kilograms (kg) by your height in metres (m)
Then dividing the answer by your height again to get your BMI.
Underweight
less than 18.5
Normal weight
18.5 – 24.9
Overweight
25 – 29.9
Obese
30 or greater
3. Diabetes
What is diabetes?
Our bodies produce insulin all day – a hormone that creates energy by converting sugar, starches and other foods. Without insulin, cells cannot absorb sugar (glucose), which they need to produce energy. When there isn’t enough of this hormone in your body, or it’s not used as it should be, sugar (or ‘glucose’) can’t be moved to your other body cells to supply them with energy. This means that you have higher than normal blood-glucose levels, resulting in diabetes.There are two main types of diabetes: Type 1 and Type 2. They are different conditions but are both serious and need to be treated and managed properly.
Type 1 diabetes occurs when the pancreas stops producing insulin. It usually starts very quickly and in younger people. If you have Type 1 diabetes you need insulin injections to survive as well as having a carefully balanced food intake and exercise programme
Type 2 diabetes (formerly called adult-onset or non-insulin-dependent diabetes) occurs when the pancreas makes too little insulin or your body can’t use the insulin effectively. It usually develops in adulthood and is often caused by being overweight and not exercising. Approximately 85–90% of all people with diabetes have Type 2 and many people who have this condition are undiagnosed. This can result in serious damage to the delicate parts of the body and lead to blindness, heart attack\stroke, kidney failure, impotence and amputation so it’s vital to be checked.
The tests
Test 1: The Fasting blood glucose test – blood glucose is taken before you eat in the morning.
Normal
3.9 to 5.5 mmols/l
Prediabetic or Impaired Glucose Tolerance
5.6 to 7.0 mmol/l
Diabetic
More than 7.0 mmol/l
Test 2: HbA1c test. The HbA1c levels determine your blood sugar control over time.
Normal
Less than 6%
Prediabetic
6 – 6.4%
Diabetic
6.5% or more
4. Blood pressure
What is blood pressure?
Blood pressure is the pressure of blood in your arteries – the blood vessels that carry blood away from your heart.
The blood pressures numbers mean the following: The first (or top) number is your systolic blood pressure. It is the highest level your blood pressure reaches when your heart beats. The bottom figure is your diastolic blood pressure and is the lowest pressure exerted as your heart relaxes between beats.
What is high blood pressure?
High blood pressure or hypertension is when blood pressure stays elevated over time. Hypertension is often known as the “silent killer”, since nearly 33% of people who have it, don’t know it. The only way to know if you have high blood pressure is to have yours measured.
Range
Normal
120/80 to 129/84
Upper end of Normal
130/85 to 139/89
Mild hypertension
140/90 to 159/99
Moderate hypertension
160/100 to 179/109
Severe hypertension
More than 180/110
If your blood pressure is too high, it puts extra strain on your arteries (and your heart) and
if it’s not treated, hypertension can cause kidney failure, eye problems, heart disease and stroke.
Van Emmenis says, ‘When you consider that one in every three people in South African has high blood pressure and every eight minutes one South African has a heart attack, it makes sense that we have our blood pressure taken regularly either at your local pharmacy or clinic or when you visit your GP.’
He urges all South Africans to be proactive and take control of their health by getting regular wellness tests done. ‘Knowing your numbers will help you manage your health better and making sure your ‘big four’ are under control will go a long way to reducing the costs of healthcare.
‘This is why Bonitas offers all members an annual wellness screening which includes the big four tests. The check is paid for from risk so it won’t impact a members savings or day-to-day benefits. We strongly urge our members to make use of the benefit and take control of their health.’
Discovery CEO Adrian Gore says he would welcome the opportunity to partner with the government in scaling some of the insurer’s healthcare innovations across the public sector, at no financial benefit.
Adrian Gore, CEO: Discovery. Photo: BusinessLIVE
“There isn’t enough collaboration between the public and private sector. Hopefully under the new leadership, I think we can do a lot more,” Gore said following the release of Discovery’s interim results.
SA’s National Health Insurance (NHI), still at an embryonic stage, seeks to improve the quality of healthcare available to poorer citizens who cannot afford private medical aid. But even in a developed market such as the UK, the National Health Service is facing considerable financial pressure, suggesting that the NHI will succeed only via partnerships between government, medical schemes and healthcare providers.
Discovery Health Medical Scheme is SA’s largest, boasting a 56% market share (2.78- million lives). Administrator Discovery Health manages more than 3.4-million lives.
Discovery’s intellectual property was “an incredible asset in terms of its ability to connect the dots” in the healthcare value chain and understand the drivers of cost and behaviour, Avior Capital Markets analyst Warwick Bam said.
“A lot of our systems, such as HealthID and Dr Connect, could be scaled across the public sector. Talking off the cuff, I would be supportive of us doing that for no return at all,” Gore said.
HealthID is an electronic record of a patient’s medical history. DrConnect provides online access to medical information, facilitating interactions between patients and doctors.
While the lack of trust between the public and private sector was a barrier, there was massive opportunity.
“We could be funding much more stuff, not just in health insurance but in healthcare delivery and training of doctors,” said Gore.
Founded in 1992, Discovery is today a business with a market value of R118bn.
For the six months to December, normalised operating profit rose 19% to R4bn on strong growth from established and new businesses.
Discovery’s emerging businesses, Discovery Insure, Vitality Group and Ping An Health, swung from a R130m loss in the previous comparable period to a R66m profit. It is the first time that all three posted profit.
The profitability of Discovery’s interest in Ping An Health, China’s fastest-growing health insurer, jumped 500% to R36m. The size of the China opportunity was probably larger than already high market expectations, but this would take time and possibly more capital to bring to fruition, said Kagiso Asset Management portfolio manager Justin Floor.
Discovery invested R352m, or 8% of profit, in new initiatives, including its bank and Vitality Invest in the UK.
As a business that invested almost all of its cash into new initiatives, Discovery had been “trying harder than before” to convince the market that its business was well managed and that cash flow was under control, said Bam. The assumptions baked into its numbers, although based on the group’s extensive data sets and dynamic risk- pricing, did require investors to “trust management”.
There was a lot of potential for Vitality partnerships in Latin America, said Gore.
Discovery’s share price, which leapt 62% in 2017, closed 3.13% up at R182.07.
The approximately eight-million people in South Africa who rely on medical tax credits to subsidise the cost of existing medical aid schemes can breathe a sigh of relief. The speculation that Finance Minister, Malusi Gigaba, in his budget speech, would do away with benefit to fund National Health Insurance (NHI) was unfounded.
Although the government has progressed on the path towards introducing National Health Insurance (NHI), and has discussed certain tax aspects of the funding, the actual mechanism remains uncertain.
NHI – where it stands
NHI was first proposed in 2011. The objectives include providing improved access to quality health services for all South Africans, employed or unemployed, and to pool risks so that equity and social solidarity are achieved through a single fund. It is anticipated that NHI will be implemented in 2025. In the interim, the design of NHI needs to be finalised and the extra costs of between R75bn and R108bn per year must be funded. Minister Gigaba has announced that over the medium term, the NHI is allocated an additional R4.2bn, funded through an amendment to the medical expenses tax subsidy.
Medical tax credits not removed
When the revised White Paper on the NHI was released in July 2017, Health Minister, Aaron Motsoaledi, expressed the view that medical tax credits are “unfair” and should be removed. This was met with public outcry. A report by Econex found that without the medical tax credit, the poorest 1.9-million medical aid members would be forced out of medical funds because of the prohibitive cost.
However, in the Medium Term Budget Policy Statement of 25 October 2017, Gigaba again noted that government was considering changes to the design, targeting and value of the medical tax credit as part of the policy development process for the 2018 Budget.
National Treasury indicated that it would seek input from the Davis Tax Committee on the feasibility of proposals to adjust the medical tax credit to fund the NHI. The committee’s final report, published on 13 November 2017, was clear that: “The phasing-out of the medical tax credits can only happen once the NHI is fully operational. In addition, the needs of people with disabilities and the aged and the financial implications for such taxpayers would require special attention.”
Government has taken heed of the concerns of the public, and medical tax credits will not be removed. Instead. The plan is to split out medical tax credits to individual taxpayers (where multiple people contribute to the same medical aid), and to impose below-inflation increases in medical tax credit over the next three years, in a bid to help fund the rollout of the NHI.
Future personal tax increases to fund NHI?
Budget 2018 did not provide any further details concerning the longer term funding of NHI.
The revised White Paper on the NHI included funding proposals. Five tax scenarios were identified:
Scenario A
The introduction of a 1% payroll tax, a 1% surcharge on taxable income and a 1% increase in the VAT rate
Scenario B
A combination of a 2% payroll tax and a 2% surcharge on taxable income
Scenario C
A 2% surcharge on taxable income with a 1.5% increase in VAT Scenario D A 2% payroll tax with a 1.5% increase in VAT
Scenario E
A 4% surcharge on taxable income alone
Scenario B has been highlighted as the “most preferred option” for revenue generation, being a 2% payroll tax on employers and an extra 2% tax on individuals. In practice, employer costs are typically factored into the ‘total cost to company’ of employment, and then economically borne by the employee. For existing employment relationships, it could be anticipated that employee increases would be lower to compensate for the extra tax. Economically, the effective personal income tax rates would shift by 4%.
High-income individuals are still reeling from the 4% tax increase in 2017. NHI would mean a further effective 4% tax increase. However, the final Davis Tax Committee report on NHI, issued in November 2017, suggests that the funding proposed in the White Paper is inadequate, and that the personal income tax surcharge would need to be in excess of 6%, not 4%.
Since Budget 2018 was silent in this respect, the questions remain around the actual funding of the NHI.
NHI – way forward
According to the NHI Impact Assessment document, the years 2017/18 to 2020/21 form the second phase of NHI implementation. This phase will focus on the development of the NHI legislation, amendments to other, existing legislation, and the establishment of the NHI Fund. The third phase, in 2021/ 22 to 2025/ 26, is where NHI-specific taxpayers are supposed to be introduced.
As highlighted by the Davis Tax Committee, adequate engagement in relation to NHI is essential to prevent later resistance during implementation, as happened with the e-toll situation.
Budget 2018 avoided discussing longer term funding. However, significant concerns remain around the funding of NHI, and the nature of proposals of heavy future tax changes on already burdened individual taxpayers.
“One of the big questions the finance minister faces this year is whether to do away with the modest tax credit taxpayers receive for their medical aid payments. Government is eyeing an estimated R25bn in funds from scrapping these tax credits, to be used to fund the incoming National Health Insurance scheme, says Rob Cooper, director of legislation at Sage.
On Sunday 10 June, 20,000 runners will gather in the early hours of the morning in Pietermaritzburg for the start of the Comrades Marathon. For those who have entered and qualified for South Africa’s most prestigious ultra-marathon, it will be the culmination of long hours on the road training for this big day. Once that gun is fired they will need strength, determination and guts to tackle the 89km ‘down-run’ to Durban to cross the finish line before the cut-off time at 5.30pm. The Comrades is a race that is known for pushing athletes to their limit, its camaraderie and contribution to charity.
Major sponsor, Bonitas Medical Fund, is again part of the supporting team making sure that pre-race, on the day and post-race assistance and guidance is given to the athletes striving to achieve their goals. Bonitas has been part of the Comrades ‘team’ for over a decade and an integral part of the medical aid schemes’ sponsorship includes the co-ordination and hosting of the countrywide Novice and Woman’s seminars as well as the ‘general training’ Comrades roadshows.
These interactive seminars include tips and advice on training, rest, nutrition, hydration and pacing. Athletes are able to hear from, talk to and ask questions of a panel of experts from fields as diverse as sport psychology, medicine and dietetics. Official Comrades Coach, Lindsey Parry, will also be on hand to provide invaluable advice about the route, the psychology of the race and what to expect at the start and finish.
Bonitas has never wavered in its belief of celebrating ordinary people doing extraordinary things. ‘Completing a Comrades marathon is an achievement and we support and champion these athletes,’ says Gerhard van Emmenis, Principal Officer. ‘As a South African company that promotes quality healthcare the fit with this ultra-marathon is a good one. It gives us the opportunity to talk about making better wellness and lifestyle choices and to encourage people to pursue and achieve their goals.’
‘With the Comrades Marathon 2018 theme being ‘Asijki – No turning back’ we are even more determined to be with the runners every step of the way as they make it to the finish line in Durban.
Cheryl Winn, Chair of the Comrades Marathon Association (CMA) says, ‘We continue our quest to stage a memorable ultra-marathon not only for the participating athletes and the spectators along the route but also the millions watching it on television across the globe. It is one of the most inclusive sporting events in South Africa, with a big heart and always gives back to society. That makes us proud.’
‘Our partnership with the Comrades is a long one and we are pleased to have shared the journey with so many athletes and supporters over the years,’ says Van Emmenis. ‘For us it goes beyond the branding and logo rights. It’s about sharing in the passion of the race, celebrating the tenacity of the runners, being part of a legacy that supports true grit and determination as well as a helluva lot of preparation and being able to give back to charity. It’s a winning combination.’
The Comrades Marathon Amabeadibeadi Campaign consists of six official charities, namely: CHOC (Childhood Cancer Foundation South Africa), Community Chest Durban and Pietermaritzburg, Hillcrest Aids Centre Trust, Hospice Palliative Care Association of South Africa, Wildlands Conservation Trust and World Vision South Africa.
For details of the Bonitas Comrades Roadshows, The Bonitas Comrades Novice Seminars and The Bonitas Comrades Women’s Seminars go to the official Comrades website www.comrades.com or download the Comrades Marathon App.
According to Discovery Health CEO, Dr Jonathan Broomberg, efforts to curb fraud in the healthcare system resulted in R568m recovered on behalf of client schemes in 2017, compared to R405m in 2016. Further, fraud-control activities in which health professionals and others contemplating fraud desist from committing fraud in reaction to visible policing and action by Discovery Health, prevented additional fraud to the value of approximately R3bn over the last two years, adds Broomberg.
Discovery Health CEO, Dr Jonathan Broomberg
Discovery Health has invested substantially in fighting the scourge of healthcare fraud. Efforts include the deployment of a specialised team of over 100 analysts and professional investigators as well as a proprietary forensic software system that uses sophisticated algorithms to analyse claims data and identify any unusual claim patterns. Invaluable tip-offs from whistleblowers also help to identify fraud.
The volume of cases reported to the forensic unit continues unabated with the trends of the top offenders, provinces and types of offences remaining relatively unchanged. Gauteng (2,595), KZN (916) and the Western Cape (773) had the highest number of fraud cases reported in 2017 with the Northern Cape (5) having the least number of fraud cases reported in 2017.
Top offenders
The vast majority of healthcare providers are honest, hard-working, highly ethical people who deliver diligent care to their patients. However, analysis of forensic investigations reveals that a minority of healthcare professionals committed fraud against medical schemes, resulting in significant costs to schemes and their members. Discovery Health data also shows that general practitioners and pharmacies are amongst the top offenders while paediatricians and ophthalmologists had the lowest number of cases reported in 2017.
“Medical aids are not-for-profit entities, solely funded by member contributions. This means that schemes have finite resources from which to pay member claims. The burden of lost funds as a result of fraud would be significantly more serious in the absence of our rigorous approach to investigating potential fraudulent behaviour and dealing decisively with fraud when it is identified. Without this rigorous approach, fraud depletes the available pools of funds needed for healthcare treatment for members, and also drives up premiums,” explains Broomberg.
Types of offences perpetrated against medical schemes
The main offence in 2017 was claims submitted for services not rendered for medicines and medical devices never supplied. A common trend in 2017 involved pharmacies supplying members of medical schemes with non-claimable items such as baby formula, nappies, cosmetics and shoes yet submitting claims for prescription medicines. In other instances, medicines or services are supplied to non-members and are then claimed using a member’s medical aid card. Sometimes pharmacies or doctors dispense generic medicines, yet claim for higher cost original medicines.
Discovery Health has also exposed doctors who admit healthy patients to the hospital and submit false claims on their behalf to both their medical aid and to the member’s cash-plan (a lump sum, cash pay-out that helps to pay for any shortfall in hospital fees covered). The proceeds received by the “patient” are shared with those in the fraud syndicate.
Fraud threatens the future of healthcare
“Discovery Health has invested substantially in fighting the scourge of healthcare fraud. Although we have secured large recoveries as a result of our fraud avoidance efforts, we believe that this is only part of the story, and fraudulent activity and billing abuse most likely costs medical aid schemes several billion rands per year. These precious funds could be used to pay for the critical healthcare needs of our medical aid members,” explains Broomberg.
Alongside a host of other local medical aids and their administrators, Discovery Health is working closely with the South African Medical Association and other industry bodies to ensure zero tolerance for fraud, and to ensure that all offenders are brought to book. “As a criminal offence, healthcare fraud not only tarnishes the good name of honest health professionals but is a grave injustice against medical aid members, driving up premiums and depriving them of benefits,” adds Broomberg.
It’s 2018 and if your company is not thinking about embracing the global paradigm towards customer centricity, then you should spend your remaining profits on building a time machine. You’ll need it to review all the moments that lead to your demise.
In order to remain relevant, companies need to innovate their value proposition at a rate of change greater than or equal to the rate of change of their customers’ needs and expectations, which is fueled by the exponential growth in technology (which, at this rate, Elon Musk suggests we are in a simulation).
To retain customers from hungry new entrants and progressive competitors, companies need to transition their thinking from how they can extract the most profit from their “historically loyal customers” to how they can better satisfy their customers’ needs and provide them with a world-class customer experience.
In short, to remain relevant and competitive in this paradigm companies need to become customer centric.
South African companies have been slow to realise this paradigm with almost two thirds of companies (63.4%) in South Africa believing disruption and innovation will have little to no impact on their operations. Either they did not hear what happened to the likes of Kodak and BlackBerry or they are comforted by the scary statistic stating that 80% of new businesses fail within their first year, therefore posing no threat.
However, those that have embraced the paradigm and gravitated towards customer centricity have reaped the benefits and expanded their market share. Two local examples are Yoco and Capitec, which have disrupted the banking industry. Yoco is currently the fastest growing independent mobile point of sale player in South Africa. In under ten minutes anyone can sign up to accept card payments. Capitec has recently eclipsed ABSA as the second largest bank in South Africa. A colleague recently shared their experience of signing up for an account at Capitec; 14 minutes after walking in the door they left with a fully registered bank account. By placing the customer at the heart of their organisations they have continuously exceeded their customers expectations.
Transitioning a company towards customer centricity involves adopting a new way of thinking premised in the new paradigm. Unfortunately, traditional consulting methods remain focused on the bottom line and cannot successfully convert a company towards customer centricity.
In order to transition into the new paradigm South African companies need not break the bank.
Here are two simple ways companies can transition to customer centricity:
1. Starting with why
Few businesses know why they do what they do. However, as discovered by Simon Sinek, all great leaders and companies know exactly why they do what they do and they communicate it thoroughly. They do so because they know that people buy why they do things and not necessarily what they do. Therefore, if people believe in why you do things, they’ll be far more open to any future products you offer. Watch his Ted Talk here.
A classic local example is Discovery. They do what they do because they believe people should live healthier, enhanced and protected lives. This has allowed them to diversify their value propositions and expand their market share horizontally from healthcare to banking, without altering the identity of their brand. Whereas their competitors who focus on what they sell (medical aid) have struggled to offer their customers anything else.
2. Embrace design principles
In 2004, a Design Value Index was created comprising of 16 public companies (these included Apple, Coca Cola, P&G, Walt Disney and Starbucks to name a few) to track how they performed relative to the S&P 500 Index (SPX).
What these companies had in common was that they were considered to be customer centric and have design principles, such as empathy, teamwork or collaboration and testing new ideas at the core of their operations.
The results show that over the past 10 years customer centric companies have maintained a significant advantage, outperforming the S&P by an extraordinary 211%.
The most recent addition to the Design Value Index is the previously engineering-centric company SAP whose co-founder Hasso Plattner, after reading on article on IDEO in 2004, became convinced that a customer-centric approach was the best way to tackle complex challenges and make his software more intuitive and easy to use.
However, embedding design principles is not without its challenges. Traditional companies are notorious for having siloed structures where departments operate independently to minimise risk. These companies also have heavily layered governance structures and strict methods of ensuring accountability.
As a result the key design principles of collaboration, empathy and testing new ideas are challenged because collaboration between business units is not facilitated; customer insights are often disregarded by decision makers because they never engage with customers; and few employees are willing to support new ideas out of fear for being criticised if the idea fails.
These challenges are the reasons why traditional companies and their internal innovation teams struggle to successfully develop innovative value propositions faster than their customer-centric peers.
To embrace design principles and become customer centric I believe companies should:
Embrace the 70:20:10 rule – made famous by the ex-CEO of Google, Eric Schmidt – which states that companies should spend 70% of their time on their core business and satisfying existing customer needs, 20% on testing new ideas and 10% on exploring new markets. Unsurprisingly, spending most of your time on delivering an existing value proposition with excellent customer service is often enough to secure your market share and prevent disruption.
Entrust the remaining 30% of innovation to an external innovation partner who can develop and test new value propositions without being slowed down by the aforementioned challenges. (Preferably an innovation partner whose teams have been trained in the principles of design thinking by a reputable institution. One such institution in South Africa, which also does executive training in design thinking, is the Hasso Plattner Institute of Design Thinking at the University of Cape Town, commonly known as the ‘d-school’.)
Encourage their employees to become vocal about customer challenges and be empowered to tackle these challenges themselves through using the design thinking methodology in sessions facilitated by the innovation partner. These sessions will ingrain design-led innovation principles in all employees, thus slowly transitioning the company one employee at a time.
Encourage decision makers to go on customer immersions to listen to their customers and understand their needs first hand. Since this is not always possible, one can follow in Amazon’s footsteps whereby CEO George Bizos insists on keeping an empty chair in every board meeting to represent the customer.
Finally, when it comes to implementing solutions, South African corporates looking to make a difference can do so by turning to small businesses, in their enterprise and supplier development programmes, that are eager, underutilised and looking to remain relevant in the supply chain. For those solutions that do not make it to fruition, corporates can make them open source so that other companies with similar customer challenges may implement them. After all, wouldn’t it be great to contribute to a world where all customer needs are satisfied?
We entered 2017 reeling from a series of double-digit medical insurance premium hikes. It was becoming clear that schemes are in trouble; undercut by unregulated, selective insurance products and forced into tighter and tighter modes of managing care delivered. We were facing an affordability crisis then – that, without serious systematic change, schemes will be unable to derail their progression towards shrinking memberships and eventual collapse.
Dr Brian Ruff
Moving into 2018, scheme’s reserves are under threat, memberships are stagnant and the system continues, for the most part, to tolerate overutilisation of hospital services while failing to invest in strengthening community-level care. Alternative fee models remain tentative and marginal, neither inspiring nor supporting any structural changes in the fragmented way healthcare services are delivered. In light of this, I predict the following for the coming year:
Too few South Africans can afford medical insurance, and those pools are shrinking as a portion of the South African population (now below 16%). Those who continue to purchase cover do so because of the deterioration of public health services or a serious health condition, and they purchase the lowest cost plan available, with hospital only cover. As premiums continue to rise, with the country under serious economic strain, we will see even less demand for scheme cover. Negative sentiment towards medical schemes will grow due to rising premiums, benefit cuts, increasing co-payments and out-of-pocket spend. Many more people will experience failures of the system; such as denial of needed care until the point of hospitalisation. Patients will continue to be frustrated and confused by the very poor communication between their clinicians.
Demand will wane, negative sentiment will riseRelative to the stagnant demand for private care, we already have a serious oversupply of hospital beds in South Africa. Yet, investors continue to build new private hospitals and clinics. The structural problems are worsening, not improving. As scheme benefits currently work, many people can only access funding for treatment once they are in hospital. Doctors are happy to admit them, as their claims are then guaranteed to be paid. Too many beds drive a very costly form of overutilisation; every time a service is done in a hospital that could have been done in a doctors’ room, we spend R100 instead of R10. This pushes scheme premiums up and is a key driver of shrinking memberships and low scheme reserves.
Overutilisation will continue to worsenThe crux of the problem in private healthcare, and what drives the health departments’ intentions to implement a single National Health Insurance (NHI), is schemes’ failure to deliver widespread access to quality healthcare. To date, as purchasers of care for their members, schemes have done too little to develop the community-level services that are required to balance the system and achieve better productivity. If schemes are to secure a place in the transition to an NHI and its management, they will need to put their efforts towards developing the supply of affordable care. They will need to dump the fee-for-service model that pays doctors working alone and axe hospital benefits that support over-utilisation, instead giving a solid boost to out-of-hospital benefit packages.
Schemes will need to innovate in how they buy care for members
Who will drive needed reforms?
One space in which reform is beginning to happen is amongst groups of practising clinicians, who recognise the fault lines in the current set-up and are seeking better forms of payment; ones that support teamwork and reward outcomes (rather than the number of services performed). This involves forming independent multidisciplinary practices that, with deep knowledge of their community’s health profile, can deliver holistic clinical and social care at the community level. Consulting together and being paid collectively, they can reduce costly hospitalisation by treating their patients in the community and using alternative facilities. As we are seeing in other countries, once these teams and systems mature and grow, they will increasingly demonstrate their value in terms of both reduced cost and better patient health outcomes – giving schemes, businesses and future NHI purchasing committees successful alternatives to the status quo.
About the author
Dr Brian Ruff is the co-founder and CEO of healthcare management company, PPO Serve. After three decades of work in both the public and private sectors, in both clinical and strategic roles, he formed the innovative company to reform the way healthcare is practiced and funded in South Africa.
At the Hospital Association of South Africa (Hasa) 2017 Conference last year, two private hospital chief executives and the head of the largest medical funder in the country laid to rest the myth that the private sector is implacably opposed to universal healthcare.
Dr Dumisani Bomela, CEO of the Hospital Association of South Africa
Practical support
In their presentations, the chief executives offered practical support to the several interventions identified by the Department of Health as it begins its first steps towards quality healthcare for all – specifically maternal and women’s health, school health, the screening and treatment of paediatric cancer, the elderly and disabled, and mental health screening.
For instance, among other suggestions, Netcare’s Group CEO, Dr Richard Friedland, pointed to his group’s success in developing high volume and low-cost cataract treatments in the United Kingdom, offering to make his group’s expertise available here; and Koert Pretorius, CEO of Mediclinic Southern Africa, suggested that in addition to the private sector making private hospital capacity available to the public sector, it could help erase backlogs in maternity care and various procedures by “undertaking a percentage of these cases at lower cost”.
Discovery Health’s CEO, Dr Jonathan Broomberg, pointed out that while it is important for ongoing engagements and debate around the form of a future healthcare system, including through the committees recently announced by the Department of Health to interrogate various aspects of the National Health Insurance, it is at least equally important to retain a strong focus on delivering immediately on the everyday healthcare needs of what Friedland earlier called an ‘unsustainably unequal’ society.
In other words, while we continue to shape and form through ongoing engagements the future fate of the healthcare system, let us get on with making sure we do the best we can for South Africans today. It is highly likely that as collaborations deepen on everyday healthcare delivery, collaboration on larger issues like the National Health Insurance will become easier, more pragmatic, and less adversarial.
Other countries
The situation South African healthcare finds itself in is not unique – many others have walked down these admittedly difficult paths. At the conference, Denise Soares dos Santos, who runs one of the largest private sector healthcare hubs in Brazil – and her compatriot Luiz Augusto Carneiro – described how the two sectors have found ways to exist side-by-side, sustainably, against a backdrop of slow economic growth, the need to reform their healthcare system, and the pressing need for social stability in an unequal society. Their journey to this point may not have been untroubled – for one, healthcare inflation ran for years in the double-digits – but Brazil has shown that workable solutions can be found.
Similarly, Dr Vinod Bhat, vice chancellor of Manipal University, described how his country – India – has fashioned success out of collaboration between the public and private sector in expanding training facilities for doctors to meet a debilitating shortage in the profession in that country. As did Brazil, which responded similarly to India, South Africa faces the same challenge in that this country has only half the global average number of doctors – a number that has remained static for decades even as the population has doubled. There are no such partnerships in this country to increase the numbers of medical students – there are no public-private collaborations in South Africa to increase the numbers of doctors in training.
Performance and outcomes
In like manner, a third speaker at the conference, Marine Erasmus, director at Econex, made the point that the cost of universal healthcare debate is a distraction from the need to collaborate to improve on the performance of the healthcare system and its outcomes.
The critical point is that whether we are concerned about the daily healthcare needs of South Africans or the long-term future of the healthcare system in this country, the potential for success is exponentially higher when partnerships exist.
We now have the stated intention of moving towards universal healthcare in the gazetted National Health Insurance, but to move from a stated intention to a realised ambition is another thing altogether.
To paraphrase one conference speaker: having a policy is important, but it is not enough; without collaboration we cannot expect to wake up on the 1 April 2026 (or at some future date) and hope that by some miracle universal healthcare will be in place. Nor, he may have added, will we quickly enough solve the immediate healthcare challenges South Africans face without joining hands today.
