1 Iso Leso Optics Ltd Healthcare Market Inquiry Submission Hearings Set #1 24 February 2016 at 2.00pm

2 SUBMISSION The multiplicity of coding structures for the same eyecare and the management of these by a specific linked Provider Network Organizations (PNOs) with eye healthcare provider groups (HCP groups) compromise competition and hamper independent eyecare HCPs.

3 Iso Leso The core business of Iso Leso, a PNO, is to be solution driven in seeking and deliver appropriate eye care models to the medical aid market that match the needs of the patient, the fund, the administrators and the HCPs in the most efficient and cost effective method possible.

4 Iso Leso Iso Leso is an open PNO available for any HCP to contract on a per fund per provider basis. There is no dominant shareholder with each shareholder /member having equal interest. Iso Leso subscribes to maintain coding efficiency in the market through an industry standard SAOA Coding set.

5 THE NUMBERS Optometry is 2.0 % of total medical aid healthcare spend Optometry spend approx R pbpm Risk 49 % Savings 51.% There is limited PMB on optical spend. Eye health and visual efficiency as well as product quality are key drivers in member satisfaction

6 The Numbers....2 Approximate apportionment of typical Optometry Spend o Professional Fees 10% o Base lens Costs 15% o Frames 35% o Lens Add Ons 30% o Contact Lens Materials 10%

7 EYECARE SPEND Only a portion of total optometry spend needs to be recognised as an essential spend for eye health and visual function. (PMB) Essential optometry spend for eye health and visual efficiency should be identified.

8 The Consumers Eyes There is little emphasis on eye health with large focus on product and fashion There is misinterpretation of what the fund pays, what the funds should pay and what the providers can and should recover Fashion and product enhancements are seen as part of a healthcare deliverable

9 The Consumers Eyes...2 Choice can be manipulated by retail dominance There is a lack of transparency driven by linked PNOs directing consumers to related retail H C Providers A significant fact of the current arrangement is that consumers / beneficiaries have seen their ability to choose a provider compromised.

10 Proprietary Codes Various PNOs have developed proprietary code and tariff structures which leads to confusion and inefficiencies. The linkage between a dominant PNO and a linked large HCP group leads to market distortion. No collective negotiation between HCP groups and funders/administrators.

11 PNOs – differences Preferred Provider Negotiators Single shareholder with direct retail provider linkage to Specsavers via KFML. Iso leso PNO with broad based shareholding and open to all. Opticlear Independent sole shareholding with possible alignment to Mellin retail group via shared management.

12 PNOs Market Size

13 PNOs Market Size

14 Effects of Linkage.....PNO and HCPs Managing of proprietary codes to the detriment of the market and to the benefit of the linked relationships Directing of patient specifically away from independents and non linked HCPs to a related retail group. Clearing of competing providers claims enables control of cash flow to non aligned providers. Access to confidential information of competitor’s pricing structures and supplier relationships impairs business privacy. Creating specific controls on supplier – providers relationships that enhance PNO’s suppliers relationship.

Linkages’ Effects Transfer of profits made on capitation arrangements has not been returned to HCPs nor to funders. The profits on risk based contracts provide a capital base to grow a dominant linked HCP retail provider group. The survival of the independent HCP is significantly compromised by the linkages.

16 Conclusion1 The linkages between PNOs and HCP groups distorts eye healthcare delivery. Distortion has lead to reduced/unfair competition and increased costs through the manipulation of proprietary code structure and transfer of risk profits outside of the fund-provider loop.

17 Conclusion 2 The PNO and HCP group has created barriers to entry for independent providers. Abuses of market position through dominance in the medical aid lives and the PNO and HCP group linkages.

18 Proposal 1 For efficiencies and transparency the optometric sector uses a single set of codes developed and maintained by stakeholders and endorsed by DoH Collective tariff and benefit structures negotiations should be permissible Linkages between PNO’s and HCP groups be prohibited

19 Proposal PNO’s with broad based shareholding should be encouraged to prevent profiteering in the medical aid market. Any positive gain in managed care interventions should be used to support both the financial stability of participating HCP’s and medical funders. There is a need for ethical guidelines to be established to govern behaviour where linkages exist between HCPs and PNOs

20 Ancillary Comment Circular 51 and Low Cost Benefit Option Inter disciplinary co ordination (lack of) as a cost driver

21 THANK YOU Peter Muller Contracts Director Tel