22 August 2012 Parliamentary Portfolio Committee on Health

Who is SAMA? SAMA is a Doctor’s organisation – Originally founded in 1927 – Transformed in 1998 by amalgamation of all major doctor groupings Section 21 company and a registered Trade Union – Not for profit organisation Represents > Doctors in public service and private practice

SAMA’s Coding history First coding booklet published in 1944 – Annually updated ever since –> called the Doctors Billing Manual (DBM) >60 years of intellectual property in DBM SAMA is the steward of doctor’s codes – Custodian for future generations of Doctors

The SAMA DBM The DBM represents the scope of practice of the medical profession Current format first created in 1975 Why does SAMA do coding? – SAMA is a neutral referee – Inter disciplinary relativity is maintained The DBM is the recognised industry standard – Today used by HPCSA & Discovery, GEMS and BHF, representing over 80% of medical schemes

Tariffs past and present Until 1978 SAMA Rate and RAMS Scale of Benefits were equal – Scale of Benefits then became lower than SAMA rate – RAMS replaced by the BHF – Subsequently SAMA and BHF negotiated tariffs annually 2003 = last year SAMA calculated a rate on behalf of doctors 2004 – Competitions Commission ruled the above activity “anti-competitive” NRPL (National Reference Price List) – 2004 – 2005, CMS produced guideline NRPL – Codes based on SAMA DBM NHRPL (National Health Reference Price List) – 2006 NHRPL produced by NDoH – Codes based on SAMA DBM

HPCSA – Produced an “Ethical Tariff” in 2006 – Used NHRPL (multiplied by 3) – 2008 the Ethical Tariff was scrapped RPL – basis of the RPL was challenged – RPL declared invalid by High Court of South Africa Tariffs past and present

SAMA/HPCSA Guideline Tariff process 15 July 2011 – HPCSA Ombudsman invited SAMA to discuss tariff guidelines 22 July 2011 – SAMA submits written Tariff Guideline Proposal to HPCSA 17 January 2012 – SAMA meets with acting HPCSA registrar and enquires when guideline will be published – stresses importance of using updated DBM for process 11 June 2012 – SAMA meeting with the new Registrar – above again emphasized

SAMA/HPCSA 2012 Guideline Discussion Background SAMA offered 2012 DBM to HPCSA – Contains 150 altered codes since 2010 – Contains 445 altered codes since 2009 – Contains 1202 altered codes since 2005 SAMA offered services of coding department SAMA delayed publishing of 2012 DBM SAMA requested a single RCF across all specialities – RVU gives interdisciplinary relativity

Healthcare Inflation Average CPI Inflation = 14.2% - Average Medical Scheme inflation =27.3% - Average contribution PBP/m = R Average CPI Inflation =5.4% - Average Medical Scheme inflation =7.5% - Average contribution PBP/m = R Average CPI Inflation =4.3% - Average Medical Scheme inflation =11.3% - Average contribution PBP/m =R975.82

1981 R11.73 PBPm 2010 R PBPm 2010 R PBPm

Scheme Expenditure per beneficiary per month 2010 Contributions R PBpm 2010 Contributions R PBpm

Healthcare Costs? Administrator cost Managed Care cost Broker fees Actual cost of healthcare

2010 R11,564,770,000

Council for Medical Schemes 2009/2010 Annual report p214 “Administrators and businesses associated with administrators often provide managed healthcare services. In many instances, these services are merely additional layers of administration costs with questionable benefits for the schemes themselves.”

23% -40% 7% 75% -42%

Medical Scheme Membership as % of Population

Broker Summary – 16% population growth 19% MS membership growth 9.4% MS membership growth excluding GEMS – new MS members new MS members excluding GEMS – Cost of R8.85 Billion R per new MS member R per new MS member excluding GEMS

Conclusion Brokers are being paid large sums of money but have effectively attracted few new members MHC has not succeeded bringing down healthcare costs only GP visits Administrators are charging medical schemes significantly Hospitals are a significant cost

How to determine an RCF?

Annualised 2012 Overheads 2012 ALL SPECIALISTS CONSOLIDATED SURGICAL CONSOLIDATED CONSULTINGGP'S Staff Salaries & Related Costs R 367, R 388, R 327, R 307, Equipment Costs R 79, R 79, R 79, R 66, Rend and Utilities R 84, R 90, R 73, R 93, Practice Management & Administration R 205, R 216, R 185, R 151, Finance & Insurance R 131, R 146, R 102, R 91, Other R 17, R 18, R 15, R 18, Total Costs R 886, R 939, R 785, R 727,814.93

SAMA 2012 RCF = R Salary Comparison of Private Practitioners versus Public Sector Practitioners versus Corporate Employed Accountants Job Title & Description Salary Per Annum Salary Per Productive Hour RCF LowestHighestLowestHighestLowestHighest * Calculated Private Practice GPs Salaries GP - More than 10 yearsR 1,418,732.93R 1,591,619.93R 1,099.79R 1,233.81R 24.44R Comparative Salary if GPs Private Practice overheads are added to Public Sector Salaries Senior Clinical Manager (Medical) Grade 2R 1,686,500.93R 1,760,582.93R 1,307.37R 1,364.79R 29.05R * Calculated Private Practice Specialists' Salaries Specialist - More than 10 yearsR 1,817,395.48R 2,050,243.48R 1,408.83R 1,589.34R 31.31R Comparative Salary if Specialists' Private Practice overheads are added to Public Sector Salaries Head : Clinical Department (Medical) Grade 2R 2,385,331.48R 2,477,290.48R 1,849.09R 1,920.38R 41.09R * Comparative Salary if GP Private Practice overheads are included Robert Walters Survey of Corporate Salaries for Accountants 2011 Audit/Tax/Accountancy/Treasury Director Level - 5+ years expR 1,627,814.93R 1,727,814.93R 1,261.87R 1,339.39R 28.04R * Comparative Salary if Specialists' Private Practice overheads are included Corporate Finance (CA (SA)) Corporate Finance CA years expR 1,636,837.48R 1,886,837.48R 1,268.87R 1,462.66R 28.20R Tax Specialists (CA (SA)) Director - 8+ years expR 1,986,837.48R 3,386,837.48R 1,540.18R 2,625.46R 34.23R *Excludes risk compensation factor

2012 HPCSA Tariff Guideline

– 62% increase in doctors’ input costs since 2003 – Malpractice insurance costs are increasing exponentially – Massive administrative burden 98 Medical schemes with on average 5 options each 490 different tariff guides 490 different protocols and formularies Exhaustive authorisation and motivation procedures 5 -10% of income to claims bureaus

Conclusion Benchmark tariff is essential – Provide much needed stability and framework – NHI process will require an appropriate tariff guideline

Suggested Way Forward SAMA suggests a benchmark tariff – Must be based on actual practice cost studies – Must include Tiered Tariffs SAMA 2012 DBM used as the standard – Tariff codes are the scope of practice of the medical profession Access = affordable healthcare + available doctors

Suggested Way Forward SAMA willing to work with the HPCSA – Use the 2012 DBM as basis for tariff guideline – Must use actual cost studies on which to base tariffs Competition Commission – Medical Industry must be exempted – Allow SAMA to suggest guideline to members – Allow doctors and funders to negotiate tariffs Pricing Commission – The composition of Pricing Commission to be equitable