Contracting with medical aids: yes or no?

In June, Health Minister Dr. Aaron Motsoaledi announced that co-payments on medical aids would be abolished under the amended Medical Schemes Bill. This, in addition to a number of proposed changes to how healthcare is funded, is aligned with the goal of achieving universal healthcare under the National Health Insurance (NHI).  Managing Director of Healthbridge, Luis da Silva, weighs in on what you should be considering when deciding about contracting with medical aids in the short term, and in the run-up to NHI.  

What does the data tell us about the size and growth of the medical aid market?

In the last 10 years, we’ve seen relatively good growth in the medical aid market, particularly with the introduction of the Government Employee Medical Scheme (GEMS), whereby a lot of people who were reliant on public healthcare, moved over to the private. In general, the total number of private healthcare patients has increased, but what’s interesting, is that in the last 2 – 3 years, the market has become stagnant, if not slid backwards.

This could be due to a number of factors, including the fact that the cost of cover is out of reach for most South Africans, as they simply cannot afford private healthcare. Another factor is that members who have private healthcare coverage, are buying down their plans and opting to just have a hospital plan as coverage.

At Healthbridge we’ve seen both sides of the spectrum, where practices that were contracted out, are now contracting in as their cash-strapped patients rely on their medical aids. And then we’ve seen practices that were contracted in, are now contracting out as they are looking to charge higher premiums or don’t want to deal with medical aids anymore

We are constantly looking at this data to help individual practices know which decision is best for them.

What are some of the criteria for practices to assess whether or not to contract in with medical aids?

There are 3 considerations I would advise practices to look at when deciding whether contracting with medical aids makes good business sense for their practice.

Consideration 1

Which medical schemes do most of your patients belong to?  If you have a large number of patients on just one or two medical aid schemes, it makes sense to contract with the schemes to minimise your cash collection processes. Healthbridge gives doctors business insight reports that enable you to see where your patient base is coming from, both in terms of medical aid membership and by demographic breakdown. This insight, together with the physical location of your practice, will typically provide the insights into your patients’ affordability and whether or not a particular medical scheme is worth contracting with.  

Consideration 2

The actual cost of contracting in or out for your practice. Typical costs that affect the way you bill include your medical billing software monthly license fee, claims switching fees, cash deposit fees, credit card transaction fees and then there’s the cost of bad debt.  These costs vary quite a bit depending on whether you are a contracted or cash practice. I’d encourage practices who are weighing up their options to do the calculations and use their data to know what percentage of revenue they’re spending on fees and bad debt and how it’s affecting both their cash flow and the financial opportunities for their practice.

If we use the example of a contracted-in practice that utilises real-time claims and automated reconciliations, that practice is much more likely to reduce bad debt to 1% – similar to that of a cash practice. If you take into consideration the needs of your patient base and actively work with partners to manage bad debt, then you are better off contracting in. But if controlling bad debt is more difficult and the patient base can bear it, then you should consider contracting out.

Consideration 3

Your personal preference, guided by the needs of your patients. I’ve talked a lot about the money side, but there are also intangible benefits that will sway your decision, like the relationships you have with your patients. What would they appreciate the most? What does it mean for returning patients and word of mouth referrals? Is it more advantageous to contract out because you can charge a premium? How do you feel about collecting cash? If you’ve got spare capacity and you’re the only practice in the area that is contracted-in and patients in that area appreciate that, you might get more feet through the door. So it’s important to factor in your patients to help you make the decision.

Let’s talk about the fact that if practices are contracted in, patients are paying different amounts for the same services depending on what medical aid they belong to. Is this ethical and how will this change in the run-up to NHI?

To answer your question about whether or not it’s ethical to charge different rates depending on the insurer, I can see it from both sides. On one hand, you are entitled to charge what you deem appropriate for your services, but when schemes started paying doctors and healthcare professionals at different rates, we started seeing up to 30 different price points within a practice. So, at the time the concept of a single fee for a service was out the window.

Now, with the announcement that co-payments will be abolished under the Medical Schemes Amendment Bill, there will be changes in how you’re reimbursed, whether you’re charging at the lowest or highest rate. The fact is that we don’t know when the amendment to the bill will be passed or come into effect but it’s absolutely the right time to look at the financials of your practice to weigh up the different scenarios and make a financial decision in the interim and in light of imminent changes.

What do you see as Healthbridge’s role in the changing healthcare landscape?

Healthbridge was a pioneer in switching real-time claims through medical aids, but now we provide healthcare providers with a complete cloud-based solution that enables them to manage their patients and their practice. We also support doctors with more options to treat patients from a clinical perspective and will continue to build on that going forward. This will become even more important as we see changes to the system.

A lot of stakeholders have speculated whether we’ll see the complete collapse of private healthcare under NHI and I don’t believe this will happen any time soon for a number of reasons. While public healthcare has the demand for services, private healthcare has the data supported by sophisticated systems and the expertise to manage the scale that we are talking about in NHI. So we are likely to see collaboration between the two that will develop over a long period of time.

There is no doubt that NHI will bring numerous changes to private healthcare funding and as a result, how doctors are reimbursed by medical schemes and what members buy from those schemes. But my advice to private practices is to consider numerous scenarios and be agile enough to make changes when necessary. This is something that I believe is much more possible, and much easier when you have access to instant digital reporting, like we offer at Healthbridge, to make data-based decisions that support the growth of your practice and better, quicker decision making when the time arises.

If your practice is looking for advice on contracting with medical aids, send an email to enquiries@healthbridge.co.za and one of our trained Business Consultants will contact you to set up a no-obligation practice assessment.