BHF360° | DECEMBER 2021
I N DUSTRY PE RS PE C T IVE
How schemes work
Selecting the strongest value proposition By Craig Getz Consulting Actuary, Insight
I
magine a scenario: you are the procurement officer for a large company that must purchase cell phones for 1000 employees. There are two manufacturers, namely Apricot and Celestial. Both their phones cost R10 000 per device. You have a budget of R8 000 000. That is only enough to buy cell phones for 800 employees. The 800 most senior staff will receive cell phones and the 200 most junior staff will not. This is an unfortunate outcome.
Schemes engage with the hospital groups, which then compete for volumes by proposing discounts and other value-adds. Schemes select the groups representing the strongest value proposition to the scheme and channel patients towards these groups. Network arrangements have empowered schemes to reduce contributions by up to 15%. This increases access to care.
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B O A R D O F H E A LT H C A R E F U N D E R S
You approach Apricot and ask them for a discount. They appreciate your plight but explain that they cannot discount their prices unless you can guarantee volumes. You suggest that if Apricot discounts their devices, you will apply a R3 000 co-payment for employees who opt for Celestial’s products. Apricot agrees to discount their price to R8 500 per phone. You have the same conversation with Celestial. They agree to discount their devices to R8 000 per device should you apply a R3 000 co-payment to Apricot’s. You agree to the deal with Celestial. Well done! This will allow you to source phones for all 1 000 employees within your budget. By channelling your employees, you were able to secure deep discounts. Simplistically, this is how schemes function. Schemes engage with the hospital groups, which then compete for volumes by proposing discounts and other valueadds. Schemes select the groups representing the strongest value proposition to
