Capitation in the South African context

CAPITATION IN THE SOUTH AFRICAN CONTEXT Current obstacles and a way forward

By Barry Childs JOINT CEO, INSIGHT ACTUARIES & CONSULTANTS Capitation is an underutilised form of reimbursement in South Africa. True capitation would mean a provider, or provider group, takes a per capita fee for a specified population in return for a monthly fee. In South Africa, public sector budget allocations come closest to capitation in that resources are divided between the provinces on a per capita basis, but from there funds

Re-empowering the primary care practitioner through progressive benefit design changes lays a foundation for reimbursement reform through capitation. “ are allocated according to local health priorities on a grant or budget basis. In the private sector there are numerous examples of intermediated capitation where a managed care organisation or provider group takes risk on a per capita basis, but in most cases individual providers are still paid via fee for service. Capitation brings some benefit to providers in the form of more predictable income and an ability to better manage the health of a pool of patients, rather than just treat patients on demand. Our system is, however, not well structured to allow capitation models to develop at scale. Medical scheme options with savings accounts or with limited out-of-hospital benefits cannot support capitation for primary care benefits.

The current prescribed minimum benefit (PMB) review process is focused on a primary healthcare package of benefits, and while there is as yet no clarity on how this will affect the current PMBs, such a package would no doubt have some influence on future medical scheme out-ofhospital benefit designs.

One fundamental flaw in the South African private health system is the generally laissez faire approach to primary care. Schemes permit members to access care at their level of choice rather than follow defined pathways of referral. This approach

Barry Childs, Joint CEO, Insight Actuaries & Consultants

arose due to schemes competing on benefit design richness and freedom of choice for members.

This means that primary care and specialists in aggregate see less complex patients than they are trained to manage, which is an inefficient allocation of resources, with additional waste arising from fragmented and duplicative care. We could do a lot more with the primary care and specialist resources we have if patients used these services more appropriately.

Giving patients the choice to access specialists directly without a referral comes at a cost, which is evident in our system with medical scheme contributions increasing over time.

Fortunately, some schemes are making improvements in their benefit design to empower primary care practitioners to play a larger role in the overall management of their patients’ care, insisting that patients first see a GP before being referred to a specialist.

This can have a sizeable effect on medical scheme costs, but at the price of members having to change their previous care-seeking patterns. However, faced with the choice of everescalating contributions, more and more members are making the tradeoff and choosing options with GP nomination and referral management in return for lower contributions.

LAYING THE FOUNDATION FOR CAPITATION

Re-empowering the primary care practitioner through progressive benefit design changes lays a foundation for reimbursement reform through capitation.

The ideal structure is one where members nominate a particular GP as their primary care provider. This enables a more active contracting engagement between the medical scheme and provider, with clear expectations of service and patient management quality. Schemes can then interact with the GP on a more holistic level for their allocated patients, including informing them of downstream care obtained, polypharmacy and quality of care-related issues, which in turn will enable the GP to take a more holistic view of health management for the allocated patient group.

Having a nominated relationship between patient and doctor allows the catchment population for capitation to be defined. This allows the setting of a capitation fee per person. This capitation fee should be risk profile-dependent as a GP working next to a university will experience different clinical demands from one working next to a retirement village.

Services that may be included in the capitation fee can vary from just visits to the GP, perhaps with minor in-room procedures and dispensed medicine included, to a wide range of primary care services including basic

REIMBURSEMENT REFORM

Members nominate a particular GP as their primary care provider

More active contracting engagement between medical scheme and provider

Clear expectations of service and patient management quality

radiology, pathology, and even dental and optometry care. Provider regulators need to relax their employment rules to permit innovation in multidisciplinary team-based contracting.

However, vanilla capitation, where a set of services is defined and paid for so that the capitation fee is just a risk-adjusted weighted average of the basket of services, has its limitations.

One core problem is the incentive to refer patients rather than treat them; this risk is another obstacle that has prevented adoption of capitation in the local market – fear that GPs will simply refer all but the most benign of patients to specialists, resulting in costly care being delivered outside of the ringfenced capitation.

The solution to this is value-based care capitation. This still involves the setting of baseline risk-adjusted capitation fees for a described set of services and identified group of allocated patients, but with the added component of value measurement on things that matter for the system – referrals and downstream costs, admissions to hospital and quality of care.

These additional components should form part of the capitation fee reimbursement with appropriate reward for effort and improved outcomes for key metrics. It is imperative that these additional elements be included in capitation systems to balance risk and reward, and incentivise system improvements.

It requires some reorganisation of the provider side of care delivery in order to enable effective functioning in teams, investment in systems and technology to enable re-thinking of care pathways and patient monitoring and management, and advanced analytics capabilities to understand claims patterns and monitor patient experience more holistically.

PPOServe has so far demonstrated the best model of primary care supply-side reforms and valuebased capitation structures to allow this progressive form of contracting between provider and funder.

Insight Actuaries & Consultants have worked with PPOServe to develop more nuanced and accurate care referral maps based on the Dartmouth Atlas approach, as well as a clinical episode grouper to better understand patient care progression over time. Combined, these capabilities enable care to be delivered and financed in the way they should be.

BHF360° | DECEMBER 2020 VALUE-BASED CARE CAPITATION IN A NUTSHELL

Value-based care capitation still involves the setting of baseline risk-adjusted capitation fees for a described set of services and identified group of allocated patients, but with the added component of value measurement on things that matter for the system – referrals and downstream costs, admissions to hospital and quality of care.

All additional components should form part of the capitation fee reimbursement with appropriate reward for effort and improved outcomes for key metrics. All additional components must be included in capitation systems to balance risk and reward, and incentivise system improvements.

Reorganisation of the provider side of care delivery is required in order to enable effective functioning in teams, investment in systems and technology to enable re-thinking of care pathways and patient monitoring and management, and advanced analytics capabilities to understand claims patterns and monitor patient experience more holistically.