Hospital use inflates care costs

Londiwe Buthelezi

An increase in lifestyle diseases and the ageing profile of the medical scheme population has caused medical scheme beneficiaries to make more frequent trips to private hospitals, and each time they are admitted, they are staying longer, according to figures compiled between 2006 and 2010.

This data, from a report published by economic research firm Econex, suggests that while hospitalisation has been the primary driver of rising costs for medical schemes, not only hospital prices should be analysed to understand the spiralling cost of health care, but utilisation patterns as well.

Econex found that hospital patient days per medical scheme beneficiary increased by 12.5 percent between 2006 and 2010. In 2006, medical schemes purchased 753 private hospital days per 1 000 beneficiaries, while in 2010 this had increased to 847 days.

The research by Econex was commissioned and sponsored by the Hospital Association of SA, which represents major private hospital groups, but Econex said it remained academically independent and could provide the data to substantiate its findings on request.

The utilisation data collected from the private hospitals was compared with that published in the annual reports of the Council for Medical Schemes (CMS).

Econex cautioned that the CMS data showed volatile utilisation patterns, while the private hospitals’ data showed consistently increasing utilisation over the period from 2006 to 2010. It concluded that the impact of private hospital utilisation patterns on medical schemes’ costs could not be accurately assessed.

The report still shows that hospital admissions for people over 65 grew 6.2 percentage points between 2006 and 2010 to 60.7 percent of all admissions.

Older patients required the most expensive care and thus their admissions weighed heavily on medical schemes’ costs.

So although the increase in spending on private hospitals per beneficiary per year was twice as high as the increase in the consumer price index (CPI) between 2006 and 2010, the data suggested that this could only partly be explained by hospital price inflation.

Jonathan Broomberg, the chief executive of Discovery Health, said its data of almost 2.7 million members strongly confirmed the Econex study’s findings that members were getting older and sicker and that greater utilisation was the key reason that medical inflation rose faster than CPI.

“The demographic changes indicate that there is a claims inflation of between 2 percent and 3 percent each year, over and above tariff increases and any other increases which arise from changes on the supply side,” Broomberg said.

He added that by the age of 65, more than 60 percent of members suffered from chronic disease, and by ages 75 to 80, 80 percent of all members suffered from chronic diseases.

Discovery Health members who had chronic lifestyle diseases claimed on average 2.2 times more than those who did not have such diseases.

Board of Healthcare Funders (BHF) spokeswoman Heidi Kruger said the age profile of medical schemes was getting older, because people over the age of 65 were living longer. The increase in lifestyle diseases could also mean higher utilisation of hospital services.

“However, we believe that pricing is also a problem. The unit prices for certain procedures have increased steeply,” Kruger said.

She said the structure of prescribed minimum benefits, being mostly focused on hospital and specialist services, could mean that schemes were forced to shift their benefit design towards creating more benefits for these services.

For instance, the BHF had data that showed the removal of senile cataracts – the clouding that develops in the crystalline lens of the eye in elderly people – had remained flat for members aged 60 or over. At the same time, it grew by 46 percent for those under 60.

Kruger said the BHF also had data that showed smaller independent hospital groups charged 20 percent to 30 percent less than the big, listed hospital groups.