Hospital admissions are one of the most significant cost drivers for any private medical scheme, which is why the tariffs are often reviewed and negotiated annually. If no agreement is reached, medical aid members will typically bear the brunt of high co-payments.
Lee Callakoppen, principal officer of Bonitas Medical Fund, says that hospital admissions account for half of the scheme’s annual claims cost.
“Last year, due to the pandemic, hospital admissions and the utilisation of other medical aid benefits fell to record lows. However, the 2021 claims’ experience has shown that a lot of services, particularly the day-to-day benefits and several hospital admission categories, are already close to 2019 levels.”
Callakoppen warned that if hospital costs balloon above CPI, so will membership premiums, which will result in medical aid becoming unaffordable.
“We are appealing to all our service providers, including hospital groups, not to pass their costs on to schemes and, by extension, to members,” he said.
Moving into 2022
Callakoppen said that there are significant concerns about 2022 utilisation levels, notably due to the risk of an increased burden of disease due to gaps in care that may have arisen during the pandemic, which is no fault of any party.
He also anticipates an elective procedure claims catch-up after so many were cancelled in 2020 and 2021 during national lockdowns.
Other areas of concern include the unknown impact of long-haul Covid and new or more expensive Covid-19 treatment costs, including booster vaccines, which could emerge.
“All stakeholders in the healthcare value chain need to be prudent in managing their costs of doing business. The intention of negotiated hospital tariffs is to reach an agreement that supports sustainability of the healthcare ecosystem and, ultimately, members,” he said.
“The issue comes when there is no agreement reached, and members may have to pay in the difference between what the hospitals charge versus what the scheme is able to pay. We try to avoid such a situation so as not to have a negative member impact, but if parties are unreasonable in their demands, this situation may arise.”
What happens if negotiations fail?
However, when the costs of doing business are passed on to schemes and, by extension, customers – or medical aid members – things become complicated, especially where tariff increases agreements cannot be reached, said Callakoppen.
He said that in these instances, there are two possible scenarios:
- A scheme pays what it deems to be a reasonable rate, and the hospital bills its rate. This means the member would be required to pay in the shortfall on the account unless the hospital decides to override the difference.
- A scheme excludes the hospital from its network and actively discourages a member from using this hospital. The member may need to pay a deductible or co-payment if they choose to be admitted at this facility unless the hospital decides to override the difference.
“Neither of these situations is a favourable outcome,’ says Callakoppen. ‘Which is why reaching a workable middle ground on hospital cost/tariffs is imperative,” he said.