Industry Insights May 2017

11 Jul 2017
Industry Insights - March 2017

South Africa’s healthcare is facing tough and complex challenges. This is partly due to an ageing population and the growing prevalence of chronic illnesses. However, another concern is SA’s declining economy, and the likely impact of our recent downgrade to junk status.

 

Consultation fee vs the economy

Year-on-year, medical professionals have felt the pressure in balancing what they charge patients with what medical aids are willing to pay. We analysed the average GP consultation fee increase from 2014 to 2016 and compared this to two key economic indicators: the average taxpayer salary increase and inflation.

Increase in GP consultation fees vs economic indicators

*YOY: year-on-year
**Net effect on individuals’ disposable income: the difference between South Africa’s inflation rate and the average taxpayers salary increase.

The graph indicates that the average increase in GP consultation fee sits at around 7% to 8.5% each year, which is in line with the standard. However, when inflation and the average increase in taxpayer salary is taken into consideration, these increases are not proportionate to the change in average disposable income.

What does this mean for primary healthcare?

1. Patients are seeing their GP less frequently

Year-on-year trend - Fewer GP visits per patient each year

We can see that year-on-year, patients are making fewer visits to their GP. In 2014, on average, a patient with medical-aid cover was visiting their doctor 4 times per year. In 2015, it was only 3.5 visits per year; and in 2016, just 3. Based on 2017 GP claims received to date, this number will probably fall to 2 GP visits per year.

Can we therefore assume that patients are getting sick less often? Increasing expenditure on hospitalisation would suggest that this is not the case.

In fact, a growing proportion of medical expenditure is for chronic disease cases, which require patients to have regular check-ups to keep their chronic conditions in check. Does the falling trend in GP visits mean these patients are attempting to self-medicate? Or are they perhaps ignoring their symptoms to avoid the cost of a GP visits and ending up in hospital instead?

2. Moving to cheaper medical-aid plans
According to ‘The Council for Medical Schemes annual report 2015/2016’; patients are downgrading their medical-aid plans. With decreased disposable income, this number of patients downgrading is likely to continue to increase. The problem will become more apparent when the lower-plan medical cover proves to be insufficient, and out-of-pocket collections become a bigger burden on the practice.

3. Higher incidence of bad debt
With higher interest rates, patients will have less disposable income to pay medical professionals. Amounts owed by patients are going to be harder to collect.

The likely effect of SA’s junk status

The country’s cost of borrowing on international markets will increase because of the rating downgrade. Ultimately, this means that patients will pay more towards interest on debt, including home loans, personal loans, car loans and credit cards. Food and travel costs will also increase. The possible implications of this are:

  • Cancellation/downgrade of medical cover
    More healthy people are expected to cancel or reduce their medical-aid cover. This could result in a higher proportion of unhealthy people within the medical-aid pool.

  • More cost pressures for a practice
    The entire lifecycle of a practice will be affected. It will become more costly to start a practice because of high start-up costs and interest rates. Current doctors will find it expensive to expand their practices. Retiring doctors will battle to sell their practice at its true value.

  • Hospitals under strain
    As patients try to cut corners and avoid preventative visits to their GPs, hospitals will bear more and more of the burden. With hospital costs already quite high, the system will be put under immense strain.

Conclusion

Healthcare performance is strongly dependent on the health of the economy. This link should not be underestimated. However, as a medical professional you can proactively implement measures to ensure your practice’s health is protected. Here are three possible ways to help your practice continue to thrive in these tough times:

 

  • Frontline staff: It all starts with great frontline staff. Successful practices have procedures in place to support and empower staff to successfully navigate the challenging aspects of asking patients for payments.

  • Practice processes: You may have the best staff, but without the right technology to invoice patients before they leave your practice, they will not be able to help solve bad debt issues.

  • Payment options: Make payments as easy as possible for patients by providing options. These include upfront payment discounts, credit-card facilities, and the ability to pay at outlets such as Checkers and Pick ‘n Pay.

 

*Net effect on individual disposable income: the difference between South Africa’s inflation rate and the average taxpayers salary increase.

 

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