1. The Costing of Prescribed Minimum Benefits
January 2003

2. Söderlund & Peprah (1998)
Minimum package defined in terms of diagnosis-treatment pairs. ICD-10 codes for diagnosis element and CPT-4 codes for treatment element.
The “core inpatient package” would cost R 502 pbpa in 1998 prices.
Data on outpatient services could not be broken down into diagnosis-treatment pairs. Assumption that experience of mine hospital users would apply. Expected outpatient costs of R 183 pbpa.
Estimated that total inpatient and outpatient package would cost R 685 pbpa, for those currently without medical scheme cover.

3. Definition of the PMB Package
Söderlund & Peprah (1998)
Minimum package defined in terms of diagnosis-treatment pairs. ICD-10 codes for diagnosis element and CPT-4 codes for treatment element.
1999 Regulations under the Medical Schemes Act
No codes in Regulation.
Subjective interpretation of PMBs by each scheme.

4. Comprehensive Crosswalk
Included (IN) as a benefit in the PMB package
Excluded (OUT) as a benefit in the PMB package
NC (not classifiable) with respect to the PMB package

5. PMB Study Data Data from Medscheme Data Warehouse
Data covers 2001 calendar year, extracted in July 2002
Data fully run-off, no adjustment for IBNR
90 options
31 schemes
million beneficiary months of data
Average exposure of 1,505,917 beneficiaries

6. Data Sets
Pricing
Chapter Analysis

7. Cluster Analysis

8. Cluster Analysis
Different clusters experience different benefit utilisation, costs and disease profiles. Provider behaviour differs by cluster, even within the same hospital facility.
Distinct clusters:
High contains options with older, 'whiter' members with high utilisation;
Medium-older contains options with medium utilisation and older members;
Medium-younger contains options with medium utilisation and younger members; and
Low contains options with younger, 'blacker' members with low utilisation.

9. Beneficiaries in Study
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10. Contributions and Benefits
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Q Data

11. Proportion of Beneficiaries Over Age 55
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12. Proportion of African/Black Beneficiaries
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13. Applicability to the Industry

14. Simplified Age Profiles of the Study and Industry
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15. Detailed Age Profile of the Industry and Study

16. Ethnicity Summary

17. Weighted Industry Total
Study contains more Low cluster beneficiaries than the industry.
Re-weighted total to give closer demographic fit to industry data:
100% High cluster
100% Medium-older cluster
100% Medium-younger cluster
50% Low cluster
Weighted industry total gives exact matching of beneficiaries over age 55; closer to ethnicity
Low cluster is more relevant to the emerging low-cost option environment.

18. Cost of PMBs by Cluster

19. Admission Count by Status
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20. Claim Value by Status Centre for Actuarial Research Centre for

21. Average Cost by Status
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22. Proportion of Status by Cluster
older
younger 0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
High
Medium -
Low
Total
Proportion
Out
Not Classifiable
Included

23. Incidence of PMB Admissions by Cluster
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24. Average Cost of PMBs by Cluster
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25. Cost of PMBs by Disease Chapter

26. Proportion of Admissions by Disease Chapter0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
CNS
Eye
ENT
Respiratory
Cardiac
GIT
HSP
MS/Trauma
Skin/Breast
Endocrine
Genitourinary
Gynaecology
Obstetrics-Neonate
Haem-Infect
Mental Illness
OUT
INCLUDED

27. Proportion of Claim Value by Disease Chapter0%
20%
40%
60%
80%
100%
CNS
Eye
ENT
Respiratory
Cardiac
GIT
HSP
MS/Trauma
Skin/Breast
Endocrine
Genitourinary
Gynaecology
Obstetrics-Neonate
Haem-Infect
Mental Illness
OUT
INCLUDED
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28. Proportion of Total Cost of PMBs by Disease Chapter
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29. Average Cost of PMBs by Disease Chapter
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30. Average Cost by Chapter High vs. Low Clusters
CNS
EYE
ENT
Respiratory
Cardiac
GIT
HSP
MS/Trauma
Skin/breast
Endocrine
Genitourinary
Gynaecology
Obstetrics-Neonate
Haem-Infect
Mental illness
Other
Average Cost
Low
High

31. Differences in Cluster Costs
Not simply different costs charged by providers for the same diagnoses. Issue is much more complex.
Very different age and demographic profiles.
Age difference would account for significant differences in diagnoses, e.g. mainly meningitis in Low cluster and stroke in High cluster in CNS chapter.
Condition perhaps not diagnosed as frequently in Low cluster due to differences in access to doctors: Low cluster biased towards GPs , High cluster prefer specialists.
Also benefit design, severity of disease and provider and patient demand.

32. Top Five Disease Chapters High vs. Low Cluster

33. Diagnoses by Disease Chapter
Top 10 diagnoses (ICD-10 codes) in the PMB schedule, ranked by claim value (i.e. total cost), usually account for more than 70% of total cost in each chapter.
Surprising since most chapters contain approximately 100 diagnoses (ICD-10 codes).
Probably a reflection of the state of coding in SA, rather than a true concentration of diagnoses.

34. Pregnancy and Childbirth

35. Cost of PMBs
by Age

36. Age Profile of Study

37. Age Profile Beneficiaries Admitted for PMBs

38. Incidence of PMB Admissions by Age

39. Average Cost of PMBs by Age
Average Cost for All Ages
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40. Average Cost of PMBs by Age
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41. Raw Price of PMBs

42. Annual PMB Price by Cluster (pbpa)
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43. Raw PMB Price by Age (pbpa)
Average Price for All Ages
R pbpa
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44. Raw PMB Price by Age and Cluster (pbpa)
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45. Raw PMB Price by Wider Age Bands (pbpa)
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46. Adjustments to the Raw Price of the PMB Package

47. Adjustments to Raw Price
Uncertainty in Definition of the PMB Package
Recoding the OUT Group
Recoding the NC Group
Costs of hospital management programme
Costs of hospital and related claims administration
Costs of chemotherapy and dialysis
Costs related to HIV/AIDS
Estimate of the cost of ambulatory care
Costs of ambulatory administration
Reduction for cost of delivery in the public sector

48. Recoding of Out Group
Coding originally done by Söderlund was open to debate among healthcare professionals.
No clear definitions in Act so ICD-10 codes placed into IN, OUT or NC on a subjective basis.
Reviewed all 1 614 ICD-10 codes classified as OUT.
New coding moved 19.8% of admissions of OUT group to IN group.
Claim value was 27.0% of the original OUT category.
Raw price for PMBs for all clusters increases from R pbpa to R  pbpa, an increase of 13.5%.
Recommendation: allow for 27.0% of the OUT category by value to be included in the final price.

49. Recoding of NC Group
NC group is more complicated to recode, as many conditions need to be linked to CPT-4 codes.
Recommendation: stress-test final price using various estimates of proportion of NC that might be included in a better-defined PMB package.
Recommended estimate is to include 20% of the NC group by value in the final price.

50. Hospital Management Costs

51. Hospital and Related Claims Administration

52. Chemotherapy and Dialysis
Treatable malignancies and chronic renal failure most frequently managed in outpatient setting.
Clarity in Regulation November 2002 that these are included in PMBs.
Figures described as “very preliminary”. Need further work.
Recommendation: use R12 pbpa for chronic renal failure and R36 pbpa for chemotherapy.

53. Regulations November 2002
Note: (2A) In respect of treatments denoted as “medical management”, note (2) above describes the standard of treatment required, namely “prevailing hospital-based medical or surgical diagnostic and treatment practice for the specified condition”. Note (2) does not restrict the setting in which the relevant care should be provided, and should not be construed as preventing the delivery of any prescribed minimum benefit on an outpatient basis or in a setting other than a hospital, where this is clinically most appropriate.

54. Costs related to HIV/AIDS
Only 9 admissions coded 168S (Diagnosis: # HIV-Associated Disease).
Confidential data from Aid-for-AIDS programme will not be obvious.
Costs of related conditions and complications are identified in categories such as pneumonia, encephalitis, TB etc. Available for further analysis.
Study almost certainly incorporates the cost and pricing of hospitalisation of symptomatic AIDS, as at 2001.
Recommendation: Allow for impact of increased hospitalisation for HIV/AIDS in later stages of epidemic. Obtain advice from Actuarial Society of South Africa’s AIDS Subcommittee.

55. Estimate of Additional Cost of Ambulatory Care

56. Ratio of Ambulatory to Inpatient Expenditure
Söderlund (1998) used 36.5%
Source: Van den Heever using OECD database

57. Estimate of Ambulatory Care
Amount paid to hospital groups, less admissions, was R314 million. Includes out-patient visits, on-going tests performed in a hospital setting, dispensing from the hospital pharmacy, emergency room visits for conditions such as asthma and diabetes, and costs for certain dialysis centres.
Chemotherapy and dialysis separately estimated. Caution overlap with CDL package.
Recommendation: use 15% as estimate for ratio of other ambulatory expenditure to in-patient expenditure for the PMB package, excluding the CDL package.

58. Ambulatory Administration
Scanty information. Level of pre-authorisation and management will be much lower and will apply only to certain tests. Administration of claims will require much less intensive activity.
Recommendation: If the other ambulatory expenditure estimate is held at the recommended level of 15%, then use 10% of the non-health care costs of the in-patient PMB package, as the estimate for the costs of ambulatory administration.

59. Delivery of PMBs in the Public Sector

60. Public Sector vs. Private Sector Costs: PAWC Study of Selected Conditions

61. Public vs. Private sector Costs for Appendicectomy
34.08% higher than public sector

62. Length of Stay for Appendicectomy for Low Cluster
Complications
86.2% hospitalised for 4 days or less. Maximum stay was 43.5 days.

63. PMB Cost in the Public Sector
Studies available use theoretical cases.
Attempts to compare actual costs of public and private sector admissions uncovered unexpected finding that not all provinces were billing using UPFS system in 2001.
Need to definitively determine the relationship between UPFS costs in the public sector and costs in the private sector. DoH study now underway.
Recommendation: use 70% of PMB price for delivery of PMB Inpatient package and PMB Outpatient package in public sector. Adjust in negotiations with provincial authorities.

64. Full Price of Existing PMB Package

65. Full Price of PMB Package
Four components :
In-patient PMB package price based on full data in study (high degree of certainty)
Portion of price for which uncertainty exists in PMB definition (proportion to include of NC and OUT)
Margin added for ambulatory costs
Non-healthcare costs.
Note: Prices should not be used blindly in pricing work. Contact a professional for assistance.

66. Full Price of PMBs (excl CDL)
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67. Full Price PMB Package (excluding CDL)

68. Non-healthcare Expenditure
Well below Registrar’s benchmark of 10% of total expenditure

69. PMB Package Relative to Industry Hospital Expenditure
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70. PMB Package Relative to Benefits and Contributions
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71. Conclusions

72. Preliminary Conclusions on Affordability
The PMB package (excluding CDL) appears to be affordable compared to hospital benefits and the proxy for hospital and related benefits.
The package also appears to be well covered when compared to the level of total benefits and contributions at an industry level.

73. Improvements to PMB Definition
All stakeholders need an unambiguous definition of the PMB package.
The Council for Medical Schemes is requested to reconsider the definition of PMBs in the Regulations and to include clear diagnosis and procedure codes in an amendment as soon as possible.
Tighter definition of PMBs would ensure more focussed attention on accurate coding from providers and administrators.
Attention should be given to the nature of the chapters and to bringing them in line with clinical practice or a particular coding standard.

74. Public Sector vs. Private Sector Approaches to Treatment
As yet, no coherent approach to defining the basic essential minimum services between the public and private sectors.
Far more agreement and convergence are required in terms of public vs. private sector approaches to common conditions. Admission to hospital is the norm in the private sector but not in the public sector where some events are regarded as being non-acute in terms of PMBs.  
Agreement is needed on the roles of new generation prostheses, devices, immune modulators, gene therapy, procedures and drugs.

75. Comprehensive Crosswalk
Provides a powerful tool for rapid application of PMB status to hospital admissions based on ICD-10 coding
Strongly recommend that this should be made freely available to other medical schemes and administrators, in order to improve their understanding and management of PMBs.
Recommend utilising this tool, or one developed from this work, to define and manage the PMB package in future.

76. Further Research
It is now possible (within a few minutes), to extract data for a specific ICD-coded diagnosis with its accompanying costs, related length of stay, age data and cluster data. These can also be expanded to include ethnicity, scheme options and provider information. This information can be grouped into clusters, age bands, and disease patterns depending on the requirements of the user.
This opens the possibility of doing much valuable and detailed analysis of specific problem areas in the PMB definitions in order to refine the PMB package.
Several projects planned for 2003 at UCT using this data.

77. Centre for Actuarial Research
A Research Unit of the University of Cape Town
(CARE)
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A Research Report Prepared
Under Contract for the
Council for Medical Schemes