The annual results for Bonitas Medical Fund (Bonitas), 1 January – 31 December 2016, were announced today. Gerhard van Emmenis, Principal Officer said, “Increasing healthcare inflation and economic pressures are proving to be a challenge to the entire healthcare industry. The reality is that when consumers are struggling medical aid, which is essentially a grudge purchase, is often viewed an unaffordable. In addition, healthcare inflation continues to outpace general inflation by about 5%. Healthcare costs are not regulated which is why it is crucial for medical aid schemes to explore ways of decreasing costs on the supplier side, without compromising the level of health care offered to members.”

Bonitas’ strategy is focused on two key areas: Affordability and quality of healthcare.

According to Van Emmenis, money recouped in the last financial year, through a number of innovative cost-saving initiatives, has allowed Bonitas to emerge in a stronger financial position. The result has been a significant reduction in the overall net deficit experienced by the fund – reducing it from R205.5m in 2015, to R16.9m in 2016.

Reserves increase

“Bonitas reserves have increased from both the consolidation with LMS and business results,” says Van Emmenis. ‘Currently at R3.2bn this places us in a stronger, more robust financial position where we are confident of our ability to meet member claims.”

Amalgamation success

New members are critical to the sustainability of any scheme and during the year under review, Bonitas amalgamated with Liberty Medical Scheme (LMS) with an excellent migration rate. “Research indicates that there is usually around a 7-10% attrition of members during an amalgamation however, with over 90 % of members taking up one of the 12 plans we offer, we had a much higher retention than anticipated,” explains Van Emmenis.

Cost containment initiatives

“As a management team we continue to explore and implement solutions to help curtail costs,” he says. “This, not only to help limit contribution increases but also so that our members can continue to afford quality healthcare cover. And, although unfortunately we had to implement a double digit increase in January 2017, Over 90% of our members opted to remain on the same plan. We feel this endorses the fact we are offering affordable options and medical aid as it should be.

“We also strive to help members derive real value for money and stretch their benefits as far as possible. Our strong financials are largely due to rigorous negotiation strategies premised on strategic purchasing and the development of advanced managed care protocols. The past financial year saw the board and management team striving to improve the operational, financial and strategic position of the Fund to ensure sustainability.”

Managed care

“Our managed care programme, introduced over the past few years, is having an extremely positive impact on cost containment,” says Van Emmenis. “Aimed at actively managing disease, crucial health interventions, family practitioner upskilling, coordination of care as well as strategic purchasing and wellness, it helps manage the increasing disease burden and contributes to the continued sustainability of the current healthcare funding model. Over R60m was saved during this past financial year.”

The programmes include:

Diabetes Management

The fund’s new diabetic programme ensures all 40,000 diabetic patients receive treatment in a co-ordinated approach and cost effective manner.

Hip and Knee Replacement

Introduced with the intention of saving member’s funds for related treatment whilst ensuring quality care, an average cost saving of 6% is enjoyed by the fund for each patient on the programme.

Back and Neck Rehabilitation

Improving clinical outcomes by restoring optimal function to the back and neck is the aim of this programme. It encourages identified patients to opt for conservative rehabilitative treatment instead of surgical procedures. Patients enrolled in back and neck rehabilitation benefit from improved mobility and reduced pain whilst limiting the need for surgery.

The fund has numerous other managed care initiatives in place to further reduce the cost of healthcare and ensure that the correct care is provided to achieve the best possible clinical outcomes.

‘‘We are pleased to say the strategy is working, we have positive member feedback and are seeing real cost savings. The board will continue to implement new strategies going forward.

Fraud, waste and abuse

Fighting fraud, waste and abuse is also one of Bonitas’ top priorities and a series of measures have been put in place to ensure that it is fraud resilient. ‘We already employ an arsenal of sophisticated measures to deal with the challenge and significant progress has been made to enhance our prevention and detection capabilities,’ says Van Emmenis.

This initiative utilises a combination of technology, analytics and expert skills to identify fraud, waste and abuse. As at 31 December, the Fund had implemented Phase 1 and identified R79m worth of fraud, waste and abuse, recovering approximately R20m from healthcare professionals. Out of the 574 healthcare professionals identified, 34 have been charged and there have been four successful arrests. Phase 2 and 3 are now being implemented which focus on pharmacies and hospital claims.

Becoming a strategic purchaser

One of the core tactical pillars is strategic purchasing – which mandates the fund to use its market power to negotiate prices to favour its members. This includes negotiating multiple contracts with healthcare service providers to lower inflation increases and ease costs within the healthcare supply chain.

“Through our robust negotiating strategy, a saving of more than R100m will be seen in 2017 and around R500m over the next three years, in present value terms is projected,” says Van Emmenis.

One of the positive outcomes for 2017 has been the negotiations with the three largest hospital groups around admission costs which are the single biggest expense for medical schemes – costing Bonitas nearly R6bn a year. “It is vital that a scheme sources the lowest possible tariffs,” says Van Emmenis. “The reasons are two-fold: To maintain the Fund’s sustainability and ensure that our members continue to have access to affordable healthcare of the highest standard. This will directly impact future contribution increases and ensure that the Fund can continue to meet the needs of its members.”

The way forward

Apart from stimulating organic growth and pursuing amalgamations to boost member numbers, the Fund continues to devise products to enhance its business and product offerings. The amalgamation with LMS also provided access to another distribution channel, via the Liberty brokers and agents, which opened up a market opportunity.

The new Demarcation Regulations will create opportunities for Bonitas. The Regulations related to the selling of healthcare products will be subject to CMS regulations. For this reason the Department of Health is looking at ways of creating affordable healthcare for all South Africans including the development of Low Cost Benefit Options (LCBO) within the next two years. Medical schemes are also creating more affordable plans for low income earners. Van Emmenis says, “There has been a growth in health insurance products over the past few years, mostly taken up by low-income earners which means there is a ‘gap’ in the market for low cost plans which cover both hospital and primary health care claims.”

“We remain positive about our sustainability and future. During our 35 years in the healthcare industry we have experienced difficult operational times but we have found innovative solutions to overcome these and will continue to strive to make quality healthcare accessible to all. Reducing the net deficit by 92% in just one year reinforces the fact our strategy is on the right track.”

Topline points of interest:

• 92% reduction in net deficit in 2016 from R205.5m and R16.9m otherwise
• 8.6% increase in claims in 2016
• Robust reserves of R3.2bn
• 44.9% of all claims were for hospital admissions and 11.7% for specialists – these were the two highest cost-drivers
• Savings from fraud, waste and abuse amounted to R20m
• R10m was recovered in historic debt
• A projected savings of R100m for 2017 from strategic negotiating strategy
• 348,0088 principal members and 753,514 beneficiaries