Fighting healthcare costs through shared-value

Last week, in this column, I asked What is driving up our healthcare costs? I shared our data which indicates that increased usage of healthcare services is the key driver of medical scheme claims increasing by 5% above CPI each year. Our healthcare system, both public and private, is facing a massive challenge from rapidly escalating rates of chronic disease including diabetes and heart disease. These pressures are aggravated by new, high-cost medicines and technologies, and also by inefficiency - in particular due to unnecessary tests and procedures - as well as fraud.

Discovery Health is deeply committed to actively tackling these issues, in cooperation with health professionals and our members, through what we call a shared value health insurance model. In this model, we collaborate with members and their doctors to improve efficiency and quality of healthcare throughout the system. This both makes members healthier and reduces claims significantly. The resulting surplus is shared with members through richer benefits and lower insurance premiums, and also with doctors through increased remuneration in return for improved quality of patient care. In this virtuous cycle, ongoing improvements continuously create additional value for all parties.

One key element of this shared value health insurance model is Vitality, Discovery's science-based wellness programme, which rewards members for living a healthier lifestyle. Our data indicates that, compared to non-Vitality members, highly-engaged Vitality members have 10% lower hospital admissions, 25% shorter hospital stays and 14% lower overall claims costs. Vitality's impact reduces the Discovery Health Medical Scheme's claims costs by around 3% each year - generating total savings of approximately R11.6 billion since 2008. This allows the scheme to provide richer benefits to its members at premiums that are, on average, around 16% lower than other competitor open-schemes, on a like-for-like basis. This is a classic example of shared value: all parties benefit from the increased value arising from healthier members' lowered risk profile.

A second element of the shared value health insurance model is our collaboration with a number of leading specialist associations to create shared value clinical programmes. These bring together doctors, members and our schemes in a positive, mutually reinforcing approach to improving the quality and efficiency of care. For example, members in our DiabetesCare programme enjoy enhanced, clinically appropriate benefits and improved care. At the same time, actively engaged doctors are paid higher fees when they achieve defined quality-of-care measures. The early results of this programme are extremely positive, with significant increases in the percentage of diabetes patients having critical monitoring tests performed, and with clear evidence of improved outcomes as well. We have seen similarly excellent results in our dialysis and other clinical programmes, with all parties benefiting significantly - patients through improved quality of care, doctors through enhanced remuneration, and the medical scheme through lower claims.

To many, this approach seems counterintuitive - it is usually assumed that cost savings can only be achieved by cutting corners and reducing quality of care. But in healthcare this is not the case. As there is so much waste in our system, these kinds of quality-focused collaborations create a win-win situation, with simultaneous reduced costs and improved quality of care. There is a vast amount of global evidence to prove this, and our own data shows the exact same pattern.

A final element is to ensure that doctors also take care of their own health. So many of our doctors are overworked and stressed, and our data shows clearly that healthier doctors have healthier patients. Through our Vitality Active Rewards for Doctors programme, we are incentivising doctors to exercise more, to eat more healthily, and to generally take charge of their health. Another example of the win-win impact of the shared value model.

In next week's column, I will expand on shared value's powerful potential to create a healthier, more prosperous society and critically, to empower patients to take charge of their own health and healthcare.