Are health co-operatives feasible in South Africa?

An investigation into the feasibility of health care cooperatives: opportunities and challenges in South Africa

by Julian Horn¹

Quality Health Care is critical for both families and individuals. In South Africa, only 18% of the population belongs to a private medical scheme which provides private health care services. Private health care is very expensive and low income earners can simply not afford a medical scheme. The result is that the only option available for low income earners is public health services like state clinics and hospitals.

Given the current state of the health care industry in South Africa, and more importantly the cost of quality health care, it is important to look at alternative methods to finance health care. If the trend of expensive health care continues and the proposed National Health Insurance (NHI) cannot deliver what they promise, it could leave the majority of South African citizens relying on an already stressed public health care system.

Nelson MandelaThe importance of this research was to explore alternative methods of health care delivery that can assist the private and public health care sector to deliver services that are seen as sufficient by global standards, as well as improving the overall health care delivery system in South Africa. One of the most prominent alternatives to health care service provision is the (not for profit) Cooperative Health Care (CHC) model.

General South African health care sector

In South Africa, we have a divided society in terms of income and standard of living. Only 18% of the population belongs to a private medical scheme resulting in a significant amount of pressure on the Department of Health. The private health care sector is operationally efficient with good quality services. However, affordability is a concern and a major barrier in terms of scheme take up by new members.

The public health care sector is under pressure due to capacity limitations in terms of staff shortages, resources and operationally active facilities. In the case of public health services, poor quality control results in loss of life, and substantial amounts of negligence in hospital lawsuits as seen in the case of Gauteng hospitals in 2015.

Operational capabilities of the CHC model compared to private health care companies

The findings of the research suggest that the CHC model can be compared to private companies in terms of operational capabilities. There will be many similarities within private and cooperative organisations as the way they operate is based on the same principles. Respondents stated that private and social organisations face the same challenges when it comes to operations. It was also noted that the CHC model could be more efficient due to a lower per capita cost per patient.

The researcher is of the opinion that the private health care industry in South Africa operates very efficiently. The only issue is the cost of being a member of a private medical scheme. As for other products available, one can argue that they are not sufficient enough in providing comprehensive health care benefits. It is also important to note that the objective of the research was never to compare the CHC model to any of the products available in South Africa, but rather the feasibility of the model in the South African context with a focus on some of the issues that we are experiencing, that is, access to health care, cost of health care and the quality of the services.

Funding and financing of the CHC facility

For the model to be successful there needs to be support either from Government or a private investment company. To ensure the co-op can sustain high benefit usage from patients, it will need sufficient cash flow to sustain those expenses. It is clear that with the help of Government the scope of the model could increase as well, meaning more people will know about the co-op, and it will be easier to attain patient numbers. Most of the respondents stated that their form of the CHC model is funded by the state and it is compulsory for members to make a contribution.

Sustainability

Sustainability refers specifically to self-sustainability. There is a concern in terms of self-sustainability, relying on financing and cash injections via investment from private, state sources or members. In addition, there will always be a consistent threat related to sustainability. The positive aspect is that there is a possibility that health care costs can decrease, meaning the amount of capital needed to fund the operations will decrease. As sustainability is a threat, lowering the cost might result in an increase of new members because they can afford a low premium.

Reduction in cost of health care

The cooperative health care model seems to be able to reduce the cost of health care. By having access to surplus funds, the cooperative can invest the funds back into the co-op to reduce the premiums of members. One of the advantages of the CHC model is the fact that members do not abuse the system because they know this could have an effect on their own contribution. This aspect depends on the objectives of the co-op. Surplus funds can also be used to increase the scope of services rendered by the co-op.

Regulation a threat to the CHC model

The researcher is of the opinion that regulations can only be beneficial to the CHC model as long as the regulations promote access to health care at an affordable price at the best quality possible. South African health professionals are regulated by the Health Professions Council of South Africa. The private health care industry is regulated by the Council for Medical Schemes and hospital insurance is regulated by the Short Term Insurance Act. This indicates that for the CHC model to be implemented; these regulations just need to be streamlined to fit the CHC model. However, the researcher suggests that there could also be a code of conduct that can be applied to the model to promote access, affordability, value and quality.

Increase in access to health care

When a country has statistical information that suggests only 18% of the population are members of private medical schemes, then one needs to consider this aspect as a key indicator of significance of the model in South Africa. Many of the respondents made the comment that the CHC model can increase access to health care. Therefore, this aspect needs to be considered as part of further research. The researcher is of the opinion that there will be patients who do not want to make use of state facilities. There might also be a possibility that medical professionals would not want to associate themselves with state services or the NHI, then the CHC model could be an alternative model for medical professionals and patients to consider.

Affordability of services

Due to the fact that medical services can be reduced could lead to a higher number of member uptake. This aspect is a determining success factor of the CHC model in the South African context. Many low income earners could benefit from the pricing strategy and with the support of small and medium companies could make the CHC model affordable to many.

Quality of care delivered by the CHC model

It was seen throughout the study that quality is at the forefront of the CHC model as patients are put first. Due to the fact that members have a say in the organisation suggests that quality can be positively affected by the members. They have a direct voice when they are not happy with the service they receive and also the services that are provided. There are some aspects of the CHC model that need further exploration like the fact that the patient is put first in every aspect of their approach and the ability of the cooperative to reinvest profit back into the facility to improve benefits and services. In a country like South Africa this feature can have a significant impact on the prevention of infectious diseases like TB (Tuberculosis) and HIV (Human Immunodeficiency Virus), whilst designing home care programmes and programmes to deliver health care services for those that cannot afford to contribute depending on the need of the community.

Recommendations

The South African National Department of Health appoints a task team to investigate and conduct research on the CHC model specifically as a model that can possibly motivate doctors to commit to the NHI and the community whilst providing them with financial security, needed facilities and resources.

This aspect is critical in the success of the NHI initiated by the Minister of Health, Dr Aaron Motsoaledi. It was stated in an article by Tamar Kahn in March 2014 that only 96 private sector doctors have signed contracts to work the NHI pilot districts, well short of the target of 600 set for this fiscal year, which ended on March 31 2014. The lack of commitment from doctors is due to the low hourly rate currently at R350 (ZAR) per hour.The researcher suggests that the CHC model could be used to provide doctors with a model that is private but still in partnership with the Department of Health. This can result in a tangible facility funded by Government, the members and employers from small and medium enterprises. The model can be based on objectives identified by the NHI for example prevention of diseases such as diabetes, high blood pressure and high cholesterol. The researcher is of the opinion that the facility can generate sufficient cash flow to add additional benefits like dentistry, optometry and nutritional services.

The South African National Department of Health appoint a task team to investigate and conduct research based on cost drivers of the CHC model.

The Department of Health can source a special projects team to analyse the financial model of a health care cooperative. In this case, the task team will analyse health care cooperatives in other countries to establish how they finance their operations.It will be of great value to draft a report on the financial feasibility of the model compared to insurance products that offer primary health care benefits in South Africa. The main objective is to establish if the CHC model can unlock value based (preventative) care at an affordable price.

The South African National Department of Health appoint a task team to conduct research on small and medium enterprises to establish their willingness to make a contribution per employee towards primary health care benefits.

As a small business owner himself the researcher states that it is important for government to be able to provide tangible evidence that the money paid by employees and employers goes towards promoting health and providing people with value for money. The researcher reverts back to earlier information that indicated low commitment levels from private practitioners. Therefore, one does not want to create the same commitment levels amongst small and medium companies. The researcher is of the opinion that the scope of the NHI is too big for Government to handle and manage effectively. For any form of universal cover to be effective one will need to have commitment from all stakeholders, without increasing financial risks for these smaller companies. It is critical to establish the level of commitment of these small and medium enterprises, and what would be a feasible contribution.

Piloting and thereafter introducing the CHC model in South Africa

The researcher recommends that the National Department of Health should pilot the CHC model amongst LSM groups 1-5 of the population to ascertain the teething problems and challenges which can be resolved. The piloting should be in phases and target different LSM groups of society in South Africa. The CHC model should work in synchronisation with the NHI. It is extremely important to explore, as the researcher is of the opinion that the model can benefit doctors, patients, government and the general health care sector in South Africa.

Introducing a hybrid model between the National Health Insurance scheme and CHC model

If the research conducted earlier suggests a positive outcome and the model is feasible in the South African environment, then one can develop a delivery or roll out strategy on how, where and when the primary health care cooperative facilities will be established. The researcher suggests to first look at some of the new clinics that were built for the NHI project, adapt and convert these facilities to health care cooperatives.

-Sometimes it takes a small solution to solve a big problem-

¹The information above was part of a research project conducted by the researcher in the completion of a Master of Business Administration Degree.