• Economics
  • What's needed for DRG's in South Africa's NHI?

    A critical theme in South Africa’s National Health Insurance initiative is changing the way that hospital services are financed. Switching to Diagnosis Related Groups (DRG) was part of the original Green Paper in 2011, and remains firmly in place in the updated version released in December 2015. It’s not a simple switch, and needs several building blocks to work effectively.

    It’s also a proven financing methodology. Many countries use DRGs, and have developed their bespoke versions. Originally designed as a quality assurance tool in the USA, DRGs were used by the Medicare Program to reimburse hospitals using prospective prices from 1983. It had 470 DRGs across 23 Major Diagnostic Categories (MDC), each of which can include both surgical and medical services. As combinations of WHO’s International Classification of Diseases (ICD), currently ICD-10, they initially didn’t reflect the severity or complexity of the conditions, and adjustments for these came later. There are now over 750 DRGs in use for 26 MDCs, depending on the version and country. Some DRG prices distinguish day case from inpatients. 

    About half the DRGs are medical, 47% for surgery in MDCs, plus 2% for pre-surgery and 1% for surgical cases not in MDCs and two DRGs for an invalid principal diagnosis and ungroupable workload. About 3% of DRGs aren’t in an MDC. It’s roughly a 50:50 split between medical and surgical cases.

    Prospective DRG prices are seen as a way to control healthcare costs. It requires hospitals to manage their unit costs and annual expenditure within these. So why’s it not that simple? DRGs don’t extend across all hospital activity and need time to catch up with new medical techniques. These can either have their own reimbursement rates, or take so long to set that they can be a brake on investment, a claim for a slow take up of telemedicine. A recent example’s the proposal in 2015 from the American Association of Hip and Knee Surgeons (AAHKS) to the Centers for Medicare & Medicaid Services (CMS) to modify or establish a new MS-DRG for total hip arthroplasty (THA) cases involving patients with hip fracture. For 2016, CMS has released DRG version 33, one a year since 1983, including eight changes to existing Medicare Severity (MS) DRGs.

    Since 1983, DRGs have almost gone global. As a proven reimbursement method, many countries have refined them to match their health systems. The UK and Ireland have Healthcare Related Groups (HRG). The Nordic countries have their NordDRG. These reflect health systems’ bespoke characteristics. This includes their different healthcare models and their specific cost structures. 

    Setting prices for DRGs often starts with existing unit costs. This needs a costing system with two main methodologies. One’s Total Absorption Costing (TAC) to allocate and apportion expenditure to unit costs. The others a variable and semi-variable costing methodology to identify expenditure changes arising from changes in workloads. Semi-variable costs are the most challenging to compile. Both methodologies rely on sound workload data and ICD 10 coding.

    Using TAC throws up a specific challenge for healthcare. Direct costs that can be allocated to specific patients are a small proportion of total costs, maybe less than 10%. This creates the risk of large skewed unit costs derived mainly from using formulae for apportionments. One way to minimise these inconsistencies it to create cost pools for the MDCs or specialties where direct costs can be increased significantly. Each MDC can have its own apportionments on to workloads. This minimises skewed results, but doesn’t avoid them, so comparisons between hospitals’ will still reveal some odd numbers.

    For South Africa’s switch to DRGs, some important activities are needed that apply lessons learned from other health systems. They include:

    Test the accuracy and completeness of hospital’s workload data, including duplication challenges as reported in eHNA, and minimising the workload assigned to DRGs for invalid principal diagnoses as discharge diagnoses and ungroupable workload Test hospitals’ ICD-10 readiness to avoid the USA’s unhappy experiences reported in eHNA Design the DRG grouper needed for reimbursement, including DRG choices for patients with more than one DRG for their hospital stay Set up reimbursement models for hospital services that don’t fit the DRG model Design and trial a national hospital costing methodology that reconciles workloads x unit costs to total expenditure Refine the costing methodology Run a parallel DRG financing model alongside the existing model to identify large swings Design an interim DRG financing model to minimise financial risks Estimate and monitor changes to hospital costs and the impact on total health service spending and finance.

    With the NHI’s fourteen-year development timescale, now’s the time to start these. An early start provides time to iron out data idiosyncrasies and will help to minimise risks, which are always prevalent when financing models change. eHNA’s looking forward to reviewing these soon.

  • Three African economies might shrink in 2016

    Expanding economies should be able to afford expanded healthcare, so may be able to invest in more eHealth. Conversely, shrinking ones may not. 

    The Economist Intelligence Unit’s forecasts for 2016 shows three African countries in the top ten growth rates. Cote d’Ivoire, Rwanda and Djibouti have forecast growth rates of more than 6%.

    Libya leads the shrinking economies with a forecast drop of more than 8%. Equatorial Guinea is forecast to shrink by about 3% and Burundi by about 1%. Libya’s falling (Gross Domestic Product) GDP goes back to 2013 and the continuing fighting and political uncertainty.

    The growth of three top expanding economies is impressive when it’s compared to the global GDP growth of 2.7% in 2016. It’s up from 2.4% in 2015. However, these global rates are seen as moderate, due to “lacklustre” growth in the “euro area, Japan and emerging market economies as a whole.”

    The World Bank has a 2016 forecast too. It has Egypt at 4.5%, above the global average and Algeria at 3.9%. Nigeria’s forecast to grow by 5% and Angola by 3.9%. South Africa’s forecast growth rate’s 2.1%, well below the global average.

    How much of this growth finds its way into healthcare is largely a political decision determined by relative priorities. However much does, it’s important that eHealth has its share.

  • South Africa's White Paper moves NHI on

    It was 2012 when South Africa’s Green Paper National Health Insurance in South Africa set out plans for a National Health Insurance (NHI). Experiences and piloting since then is culminated in a White Paper, National Health Insurance for South Africa Towards Universal Health Coverage White Paper. Released in December 2015, it refined some of the approach. The 14 year timescale is retained. The information requirements are now much more developed and extensive.

    The NHI Fund will contribute to an integrated and enhanced National Health Information Repository and Data System. It’s crucial for implementing and managing NHI and service portability of services. The NHI Fund’s information system will be based on an electronic platform, with links between the NHI Fund membership database and the accredited and contracted healthcare providers. It’ll support:

    Monitoring the extension of coverage in population sectors Tracking health status of the population and production of disease profile data used in computing capitation allocations All the financial and management functions Utilisation of healthcare benefits by the NHI members and using the information for planning and decision making for contracting, purchasing and communication strategies Quality assurance programmes for healthcare providers Production of reports for health facilities and health system management Research and documentation to support changes as the population’s healthcare needs change. 

    The NHI Green Paper identified the need for a Health Patient Registration System (HPRS) to enable for planning and providing health services, and tracking their use. The patient registration system will provide essential information on demographic and epidemiological data which is important for determining the services needed and refining reimbursement mechanisms.  

    The National eHealth Strategy for South Africa outlines a roadmap for achieving a well-functioning, patient-centred electronic NHIS. The strategy recommends an integrated national patient-based information system based on:

    Agreed scientific interoperability standards Improving clinical care efficiency Producing management indicators Facilitating patient mobility. 

    Realising the NHIS architecture, or eHealth enterprise architecture proposed in the eHealth Strategy, is an iterative process as part of establishing key building blocks and technical components. It’ll facilitate integration with other health sector information systems in the health sector, a critical NHI enabler. 

    The HPRS is an NHI component, and started its development in July 2013 as a partnership of the National Department of Health, the Department of Science and Technology and the Council for Scientific and Industrial Research (CSIR). It includes a Patient Registry and Master Patient Index (MPI) using South African’s Identification Number and all other legal identification numbers such as passports, as the primary patient identifier.

    HPRS will track people using services at health facilities at different levels of care using capabilities of:

    Barcode Scanning of ID Books, driver’s licenses and biometric readers Patient lookup for demographic details, facility links and patient file numbers Generate a patient file number Maintain patient details Links patients to primary healthcare facilities Record visits by date, time, facility and purpose Provide management information about health service provision.

    Phase 1 has focused on primary healthcare facilities in pilot districts. More than 555,000 patients were registered in 118 facilities. It’ll be operational all 698 facilities in the NHI pilot districts by 31 March 2016. Phase 2 will implement HPRS in PHC health facilities in all 52 districts and the 400 hospitals in the public sector.

    HPRS Phase 1 includes geo-spatially plotting 12,808 GPs, 3,085 dental practitioners and 15,717 allied healthcare professionals currently practising in South Africa. It’ll be part of a web-based Health Provider Registration System for provider registration. Phase 2 create a Health Provider Index with links to the MPI through Health Information Exchange (HIE) middleware.

    An NHI Risk Engine’s planned to mitigate fraud and corruption. It’s important partly because there may be weak internal control systems. It’ll be part of policies, procedures and systems that aim to curb aberrant practices. Alongside these, strategies will be developed to prevent abuse of health service facilities.

    Cyber-security isn’t mentioned as a risk. Experiences from the USA show that healthcare’s at increasing risk, especially to acquire personal social security details for fraudulent claims. NHI data can have an equivalent appeal to cyber-criminals.

    More health technology’s planned for South Africa. The White Paper sees health technology assessment as informing, prioritising, selecting, distributing, managing and introducing interventions for health promotion, disease prevention, diagnosis, treatment and rehabilitation. Efficient use of resources is a crucial to achieve a sustainable health system.

    Increased investment is envisaged. eHealth leaders will need a methodology to demonstrate value for money and affordability. These are core components of business cases that eHealth leaders and teams need to master.

  • GSMA's mNutrition costs

    Over the last decade or so, there’s been a few exhortations, a bit short of clamour for business cases for all types of eHealth. It’s vital information for Africa’s health systems where extremely stretched healthcare resources makes rigorous investment decisions a necessity. GMSA’s published two, and it seems that more are on the way. They’re for mHealth to support nutrition, called mNutrition by GMSA, in Zambia and Mozambique.

    They use the same methodology that includes:

    The Lives Saved Tool (LiST) A Likert Scale, which uses a small number of questions to measure attitudes Have the same two scenarios: one for SMS and one for SMS with Interactive Voice Response (IVR) A five year horizon.

    Both evaluations estimate that mNutrition products are cost-effective intervention for the prevention of child deaths in both the SMS only and IVR scenarios. The irreversible effects of stunting and wasting present long-term challenges to productivity and quality of life. Stunting include delayed motor development, impaired cognitive function, and poor school performance. Wasting, or low weight for height, can result in mortality for children under 5. The health effects of avoidable stunting and wasting negatively impact economies by reducing the population’s capacity to maintain current levels of productivity and increase it over time. If these were quantifies, it may improve the economic case for mNutrition.

    Both reports claim to offer a business case for mHealth, so it’s reasonable to compare it to a proven methodology, the five case model. It complies with some of it, and omits some important business case components. The two scenarios, which are options in business cases, are both mHealth, so there’s no comparison with other options that may be better or worse.

    Like all business cases, they’re based on assumptions and estimates. The five case model requires results to be adjusted for sensitivity, risk and optimism bias. It seems these aren’t included in the reports, so no help on how to mitigate investment risks. There are two kinds of money, economic and financial. They’re similar, but not the same. Economic costs are used to measure value for money (VFM), financial, or accounting costs, are used to measure affordability. Estimated costs into the future as part of VFM are usually discounted to Net Present Values (NPV). It’s not clear how this is done it the reports, or if it’s done at all.

    This is a vital distinction for African countries. Sometimes, attractive VFM’s not easily affordable, so not sustainable, and invariably the critical factor in eHealth investment decisions. It’s important to keep these two concepts integrated, but apart, especially when comparing mHealth to other investment choices such as new clinics and innovative medical equipment.

  • England's not releasing eHealth savings estimates

    The need for evidence for eHealth benefits is vital in making better eHealth decisions. eHNA has numerous reports on a range of findings from the USA. Some of it’s positive, some shows the need for change and show limited gains in efficiency and cost savings. A report in Digital Health News (DHN), a UK-based online media services, says England’s NHS isn’t sharing details of estimated savings. The Department of Health has turned down DHN’s Freedom of Information request to see the report that DHN claims is the source of the estimates: Modelling the potential of digitally enabled processes, transparency and participation in the NHS by McKinsey.

    Estimated savings of between £8.3 billion and £`13.7 billion by 2020 have already been referred to in the public domain by officials. It’s not clear if these are potential savings, probable savings, cash savings, redeployable resources, or exceed the costs of achieving them. The numbers are significant, about half the £22 billion in annual efficiency gains that NHS England’s aiming for by 2020 to help fill a £30 billion gap between funding and demand. The report has been superseded by new plans, so the status of its estimated savings isn’t clear.

    It’s also about 1% of NHS England’s total spending. If extra eHealth spending takes its share of total spending up by about 1%, the eHealth savings may not be a net gain. This very simple comparison excludes the extra costs of risks in trying to realise the benefits. 

    In Exploiting the information revolution: call for independent evaluation of the latest English national experiment in the UK’s Chartered Institute for IT’s Journal of Innovation in Health Informatics, Dr Philip Scott says NHS England’s eHealth framework has “Many laudable and common sense ambitions,” but it’s “Light on evidence to support its aspirations, or plans for its evaluation.” An example is that it doesn’t include findings from the evaluation studies of the later stages of the abandoned National Programme for IT, and claims the unpublished McKinsey report was commissioned specifically to support the framework, raising “Questions about its objectivity.”

    An important lesson for African health systems is to ensure transparency about their eHealth plans. Engaging stakeholders effectively helps to produce better, sustainable business cases, plans and results. Sharing all the information is essential. eHealth plans are hardly state secrets.

  • How much does eHealth matter?

    It’s a good question. It’s also surprisingly difficult to answer. Typically, it depends. An answer starts from relatively simple aspects such as how much needs to be spent, what benefits it realises and what the health outcomes look like, and then moves into trickier areas such as what else is changing, who it’s changing for and how much of the change can be attributed to eHealth. Core themes for eHealth to matter are, does it help to:

    Strengthen healthcare Transform healthcare Improve health.

    From these, the challenge is to identify eHealth that contributes effectively to better health and healthcare. It needs a good framework to help deal with the complexity. Unfortunately there isn’t much available and the ones that exist use methodologies that are not well suited to the priorities and challenges eHealth faces in African countries. This is why Acfee believes it’s an important to begin building an appropriate framework for appraisal of eHealth Impact in Africa.

    Countries need appropriate tools to help implementers with less experience and skills in economic evaluation to get started, grow, learn and progress to more complex techniques. It’ll also integrate economics with financial perspectives, so be able to deal with value for money and affordability. The dual view’s vital. eHealth affordabilitty’s a key obstacle for many African countries. Acfee’s building an eHealth investment framework to provide a structured appraisal to support countries’ business cases. It’s due for release in the second half of 2015, and has three components:

    Prospective evaluation of eHealth inititiatves, to identify the ones worth investing in Ongoing monitoring and evaluation of implementation, with a direct connection to the proposed benefits identfied in the initial evaluation Retrospective assessment, to extract lessons learned, to take back into planning and evaluation.

    If all goes well it might even help us provide a clear answer, the next time someone asks, “How much does eHealth matter”.

  • Acfee's eHealth investment framework's on schedule

    African Centre for eHealth Excellence (Acfee) plans to release its eHealth investment framework.

    It’s a combined economic and financial model that can be used to appraise Value for Money (VFM) and affordability for eHealth business cases. The integrated model means it can also help with Monitoring and Evaluation (M&E). This creates a matrix of uses as:

    The templates are all in Excel. They’re planned for release in September 2015, along with the Southern African Spring.

    They’re part of Dr Sean Broomhead’s PhD. He’s Acfee’s Chairman. More information will be on eHNA once it's ready.

  • Why use telemonitoring if it makes no cost difference?

    A study in Pub med by a team from Regenstrief Center for Healthcare Engineering at Purdue University, Indiana, USA has found that there are no cost differences between telemonitoring and conventional care for elderly patients. There were some differences, though. The costs of the telemonitoring patients weren’t as variable, and they had lower total 30-day readmission costs too.

    The patients had a range of characteristics. They were high-risk, seriously ill, frail, elderly patients, each with co-morbidities. The research team says that a different cohort with higher readmission risks, such as heart failure patients may provide better outcomes at lower cost.

    The team also pointed out that a weakness of the study is the difficulty in estimating telemonitoring costs because the devices were provided free. They also said that telemonitoring costs will drop as equipment becomes cheaper with technology advances.

    England’s Whole System Demonstrator had a similar finding. It said that its telemonitoring isn’t cost effective.

    With the lack of positive findings, a cautious approach to telemonitoring seems a good idea for African countries contemplating telemonitoring initiatives. It seems important to find the right context first.

  • Ten tips for evaluating BYOD cost-benefit

    With the prospect of a progressively increasing role for Bring Your Own Devices (BYOD) in Africa and elsewhere, it’s good to know that there’s advice on how do to it. Gartner’s described challenges, Cisco’s an eye on it TechRepublic has a report on ten considerations for BYOD cost benefit analysis, to help make organisations quantify their position after considering competing risks and opportunities.

    New costs of an enterprise Model Device Management solution New costs of BYOD policy development and program management New costs to update enterprise security and help desk to deal with new responsibilities and risks created by BYOD New risk management expenses New internal app development costs, to allow BYODs to interact with business systems New, potentially hidden back-end costs, such as software licensing and increased network traffic Uncertain costs of BYOD data plans, which could be a cost or a saving, depending on how it’s financed Potential to reduce the cost of company-owned devices Potential benefits to employee morale and productivity Potential benefits of employees being more responsive to your customers – perhaps

    Capgemini analysts are upbeat about BYOD, with a recent paper titled “it’s all about employee satisfaction and productivity, not costs.” Technology company Cisco believes BYOD can deliver productivity and cost savings, which is explained in their blog. African healthcare organisations want happy, productive employees and cost savings, so BYOD looks promising and worth a closer look.

  • Better cyber-security poses an old economic question

    Woody Allen said, “I am not afraid of death, I just don’t want to be there when it happens.” The increasing fear and anxiety now generated by cyber security may encourage CIOs to adopt a similar aspiration about breaches. It is not just a technology challenge. Increased costs of cyber-security and regulation pose the classical question for eHealth decision-takers. How do I afford cyber-security and still have the sustainable net benefits from eHealth?

    Now that cyber-security and regulation are rapidly climbing the eHealth priorities chart, the economic and financial implications are becoming a bit clearer. The first approach is to adopt the eHealth definition that tinTree uses: ICT and organisational change. Generally, ICT is just less than half the cost over a ten-year timescale.

    The economic analyses of eHealth over the last decade generally reflected security as part of the cost of ICT and compliance with regulation as part of the cost of change, mostly through training. Acfee has reviewed its eHealth economic database of 57 eHealth economic evaluations and updated its model. Relative to the total cost of ICT and change, the cost of better cyber security and regulation compliance are not high. Effective eHealth has high net benefits, the socio-economic return (SER). This is resilient to the extra costs over long timescales. The SER is a bit lower, and the time to reach a net a few months longer. Good eHealth is still good value for money. For weak eHealth, there is no hope. The bad value for money just deteriorates.

    Affordability is the biggest challenge. Where do organizations find the money? African countries have few choices. Their main one is to review their eHealth strategies and investment plans and redeploy finance by changing the pace of change. If cyber-security is minimal, the eHealth risks rise and new eHealth projects start to look a bit shaky: not a good place to be. eHealth News Africa will report on the effect of increased risks for eHealth decision-taking in a few days.

    The next step is for the cyber-security experts to provide estimates of better performance that tinTree can use to refine the prospective data its eHealth economic model described in the eHealth News Africa story costs, benefits and economics of eHealth.