Founder and Managing Director of CareCross Health, Dr Reinder Nauta, talks about giving the majority of South Africans access to private healthcare and the possibilities it creates for the future of healthcare in the country.
What was the premise for starting CareCross?
CareCross was founded in 1998 to deliver affordable private healthcare to those who can’t afford normal medical aids. At the time, annual medical costs inflation was between 16% and 20% which led to a lot of people talking about the unsustainability of the business model.
We entered the market by establishing a new model whereby we engaged GPs by offering them the opportunity to generate income with their spare capacity by signing them up as providers within our network. We understood that we needed to change the remuneration model if we wanted to create cost benefits, so we use a cash payment system that allows low income earners to pay their bill over a year resulting in a doctor making more money for the same amount of patients. For example, a wealthy patient might see a doctor twice a year and be billed R250 per visit. A poorer patient will also see a doctor twice a year, and the doctor will get R50 per month over 12 months. So the poor patient ends up paying R600 a year while the rich patient pays R500 a year.
We also knew that the model had to incentivise GPs to be more preventative. You simply can’t do that in a service model where a doctor gets paid as long as someone is sick, they’ve got to get paid for taking preventative steps.
Our first big customer was Discovery, who, like many other medical schemes, started with us until they were big enough to develop and sustain their own models. Since then, we’ve grown into a sizable company to include brands such as OCSACare and ONECARE. And in December 2014, we (the CareCross Health Group) were acquired by MMI Holdings – the third largest insurer after Sanlam and Old Mutual.
Tell us about OCSACare and the impact it’s had on making private healthcare more accessible to more people.
We believe that the employee-employer relationship plays a big role in answering the question of medical insurance affordability. Because of regulatory policies and, in particular, the mandatory necessity to cover individuals for Prescribed Minimum Benefits (PMBs) creates a baseline for the costing of medical aid which excludes the majority of the population. There are talks underway to make changes to regulations and open up possibilities for reducing the minimum cost but we’ve developed a product that is both low cost and attractive to employers, even in small businesses.
OCSACare is the ideal occupational care solution because companies can afford to make the full contribution to cover staff in non-managerial positions. I believe our other product, DomestiCare, is even more exciting as it specifically focuses on SA’s 2 million domestic workers, au pairs, gardeners – essentially, anybody who has a one-on-one employer-employee relationship. Employees visit the nearest CareCross doctor who actively encourages the patient to act responsibly at a primary care level. Currently families of the employee aren’t covered, but we’re working to resolve that.
Is it safe to assume that if more people were covered by some form of medical insurance, it would bring the cost of private healthcare down?
The reality is that for individuals who have no money and no health insurance, they will most likely only see a doctor when they really need to, which in healthcare is often too late and exponentially more expensive than if the patient was treated early on. So there are incredible cost savings to be had when prevention and screening are done properly at an occupational level and in conjunction with a medical provider or insurer.
PMBs immediately make insurance unaffordable for most because medical schemes are forced by law to cover people who are not necessarily acting responsibly for their health and wellbeing. For example, medical schemes can’t tell smokers to pay more than those who don’t smoke. I believe we need such a model in healthcare because as we all know major disease groups such as diabetes and HIV are largely the result of poor lifestyle choices, except in exceptional circumstances. But at the moment, a healthy person who looks after themselves has to pay for an unhealthy individual. So to counter that, even though it’s not the final answer, you need a provider to get involved, which is where CareCross comes in. We fit into the space between fully insured private cover and free public health care.
Within that space, there are additional opportunities to reduce costs by stipulating that a patient has to go to a particular doctor for a particular disease, because the management of that disease – including x-rays, medication and blood tests – are all coordinated and any unnecessary medication or tests are excluded to eliminate waste. There’s also a huge need for patient education in South Africa to address some of the diseases born out of poverty and if a GP knows that he is going to be paid for treating that particular person – even if he’s totally healthy – there’s incentive for that doctor to not only focus on curative measures but on preventative care.
Do you think a version of the OCSACare business model could be replicated for NHI?
I appreciate that the subject of NHI has got everyone talking and thinking about alternative models to make it happen. I was recently a speaker at a meeting hosted by the NHI Council to ask various stakeholders how they could develop a system that could be extended to the public. I presented our model and was very encouraged by the engagement between the public and private sector.
There are discussions underway with the Council of Medical Schemes to develop guidelines to exempt schemes from some stipulations of the Medical Schemes Act, such as PMBs. If that were to happen, and OCSACare becomes non-occupational care – in other words, anyone can join the scheme, then it opens up numerous possibilities for government to privatise some of the healthcare they envisage offering.
The healthcare system in SA, particularly the low-end of the market that we operate, can deliver incredible value for money. Our product costs about R220 a month and covers a GP consultation, including basic tests, radiology, pathology, optometry, dentistry and medicines in the private sector. It’s an open question whether NHI will be able to do it for cheaper.
Do you have any other comments on NHI that you would like to share?
I don’t think we can underestimate the task at hand for the government. It took CareCross 16 years to sign up 1,500 GPs and 200,000 patients, so for NHI to do it much faster by trying to find 10,000 GPs for 50 million patients is an enormous order.
Up until 10 years ago, the state appointed GPs from the district hospitals to visit surrounding clinics, every town had a doctor that looked after the residents, and by and large the system worked very well. That structure was scrapped and we’re now seemingly reintroducing it under a different name. I think for us to make real progress with NHI, we need to clearly define some of the terms we’re using to describe it. The word “pilot” is an example because I believe the current NHI pilots, aren’t actually pilots, they are just clinics because there are no variations for comparison to measure success. We also need to define what is implied by “doctor” – is it someone fresh out of medical school or an experienced GP with hands on training in the community? I think we’ll find that once we have those definitions in place a very different picture will emerge.
Let’s talk about the technology side of things. Can you give us some insight into the business case for implementing technology?
In principle eHealth platforms have to be interoperable, but that’s often a problem. I am a major supporter of locally developed systems, particularly for administrative tasks and GP workflows, because they’re specifically designed around SA’s disease patterns, payment models and the way that we communicate with doctors.
CareCross went through several permutations all driven by the size of our business, the need for our own IP, and to meet policy and regulatory changes.
The challenge for the system that will support NHI, for example, will be its stability and scalability. There are some smaller schemes with 15,000 members who can work off a spreadsheet, but when you’re talking about 2 to 10 million people then you need a very robust system. I think that understanding and planning for the requirements at the start and with a longer term view is essential and will give you the basis to measure the success of the system at regular intervals and evaluate the ROI in the long run.