ECONOMIC VIABILITY & FUNCTIONALITY in HEALTHCARE

1. ECONOMIC VIABILITY & FUNCTIONALITY in HEALTHCARE A Holistic Approach by Dr Estie Maritz Economist Business Forum 14 July 2004

2. Where do we start?

3. Let us take as a starting point that there is a crisis in healthcare and healthcare management, a crisis that has never been totally resolved. Fundamentally it affects us all, because it affects our pockets, our quality of life, our hopes and dreams. Interpretations of this crisis vary widely, it is blamed on doctors, pharmacists, funds, on development of too much medical technology, on the failure of government resources to pay for a system of proper medical care …… It is a very complex problem rooted deeply in our economic and social systems; in our thinking.

4. Dr Manto Tshabalala-MsimangMinister of Health etc – South Africa The latest talking point or BUZZ:One Exit Price in Medicines in 2 Phases In Phase 1 the single exit price will be the net price at which a medicine is currently being sold. In Phase 2 the benchmark for the single exit price will be based on an international price, calculated according to a prescribed formula – probably starting in 2005. Is this an example of economically viable, sustainable healthcare for Namibia?

5. What is a “good cost” for medicine?

6. PRESENTATION OUTLINE • Sustainability • Preventative & Curative Medicine • State’s Regulating Dichotomy of Capital Interests vs Healthcare • Non-ideal Market Mechanisms vs HC • System & Information Management • MAN’s SHCP Organization

7. Sustainability To deliver Healthcare to the person in need, in the right place, at the right time and in the right manner, whilst remaining affordable. To establish and maintain a continually uncompromised capacity of medical aid funds and the state to provide necessary resources, finances and professional management of the healthcare system for overall optimums, maximum benefits and best ethicalHCV – Healthcare Value , to the patient.

8. Capital Interests vs HealthcareCI vs HC • Economic Dilemma of HC Regulation & State’s Role in HC Management >>>> • to drive UP & EXPANDCapital Interestsin a General Economy, including: Production, Manufacturing, Enterprise, Services, Business, Profits, Consumer Markets, . . . vs • to drive DOWN & DECREASE the effect of Capital Interestson HC, especially: Cost of Drugs, - Medical Equipment, - PrivateHospitalization, Cost of HC Infra-structure, HC Consumerism . . . . .

9. Scale & Effect ofCapital Interests in Healthcare • Pharma/ Multi-Nationals, Medical Equipment Manufacturers, Private Hospitals . . . : • Have typical p/e (Price Equity) ratios > 30 • Have typical ROI (Returns on Investment) of 2x manufacturing / service industry averages • Mask profits, eg through TRANSFER PRICING • Drive Medical Consumerism & Curative Medicine (vs Preventative Medicine) • Employ strong anti-competitive forces,eg patents: at the Social cost of HC

10. Non-Perfect Market Mechanism • The theoretical Perfect Market Mechanism is Conventionally seen as driver of Consumer Value, also in HC: • Main Characteristics of a Non-Perfect Market is NON-AVAILABILITY of: • Instant Comparative Price Information • Instant Comparative Service/ Product Quality Information • Instant Opportunity for Decision Making& Switching between Service/ Product Options

11. Management of Non-Perfect Markets (NPM) • Is Management of inflexible NPM’s inHealthCare via REGULATIONS (esp Anti-Competition Regulations) & physically REGULATING it,the TOTAL solution? • RegulatingHC remains of particular importance, considering: • Major & Historical influence of Capital Interests on the HC market & its market mechanisms • Skewed resource allocation in HC(poor vs rich, rural vs urban) • Cost of failed HC to society

12. Satisfying Competition Requirements with RPL? • RPL – Reference Price Lists for all products & services >> to Manage Influence of Capital Interests on HC as a 1stPriority: • RPLSingle Index Adjustments (SIA) to accommodate special situations, eg Small Rural Hospitals, Logistic Complexity, etc. • RPL with SIA will allow Medical Aid Funds to plan, execute & control Effective Operations • RPL has delineated additional “compe-tition margins” eg 20% to satisfy thecompetition objectives of Regulations.

13. Preventative vs Curative Medicine

14. Preventative vs Curative MedicinePM vs CM • Shift is required from CM to PM • CM = technological, medicalized, drug-based, procedural intervention healthcare to • PM= Socio-economic healthcare • Structural problems: Addressing Poverty, Malnutrition, Conditions of living, Water, Sanitation, Job-creation • Life-style issues: Management of Exercise, Diet, Tobacco, Drugs

15. Decision Point ManagementBuilding the Healthcare System • DPM – Decision Point Management in the healthcare delivery chain >>>> • DPM can only be Systemically Achieved by Professionals who have Sufficient Authority at process decision points >> a role of Doctors? • DPM is Doctor driven • DPM requires smart, HC Optimizing decisions • DPM GOALS:1) therapeutic efficiency(treatment that works) 2) economicefficacy (affordable treatment)

16. Decision Point Managementin the Healthcare system

17. Sustainable HealthcareOptimums in System Management • Theory of Optimums re Managing Systems: • Local Optimums - small gains and restricted improvements - cannot guarantee Maximum Overall Benefits. • Global Optimums – Maximum gains in a Total Systemare achieved through the methods of Complex System Management. • HC is a Complex System which will not escape the simplistic traps of Local Optimization if someone does not start managing it GLOBALLY. Simplistic thinking is notappropriate in HC.

18. Sustainable HealthcareInformation inSystem Management • A higher “class of information” is required to manage complex systems for OPTIMALS: • Independent Info is compiled from measured data & stats: undistorted, unbiased, “no spin” • IDI – Independent Diagnostic Information – info providing system FEEDBACK diagnostics: generic, general INFO for allHC role players • DMI – Diagnostic Management Info – IDI that is further prepared for systeminputs, corrections, contributions by role players, stake holders, decisionmakers, regulators, etc

19. Information inManagementin Healthcare

20. Economic HOLISMNational HC Auditing Agency • HCAA–HC System Auditing Agency: • manage, structure, provide IDI and DMI • ensure strict & meticulous independence of IDI and DMI for HC diagnostics & management • coordination of RPL, indexes, • coordination of protocols, procedures, policies, • coordination of collective price negotiations with Capital Interestson national level (Pharma, Medical Equipment, Private Hospitals) Note: Due to the lack of IDIthat it isrelatively easy to scapegoat role players

21. Economic Vitality

22. Sustainable HealthcareProfessional Remuneration Parity? • Responsibility: • Therapeutic, Economical, Managerial • Clinical Risk • Complexity; time-criticality, state-of-the-art relevance ASSOCIATED WITH: • Medical Decision making; Medical Consultation; Medical Procedures; • Liability • Unlimited Professional Liability and liabilityin terms of personality rights (Good name; Professional standing)

23. Economic & Functional VitalityMAN’s HOLISTIC ROLE • Value Propositions – to develop in HC, ieHCOptimization Propositions: • Basic Value Proposition – “health with economy” • Specific medicine interest area Value Propositions: developed, detailed improved & maintained under MAN with the aid of IDI &DMI • Participation and leadership through HCSAA • HC forum, training, clinical accreditation,communication of essential info, review,feedback, technology evaluation, etc

24. Sustainable HealthcareMAN’s ORGANIZATION

25. To Answer Dr Tshabalala-Msimang on One Exit Price in Medicinesin NAMIBIA/ South Africa? Will pharmaceutical manufacturers be able to continue research, production and distribution logistics? Will pharmaceutical competition, to the benefit of the consumer remain/ improve? Are the structures in place to evaluate whether this is sustainable healthcare for Namibia, EGHEALTHCARE AUDITING AGENCY?

26. Economic & Functional VitalityA HOLISTIC APPROACH FOR NAMIBIA • Ask the right questions. • Take a global view. • Design and implement an overall Healthcare System according to the science of Systems Theory. • Manage overall Healthcare System according to the science of Systems Theory. • Create a HCAA.

27. HOl