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The Honourable Minister of Health
Ms Barbara Hogan
National Department of Health
Private Bag X399
Pretoria 0001
Tel: 012 312 0546
Fax: 012 325 5526
Care of the Private Secretary
Ms. Fezeka Baba
babaf@health.gov.za
Dear Minister
RPL 2009
The meeting between Dr Kamy Chetty Deputy Director General of Health and SAMA and SAPPF representatives on
Thursday 20th November refers.
We would like to thank you for facilitating the above meeting aimed at resolving a number of outstanding issues around RPL 2009.
Before referring to issues discussed and decisions made, we would like to applaud the acknowledgement
by the DG, Mr Thami Mseluku, made at the SAMA Awards Dinner last Thursday evening on your behalf, that the
cost studies, contrary to previous perceptions held by the NDoH, had shown that professional fees needed to
be increased not reduced. Clearly this realisation will have profound implications for the
National Department of Health’s plans to reduce private sector costs and we would like to reiterate our offer
made in an earlier communication, to work closely to with the National Department of Health to find pragmatic
solutions to private health affordability issues. We have a number of proposals to put to the Department for
consideration that we believe could not only reduce the overall cost of care to the consumer, but could also
help to keep professionals here, and we look forward to further constructive engagements with members of
your department around this issue.
A number of important issues were discussed at the meeting between the NDoH, SAMA and the SAPPF on the
20th.November 2008. The two most important issues discussed were the CPIX inflator for 2009 and the RPL
for 2009. With respect to the CPIX inflator for 2009 Dr Chetty reassured us that consideration would be
given to review the current proposal of 8.7% following our input.
Regulations stipulate that from 2009 the RPL must reflect the cost of providing the service in the price.
This marks an extremely important new approach to the determination of fees for professional medical services,
replacing the previous arbitrary and ad hoc process with a “cost plus” approach that is both defensible and
logical and has our full support.
Considerable discussion revolved around the verification process and we would like to make a few observations
pertinent to this process. The first point is the sensitive nature of the process that needs to be followed and
the need to adopt an approach that will not make future exercises impossible, because of the loss of confidence
in the impartiality and confidentiality of the process. The verification process conducted in 2006 negatively
affected confidence in this process that we would not want repeated. The NDoH has given us assurances that
the process will be dealt with sensibly and with cooperation. Secondly we suggest that in future it would be a
simple exercise to create a “virtual practice” in which between eighty to ninety percent of actual costs could
be determined from independent sources, thus largely obviating the need for expensive and time consuming studies
and verification processes.
Currently the Rand Conversion factor (RCF) for surgical procedures is R7.03 which equates to a gross annual
income of R557408, (7.03 X 79290 min.) from which surgeons are expected to pay their costs and VAT, and earn
a return on investment, as well as take home a salary. This can be compared with the DPSA level 14 salary
proposed as an appropriate salary for private specialists under an RPL, of R750000.
If this salary component of R750 000-00, (as provided by Dr Chetty), is divided by the annual number of
minutes of 79290, used in the RPL formula, a RCF of R9.459 is achieved. This figure excludes the Practice
Costs, the Return on Investment, and VAT of 14%., all of which need to be added. The bulk of the practice
cost component can easily be calculated by adding the various component prices, which are largely in the
public domain. For example: Transport, rental, staff salaries, practice insurance, tax, municipal services
etc.do not require either practice cost studies, nor an expensive and time consuming verification process
for their determination, This process will establish a RCF for overheads of more than R12. This must now
be added to the salary component (9.459) and the amounts required for VAT and ROI must also be added.
Therefore it is difficult to see a RCF for specialist services being calculated at less than R25. Verification
of actual costs, and adding an inflator for 2009, could easily result in a value closer to R29/ unit.
Clearly the industry could not sustain such a massive increase in 2009, and expecting the funding industry to
develop benefit packages to cover fees determined by such an RCF, would have a catastrophic effect on the
whole industry, but that is the reality that needs to be grasped. The cost studies have demonstrated something
to the whole industry that doctors have been aware of for years, namely that professional fees for medical
services are far below what they should be. Clearly practices will not be sustainable in such an environment in the long term..
For many, many years the medical profession has had to cope with an extremely unfavourable and deteriorating third
party reimbursement environment, which has seen the emergence of necessary coping strategies such as balanced billing,
as well as the abject failure of managed care strategies designed to reduce provider induced demand. Attempting to
manage utilisation when fees are suboptimal was always doomed to failure. Given such unfavourable trading conditions,
it is no wonder so many South African professionals have sought to pursue their careers elsewhere.
Despite the forgoing, the medical profession is acutely aware of the extremely difficult economic circumstances now
facing the country, and stands ready and willing to play its role in meeting the healthcare challenges created by
these extraordinary times and the burden of South Africa’s past. Provided the pricing realities exposed by the RPL
determination process are acknowledged, and it is agreed that the situation has to be remedied, the SAPPF will be
willing to consider a phased approach over a number of years if necessary, to correct the RCF.
The first step in finding a solution to any problem is to acknowledge that one exists, and it takes a big man to
admit publicly when he is wrong. Clearly the DG is a big man in more ways than are immediately obvious, and he
revealed this during his speech at the SAMA Awards Dinner last Thursday evening. The subsequent steps that need
to be taken should be deliberated in a constructive manner, and we believe the DoH will find in the SAPPF, a
partner sensitive to the need for a progressive incremental approach, that is both practical and affordable to the
industry at large.
The SAPPF awaits your response to our sincere offer to work with the NDoH, and all stakeholders, on all the issues
mentioned above, and, given the acute time constraints, request an urgent follow up meeting to agree the way forward.
Yours truly,
Dr Chris Archer
Tel: 011 4841262
Cell: 082 4618595
Email: chrisarcher@wol.co.za
| Dr Eugene Allers
011 4211262
082 6520692
kopshop@global.co.za
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Cc Mr Thami Mseluku Director General NDoH
Dr Kami Chetty Deputy Director General NDoH
Mr Casper Venter Healthman
Dr Johann Van Zyl Fifth Quadrant
All pre-existing SPPC Committee members
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