Pricing, practice management systems and Discovery’s network agreement

Industry component and material pricing:

In the past, medical orthotists and prosthetists (MOPs) used the Allnutt and Luttig (A&L) guide to tariffs to compile their claims in respect of professional services and components and materials. The A&L component tariff section has lost credibility for several reasons, to the extent that it is now being rejected by most healthcare funders, and medical aids in particular. Consequently, SAOPA has embarked upon a process to develop and implement alternative coding and billing models for MOPs.

The preferred/accepted pricing model for components and materials favoured by key stakeholders is based on the South African industry standard NAPPI coding system. While this system engenders fear in adherents to the traditional A&L model, the NAPPI system holds numerous advantages and will ultimately be of great benefit to practitioners and their patients as well as medical aids and component and material suppliers. 

The NAPPI system holds numerous advantages and will ultimately be of great benefit to all stakeholders:

Historic weak points in industry pricing system:

  • The full details of A&L’s formula for pricing were not known, so only they were able to determine prices, at their own discretion.
  • Prices were allegedly not always verifiable.
  • Perceptions arose that industry prices were often inflated due to excessive profit margins. This caused an unsustainable situation for both patients and medical aids that was bound to lead to a demand for change by all major role players. 
  • A&L prices were updated only annually, while supplier prices vary during the year due to, for instance, new products being introduced and exchange rates affecting imported component prices.
  • Of late, A&L price adjustments have not been readily accepted by major medical aids.
  • Medical aids went on to freeze their component and material prices as from 2016/2017 due to uncertainty and lack of transparency.
  • A situation now exists whereby some components and materials are being reimbursed at rates that are below the acquisition prices.

While we do understand the discomfort and anxiety accompanying the change-over process, it is important to note that suppliers are able to update the NAPPI list prices of their products on what is theoretically a daily basis.  Most medical administrators’ systems and practice management systems receive regular updates on the NAPPI list process from Medikredit. Consequently, all references to NAPPI list prices will ensure that the most recent prices are applied and that the effect of the prize freezes that applied to components and materials will expire.

Discovery Health component and material pricing:

Discovery Health, as the administrator of several medical schemes, including Discovery Health Medical Scheme (DHMS), has a different approach in that it negotiates its own prices with medical schemes and does not subscribe to the price files produced by Medikredit.  Consequently, the Discovery prices for components and materials will in most instances differ from the prices published by Medikredit.

How to deal with the different component and material prices in the market:

Understandably, practitioners are confused by the different component and material prices in the market. Broadly speaking, these include:

  1. The earlier version of the A&L list prices for components and materials, which is still being referred to by some;
  2. The Medikredit list prices; and
  3. The Discovery Health list prices.

SAOPA is currently involved in negotiations regarding facility and administrative fees. 

SAOPA recommends that MOPs adopt the following approach:

  1. Subscribe to regular price file updates.  The most practical way to do this will be to purchase a price file add-on from your practice management software vendor.  This will ensure that the component and product list prices (as they have been submitted to Medikredit by suppliers) will remain up to date in your practice management system.
  2. Check the Discovery Health prices by using the Discovery Health provider portal. The Discovery Health provider portal has a lookup tool where the Discovery Health prices for components can be looked up after logging into the portal.
  3. Renew your SAOPA membership. SAOPA has come to an agreement with Medikredit whereby a lookup tool on the SAOPA website will enable members to look up the latest available list prices for any NAPPI-coded component or material item.  SAOPA is aiming to conclude the development of this tool before the end of February 2020, and subsequent phases of development will include the categorisation of products and the inclusion of different schemes’ exclusions.

How to deal with administration or facility fees:

Administration or facility fees can best be defined as a fee that can be added to the list prices of components and materials.  These fees should not be confused with mark-ups, margins or profits and are intended as a mechanism that allows practitioners to recover the overhead costs associated with the provision of components or materials to their patients.  Such overhead costs include, for instance, postage and courier costs, costs associated with stockholding, costs associated with shrinkage and financing costs.

Some funders, such as Discovery Health, are likening administration or facility fees to the dispensing fees that apply to medicines.  This is an incorrect approach, as devices, components and materials are not regulated by the same legislation as medicines; as such, the application of the dispensing fee principles is not legally applicable. SAOPA is striving towards the universal application of principles with respect to administration or facility fees, but negotiations have not yet been finalised.

Practitioners who subscribe to a price file via their practice management system will notice that the system yields two prices: a purchase price, equal to the Medikredit NAPPI list price; and a selling price, which is the purchase price plus an administration or facility fee.  Most price file vendors use a default percentage of 35% for the latter, but this can be adjusted at an individual practice and/or product level.  Only one amount is shown on the invoices that are submitted to funders, namely the selling price, which must be inclusive of the administration or facility fee/cost.

Although the principles outlined above apply generally in the industry, it is important to note that each medical scheme will apply its own interpretation and/or rules and that there is no guarantee that claimed amounts will be paid out in full.  Practitioners are encouraged to make their patients aware that they will be liable for any shortfalls that may arise as a result of partial payments by medical schemes.

In the interest of clarity, the administration or facility fee must be contrasted with profits made on components and materials.  A profit would arise when the Medikredit list price is higher than the price at which the practitioner was able to procure a component or material from a supplier.  In this regard it is important to note that, unlike with medicines, the process that applies to components and materials is not regulated.  Therefore, the price at which an MOP buys a product from a supplier will be determined solely based on the business relationship between the practitioner and the supplier and/or their wholesaler.  It is also not necessary for MOPs to disclose their purchase prices to anybody, including medical schemes when they request these prices as part of their so-called desk reviews or audits.

What about the Discovery Health network rates?

Many MOPs are part of the Discovery O&P network.  Participation in the network requires practitioners to charge their patients the Discovery network rates without any co-payments.  Subject to compliance, practitioners are then paid directly at the Discovery network rates.

Previously, the Discovery network rates applied to components and materials too.  However, at a meeting that was held recently Discovery indicated that the network rates now only apply to the rates charged for professional services and that the so-called direction of payment will not be influenced by the rates charged for components and materials.  If the rate charged for components and materials is higher than the Discovery rate (which can be found on the Discovery Practitioner Portal), the practitioner will only be reimbursed at the Discovery rate and the balance will have to be recovered from the member or written off.  However, please be aware that we are awaiting formal confirmation of this policy change and that we will notify members as soon as such confirmation has been received.

SAOPA took the initiative to investigate the structuring of a coding system based on the NAPPI codes that would bring transparency and certainty to all stakeholders, including suppliers, practitioners, patients and medical aids. 

SAOPA succeeded in convincing MediKredit to provide a look-up tool on the SAOPA website,  to be made available as from the end of February 2020. The tool will allow access to one NAPPI code at a time to prevent all of MediKredit’s price lists from being downloaded.

Practice management systems:

There are numerous advantages to investing in a practice management system:

  • All administrative tasks are streamlined, saving valuable time.
  • The potential for administrative errors is reduced.
  • The system keeps an easily referenced database of patients that the practitioner has seen.
  • The system assists with preparing bills for patients, with an automatic link to MediKredit’s NAPPI code-determined prices, updated hourly. Practitioners therefore no longer have to try to determine prices themselves from the conflicting information out there.

Discovery’s network agreement:

SAOPA identified that the current Discovery network arrangement dates back several years and that most practitioners that are part of the network do not know what the associated terms and conditions are. Furthermore, another form inviting practitioners to participate in the network was circulated in recent weeks, again without accompanying terms and conditions.  This issue was raised with Discovery during a recent meeting and it was confirmed that:

  • The network arrangement applies to an undertaking to charge Discovery rates only;
  • If Discovery rates are charged, reimbursement will be made directly to the treating practitioner; 
  • If Discovery rates are not charged and/or if a practitioner chooses not to participate in the Discover network, patients will be reimbursed, and practitioners will have to collect their money from the patient; and
  • Discovery has indicated that the network rates that determine whether the patient or the practitioner is paid (direction of payment) only apply to rates charged for professional services and not to the prices charged for components and materials.

Discovery acknowledged that their agreement is no longer reflective of the current situation and have agreed to send a reviewed and updated version to SAOPA. Once SAOPA has received this new version, it will obtain a formal legal opinion on the agreement which will be distributed to members. In the meantime, SAOPA cautions members to be careful in signing a form that refers to an agreement which is not current and/or of which the terms and conditions are not available.