Health Benefits Fund - Ramsay Health Limited - Case Study Example

Health Benefits Fund (HBF) Health Limited: Business Case Report

Executive Summary

The paper evaluates HBF’s health Limited. This is a private insurance company that has in the recent past experienced intense pressure to increase its high insurance premium rates yet misalign with members’ desire for low premiums. Consumer desires and HBF premium costs differ and HBF believes its main obligation is to prevent consumers from exploitive and unreasonable high health costs and high premiums. On such show of credibility and concern for its members was the refuting of high services prices by Ramsay that would translate to high premium costs, reinforcement of private health providers’ capability to determine prices, and an endless cycle of increasing medical costs followed by increasing premiums. However, HBF rejected the health services price increments by Ramsay Health Limited terming them as unjustified. To support the claim, HBF revealed that like other business, Ramsay was a for-profit company driven by the pressure from its stakeholders to increase its returns. The advantage of increased returns was more dividends to stakeholders, and high share prices. Consequently, this would further expand the company’s market share setting it apart as a pace setter in terms of health care prices.

Unlike rejecting increase in health prices by providers, payers like HBF can advocate for health care reforms that require the use of advanced technology to guarantee high quality care. Decision regarding healthcare providers and payer must involve government and non-government institutions, patients, the private sector, and community groups to facilitate monitoring and accountability. The recommended solution for HBF is the negotiation with other hospitals to improve flexibility of patient choices, control health care prices, and guarantee high quality services for improved health outcomes.

Issues

Like other health insurers, HBF is under enormous pressure to keep its premiums to the minimum. Again, members do not like seeing high premium increments. The pressure involves requirements by the responsible health ministries or department to submit an application for increases in premium. The applications are then scrutinized by the government to evaluate the financial position of the insurer.

Besides the pressure to keep health fund premiums to the minimum, private insurers, like HBF are not the price setters of the services that members should pay for their public hospital bills, pay the doctor, or optician among others services. However, Private health insurers like HBF pay the health benefits of the members to enable them meet the costs of health services obtained. Since health insurers are not the price determinants for health services providers, the prices go up and at times exceed the HBF’s set benefits. The concern for majority of consumers then becomes the affordability of premiums and HBF policy’s value for money. In search of a solution, HBF engages with private health services provider and negotiates with them the prices on behalf of their members. The negotiations are crucial because hospitals want to increase their prices as much as they can while health insurances want to lower their premiums as much as possible or none.

Though HBF is not a price setter for hospitals, it experiences challenges refuting very high and unjustifiable health care prices set by hospitals. High hospital prices translate to prices being passed on to health fund members through increased premium rates. One such experience was with Ramsey Hospital that set to unjustifiably increase the costs of its health services.

Causes

The increase in the hospital prices by Ramsey raised concerned to HBF because the hospital was responding to pressure from their main stakeholders or shareholders, which was their listed company, and wanted to make returns that they could pass on to their dividends and increase the prices of their shares. Reasonably, translating high health care service prices to high insurance prices is the only way out to guarantee that the amount coming in through premiums is enough to cover what HBF pays out as claim. Additionally, the premium increase must be such that the health income covers its expenses and remain financially viable. Ramsay’s focus on increased profitability contradicts HBF’s mission of looking after its members and ensuring that its members are not bombarded with very high and almost unregulated premium increments. HBF does not allow itself to increase members’ premium costs in order to meet the increased benefits that Ramsay and other private health providers’ wishes to charge. The interests of the for-profit, Ramsay, and the not-for-profit HBF differed mostly because the interests of the stakeholders are different.

By refuting the high rates of hospital prices required of its members by Ramsay, HBF was proactively preventing them from agreeing to unreasonably set high prices of services, and preventing Ramsay from being a pace-setter to other health services providers to increase the price rates for their services. This is because Ramsay would set a precedence that other hospitals would follow and this would result in unregulated and uncontrolled high hospital prices that would overwhelm private insurance members. Consequently, most members would either abandon or reduce their premium contributions and this would increase pressure on government and other public health services. On the contrary, failure of HBF to refute the unreasonably high prices set by Ramsay would cause other hospital groups to come to them and request that they take up services from them at increased prices. This would lead to inability of small independent insurance providers to negotiate for lower prices for their members. The result would be an uncontrollable markets for just a selected few members who could afford the high prices. Finally, by refuting the high hospital costs set by Ramsay, HBF prevented a culture amongst private hospitals that they had the capacity to regulate health prices at the expense of health insurance companies and their members. The private health providers would find that they would get away with very high increments in health prices thus setting standards that insurance providers had to adhere. Consequently, it would be difficult for insurance providers like HBF to resist very large health cost increments in future. HBF’s refuting the increment in prices was drive to sustain its credibility and demonstrate its capability to manage its financial position.

Alternatives

• Do nothing and do not increase price for members

Increased health care service costs and the rise in private insurance prices may or may not enable patients to attain more seamless care across the health system. However, low or high health care prices must align with the quality of care that patients receive through high performance conventions, uncompromised transparency levels, and improve involvement with local clinicians.

• Do not have reliance for health services

Additionally, private insurance companies must guarantee secure funding base for hospitals and heath in future. Before increasing their health prices, health care providers need to provide proof of how reliable their services are to the public. This can be done through applications that should be subjected to thorough scrutiny against set standards and regulations. This would control business interest by stakeholders at the expense of the public while preventing patients from seeking unnecessary care and increased cost sharing strategies between health care institutions and patients. Kemble (2012) confirms that cost-effective care translates to physician-led quality improvement unlike insurance-oriented managed care.

• Negotiate with other hospitals

Reforms in health care must encourage negotiation with other health institutions to avoid instances where health care prices are raised with the excuse of technology. Often, health care institutions increment their health prices under the excuse that technology advancements drive up costs. Increasing health care costs due to technological advancement cause health care providers like Ramsay to neglect the role of innovation and at time slow the pace of technology integration in quality health services provision. Health care providers must understand that innovation arising from competition is crucial to the success of health care reforms and not just one health care institution dictating the health care prices for patients and removing the negotiating power of other service providers. Consequently, payers must ensure that their profits are only derived from enhanced quality of medical results and minimized costs that are not derived from shifting payment burden onto providers or patients.

Decision Criteria

• Costs

• Location

• Quality assurance

• Delivery time

• Enthusiasm by team members

• Value to patients

• Patient-centered

• Flexibility of patient decisions

• Availability

• Customer satisfaction

Decision criteria and alternatives matrix

(Using a 5-point scale where 5=excellent; 4=good; 3=satisfactory; 2=below average; 1=poor, depending on how well an alternative satisfies a given decision criteria)

Alternatives\decision criteria

Costs

Location

Quality assurance

Delivery time

Availability

Patient centered

Enthusiasm by staff members

Value to patients

Flexibility of patient choices

Customer satisfaction

Total

1

Do nothing and do not increase price for members

5

1

3

3

3

5

4

4

1

4

33

2

Do not have reliance for health services

2

1

2

1

2

3

2

2

2

1

18

3

Negotiate with other hospitals

5

4

5

5

5

5

5

5

5

5

49

From the table, clearly, compared to alternative 1 and 2, will reduce guarantees patients quality for health services, availability of health care services, and flexibility of patient choices. Alternative 3 also reduces assures patients of satisfactory health care prices and customer satisfaction more than alternative 2. Though alternative 1 rank higher compared to alternative 2, the weighted total of ratings is less compared to alternative 3. For instance, alternative one does not satisfy patients’ decision criteria of location yet alternative 3 improves guarantees patients easily accessible service providers. To this effect, alternative 3 demonstrates a patient-centered approach with high value to customers compared to alternative 2.

Recommended Solution

I recommend more focus negotiating with other hospitals. Payers should be obliged to look for high quality health services providers. The health care providers should be classified based on good medical outcomes and their wiliness to allow negotiations for lower prices for their services without impacting on the quality of services. Negotiations must be based on evaluation of strategies that protect and promote health and that operate under the regulation of government and non-governmental institutions, the private sector, academia, and community groups. The hospitals must also have well-planned health care services goals and objectives for better life quality and higher life expectancy. The decisions by payers regarding health care providers must guarantee patients that the predetermined hospitals, specialists, and imaging facilities, laboratories, or health plans meet their needs. By requiring that health care providers selected by insurances have a proven record of improving health outcomes, providers will be subjected to pressure to limit themselves from prescribing services and products that could be unnecessary just to raise the cost of services. On the contrary, providers will be under pressure to utilize evidence-based practice and provide reports on how they have contributed to improved health to their patients. The results will be used by policy makers to know what works and what requires further research to prove its efficiency. The government and other stakeholders in promoting health for the public will benefit from spending too much on excess care probably causing overtreatment and more-invasive procedure.

Implementation and Implications

HBF’s implementation of the recommendation would require that health care providers like Ramsay provide reports of how its services have contributed to the improvement of public health. The providers must also justify their prices for health care through application to the ministry and report of the results of the scrutiny. This way, any increase in health care prices will not only meet the profitability of the stakeholders, but also the promote and protect public health through prevention of excessive care that cause overtreatment or provision of very invasive medication and procedures. HBF itself will be obliged to educate its members and potential members regarding available health provision and align them to meet their needs.