Verirad's Pathology Perspective

International Overview
South African private pathology practices are run very much along the lines of pathology practices in Canada, Australia and the USA over the last 30 years. Service is based on fee for service and third party funding. This is a combination of events not conducive to cost containment and in some cases open to over servicing and billing abuse, particularly with the addition of the EDI billing process. Most EDI pathology billing processes are taken on trust with no audit or verification process in place.

Unfortunately for South African funders none of the controls in place in other countries are available in South Africa. In fact legislation is in place in both America and Australia that makes over servicing, inducements and fraudulent billing unlawful. To this end, funders and Government departments in both countries over the last 10 years have recovered large sums of money. (USA 2002 – 2005 recovered $987 million). In 1985 the Parliament of Australia commissioned an investigation by the Joint Committee of Public Accounts into Medical Fraud and Over servicing with reference to Pathology.

South African overview
We have estimated that the South African pathology funder spend will be in excess of R2.8 billion in the year 2006. The National Pathology Group (NPG) guides the private pathology practices on professional and financial billing matters and billing structures as agreed with the NPG, CMS and DOH. This is a self-regulatory monopolistic situation with no formal external review.

Many defects are present in the above system, which offers little financial protection for funders and their members. This view is well known in the funder industry.

The current CMS NHRPL is outdated and in many respects intentionally ambiguous, it is also open to inappropriate interpretation in terms of the choices of billing codes used and codes charged.

Verirad has identified a wide range of billing defects, which are, almost without exception carried out by the major practices. Additionally each practice has developed its own combinations of particular idiosyncrasies, which stand out as individual billing fingerprints. Wide variation occurs in the billing of the same test or group of tests amongst different practices, without differences in the applied technologies to perform the test.

Verirad overview
Verirad now has the only overview of National Pathology practice billing styles; particularly those of the two large groups of laboratories which comprise 85% of funder’s national pathology spend.

It should be stated at this stage that the introduction of ICD10 in the future would not alleviate the foregoing problems as the ICD10 construction for South Africa is flawed with the transfer of most of the gazette defective billing into the ICD10 compendium.

The following is a brief overview of some of the billing styles, which comprise over servicing, fraudulent billing, or both. American terminology is in bold italics.

1. Laboratories not complying with NPG guidelines on profiles, (extra tests are included on the request form and automatically ordered)
2. Laboratories automatically reflex on the computer system extra tests that are not indicated on the request form. These extra tests do not comply with NPG guidelines.
3. Tests billed but not performed
4. Low cost tests performed but high cost tests are charged – upcoding
5. Padding of orders as in 1 and 2 above
6. Unbundling of group tests into their constituent parts
7. The use of inappropriate service and administrative codes
8. The upcoding of Histology and Cytology accounts

It is of concern to Verirad that the annual tariff negotiations appear to have legitimised certain anomalies that have been in place for some years. It would appear that the tariff negotiations between CMS and NPG have not been successful for either funders or their members in reducing the cost of pathology tests as has occurred internationally.

Pathologist reaction to Verirad activity (Market reaction)
We believe that currently the NPG specifically and pathologists generally have detailed knowledge of Verirad’s existence and function. However, Verirad has had a window of opportunity to collect and evaluate accurate up-to-date information. This places a funder (with Verirad's assistance) in a very strong position in respect of enacting a behavioural change; this will result in reduced service levels and lower costs.

However, it is possible that prior to Verirad's intervention many pathologists were not aware of the billing defects in their practices. They have however all been created by design to maximise profit. The pathologists should be aware that the current situation is neither sustainable nor tenable and should welcome the regularisation of the billing system.

It is however, a fact that no funders have expressed surprise at any of the evaluations provided by Verirad.

Competition Commission / Tribunal Enquiry 2003 - 2006
Following complaints, there is an investigation taking place regarding the negotiation of all Medical Fees, by the BHF, on the basis of alleged price collusion, and horizontal price fixing. As a result the BHF will not be publishing the Medical Schemes Bill guide for 2004.

In addition the Treatment Action Campaign has complained to the Competition Commission regarding the apparent collusion of Pathologists within the National Pathology Group regarding the maintenance of high charges for the diagnosis and monitoring of HIV Aids Patients.

Corporate Ownership, October 2003
The Health Professions Council of South Africa has "outlawed" the ownership of Medical Services by non Doctors who are "not accountable" to HPCSA. Where a Medical Practice is owned in part by a "lay entity", HPCSA has given notice of six months to reverse the arrangement. It would appear this new rule affects mainly Optometry, Pathology and Radiology Practices, the latter two having listed Hospital groups as significant investors.

2006 Overview
The National Pathology Group have stated that it is their intention to "re-write" Billing Gazette for Pathology. They state that the current Billing Guide is out of date and ambiguous.

It is imperative, because of the cross subsidation that takes place, that all tests ` are costed correctly and appropriate charges calculated. Profiles should be reviewed, and cost decay introduced as has occurred in USA, Canada, Australia and New Zealand, i.e. proportionally more testing leads to proportionally less billing.

Correctly performed, the "re-write" should lead to lower cost Pathology Services, this will not be the result if the process is left in the hands of the Pathologists.

It is interesting that it would appear that the "NHRPL" in future will be published by the Government as a "Gazette" as it was some years ago.

Conclusion
Verirad is confident that the actual and potential savings are worth the extra effort that will be necessary to put additional processes in place to reduce and contain "pathspend".

We believe that with the input of Verirad funders will experience a paradigm shift with respect to their "pathspend". This will add value for both the funder and the member with no loss in the real appropriate level of requested pathology service provided to the member and referring clinician.

It is not Verirad's intention to interfere with the patient/doctor /pathologist relationship. We are advising only on inappropriate test ordering practices and inappropriate billing practices based on either computer technology, administrative policies, testing technology and/or gazette driven defects.