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National Health Act, 2003 (Act No. 61 of 2003)


National Health Insurance Policy towards Universal Health Coverage

Chapter 6 : Reorganisation of the Health Care System and Services under NHI

6.4 Medical products and technologies

6.4.2 Improving the efficiency of National Health Laboratory Services (NHLS)


187. The reimbursement of laboratory services currently occurs through a fee-for-service (FFS) model. A strong criticism of the NHLS’s use of the FFS model is that it produces financial driven perverse incentives, i.e. tests are conducted as a means of revenue generation and not from an appropriateness of need for care perspective. Fee-for-service perpetuates fragmentation in healthcare and does not address the quality of testing or the results produced.


188. A number of interventions that include the implementation of a gate-keeping tool that identifies unnecessary test requests, provincial verification of billing, an alternative financing model for training and a review of the current fee for service model used for billing. It is for this reason that a new funding model for NHLS is required to reduce the costs associated with the NHLS. The objective of reforming the funding model of laboratory services, is linked to:
(a) Reducing inefficiencies; and
(b) Closer alignment with the health needs of the populations.


189. The reforms are premised on making appropriate health risk adjustments to deliver services, in the volume and at the point where required to improve efficiency and thereby health outcomes, i.e. based on the volume specification, the correct number of laboratories staffed and functioning at an optimal level is determined for each province. This is a fundamental shift from raising fees from tests to cover an existing cost structure.


190. The goal is to change the way the NHLS is reimbursed in order to emphasize higher quality at lower costs—in other words, to improve value. The NHLS reforms are aimed at delivering an efficient laboratory service. There are three fundamental components to the reform:
(a) Defining an essential set of tests that will get funded. Currently, 127 tests comprise of 90% of the total volume of tests ordered across all public health facilities. These tests will be categorized into individual patient healthcare needs that are linked to specific disease incidence at a provincial level. This will include developing disease based volume specifications.
(b) Using clinical governance rules to manage demand and/or utilisation. As the new funding model will be volume driven, a service specification outlining a volume threshold for each specific test in the basket will be developed. Service volume thresholds are needed to mitigate the potential risk of wastage or inappropriate ordering of tests. In this case a 5% margin of fluctuation is proposed as acceptable. When the target volume exceeds 5% on a monthly or quarterly basis, fee-for-service will apply.
(i) Based on current standard treatment guidelines and protocols, a set of clinical rules have been developed and operate by defining conditions for outright rejection, restrictions are put on each test method using predetermined evaluation criteria as well as multiple conditions for when a test is allowed. If none of the allowed conditions based on the rules are met, the test will be rejected.
(ii) The new funding model further specifies authorization levels by category of health professional, seniority and type of facility.
(c) Moving towards a capitation based reimbursement model, based on the needs of the catchment population requires a cost-based tariff schedule. Cost per test will be adjusted against the demographic (or disease) profile of the specific province, giving a cost per person for laboratory services.


191. The laboratory investigations to be covered by NHI would be requisitioned for a specified clinical indication and not merely as a routine procedure. The authorised requisitioning healthcare professional will be required to decide on and define the purpose or reason for each laboratory investigation taking into account the following factors:
(a) If the investigation is clinically justifiable
(b) Whether the previous results still have clinical relevance
(c) If the investigation is required to ensure patient safety
(d) If the investigation is required for quality assurance purposes