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


National Health Insurance Policy towards Universal Health Coverage

Chapter 7 : Financing of NHI

7.10 Containing costs and improving management

7.10.1 Supply-side measures


261. International experience shows that the way in which hospitals and service providers are paid influences health expenditure patterns. Costs can be contained through volume-based global budgets and case-load payment systems for hospitals, such as DRGs, introduced in many countries without leading to deteriorating quality of care. This is explained in more detail under 8.3 Provider Payment Mechanisms.


262. Capitation payments rather than fee-for-service charges for general practitioners and other primary care providers have typically succeeded in containing overall costs, without leading to cost-shifting to higher levels of care. However, this brings complexity into the negotiation and management of alternative reimbursement arrangements and it will take time to implement such reforms in South Africa.


263. Other supply side measures include coverage rules and pre-authorization, two common methods used by purchasers to limit unjustified tests and therapies and nudge providers towards proven standard treatment pathways. Some countries have opted to control supply-side prices of both health services and medical or pharmaceutical supplies. Price-setting has been more effective in hospitals.


264. International evidence suggests that professional entry barriers and wage controls have been ineffective in containing health expenditure, and may have increased costs due to the resultant increase in the wage bill for protected professionals. More indirect measures such as the adoption of electronic health records may save money through better diagnoses, fewer duplicative tests and medical errors, and less time spent in archiving and transporting records.