Southern Cross Steps Up Direct Contracting

News release
31 May 2012

Southern Cross Steps up Contracting Directly with Medical Providers

New Zealand’s largest health insurer has entered into over 120 new Affiliated Provider agreements in the last two years, and says it intends to take an even more active role in managing the rising cost of healthcare in the future.

Southern Cross Health Society now has Affiliated Provider agreements with over 300 healthcare providers nationwide – up from 180 agreements in 2010. Affiliated Providers are specialists, surgeons and medical facilities that carry out certain medical procedures and healthcare services for Southern Cross members at pre-agreed prices.

Latest data shows around 25% of all claims costs paid by Southern Cross are now carried out through Affiliated Provider agreements.

Southern Cross Health Society Chief Executive Peter Tynan said the aim of the Affiliated Provider programme was to achieve better value healthcare services for Southern Cross’ 820,000 members long-term.

Across all healthcare services the Society’s total claims costs have grown 52% over the last six years - from $379 million in 2005 to $577 million in 2011.

Tynan said that this growth was attributable to an increasing number of claims, and the increasing cost of healthcare services. However, claims inflation has been lower than expected for the majority of this current financial year.

“Affiliated Provider contracts are an important way we are managing future cost increases. We can’t control the number of procedures our members need. Nor is it our intention to prevent justifiable medical cost increases. But what we can manage for our members are unreasonable price increases or prices that fall outside market norms.”

Prices for a procedure are negotiated individually with each Affiliated Provider.

Tynan said an example of recent negotiations with a provider saw the Society achieve a $2,100 reduction per procedure on normal fees.

“As a not for profit insurer, our premiums are a direct reflection of the claims we pay. We’ll be continuing to contract across all specialities as a way to manage rising costs for our members.”

A catalyst for the growth in Affiliated Provider agreements has been an increase in procedures in the “Affiliated Provider only” category of cover. For these procedures, Southern Cross members are only reimbursed if the procedure is carried out by an Affiliated Provider.

Procedures added to the “Affiliated Provider only” category in the last two years include colonoscopy, gastroscopy, cataract extraction, Mohs surgery (a type of skin surgery), intra-vitreal injections (an ophthalmology treatment for age-related macular degeneration), PET scans and prostate surgery.

Tynan said using an Affiliated Provider benefited members by providing certainty around procedure costs, and also made claiming easier, as the entire claims process was handled by the provider.

“Use of Affiliated Providers benefits the entire membership long-term by managing costs.”
ends

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