Day surgery facilities throughout the world have transformed the surgical experience for millions of patients by providing them with a more convenient alternative to hospital-based surgery.
In South Africa, the concept of day hospitals is gaining traction as the fast growing and disproportionate increases in hospital costs are giving way to alternatives that are more affordable to both insurers and the broader public.
For a small percentage of the South African population, healthcare costs are covered by medical aid schemes, while the rest of the population depends on an overburdened public healthcare sector. Even the insured are finding it difficult to cope with escalating medical aid premiums, and insurance companies are struggling to grow memberships and limit terminations. According to data from the South African Council for Medical Schemes, total hospital expenditure for medical schemes accounted for 37.4% of the total amount paid to all healthcare providers, while inpatient admissions constituted about 88% of what was paid to private hospitals in 2016.
Distribution of healthcare benefits paid in 2014, 2015 and 2016
Source: SA Council of Medical Schemes
In South Africa, day hospitals offer an opportunity to improve the efficiency of private hospitalisation, especially when it comes to routine procedures. Some of the procedures that can be done at day hospitals include plastic surgery, cataract surgery, ear/nose and throat surgery, general and gynaecological surgery, orthopaedic arthroscopy surgery, maxillofacial surgery and sterilisation and circumcision. The benefits to patients are as follows:
• Lower costs – the costs of procedures performed at day hospitals are much lower when compared to general hospital, due to infrastructure and staffing requirements. Operating theatres in hospitals are equipped for more complex types of surgery, whereas day hospitals do not require such a wide variety of technology and equipment. According to the Competition Commission of South Africa, in 2016 a routine tonsillectomy for a child cost about R11 000 in an acute hospital versus R8 000 in a day hospital.
• No overnight stay – patients are admitted, operated on and discharged on the same day. It is especially convenient where children are concerned, as they do not have to sleep in an unfamiliar environment.
• Lower risk of infection - due to the fact that patients return home on the same day, the risks of cross infection are reduced, which results in a shorter recovery.
• Child friendly wards and facilities - day hospitals are the ideal alternative for children requiring same day surgery as the trauma of overnight stays are eliminated.
Day clinic operators such as Advanced Health (listed: AVL), Intercare Day Hospital Group and the Cure Day Clinics are set to win longer term should international trends materialise locally. Apart from higher volumes at existing facilities, there is also significant scope for expansion. According to the SA Day Hospital Association, there are currently 50 day hospitals in the country, compared to 235 acute facilities. In the United States and Australia, the split between the number of acute and day hospitals is close to 50/50. Furthermore, only 13% of surgeries that are performed in acute facilities are also performed in day hospitals in South Africa. In developed countries such as the United States and the United Kingdom, up to 70% of surgeries are performed in day hospitals. The utilisation rate of day hospitals locally is extremely low according to international standards.
Source: Advanced Health
But there are several reasons why demand for day hospitals have been below trend and could remain so for longer than anticipated.
• Day hospital providers are faced with mounting regulatory and administrative challenges. Securing licences is one of the biggest hurdles, as day hospitals should be located within a radius of 5km of an acute hospital, in case of an emergency. The Day Hospital Association South African argued that licences issued for day hospitals had been evaluated based on the number of existing hospital beds in a catchment area rather than for economic reasons, making day hospitals’ footprint less competitive.
• Private patients are generally unaware of these low-cost health facilities, as a doctor’s referral is usually required to be admitted. The probability of patient referral to a day hospital is lower as specialists in the state operate in the hospitals they are employed by, and most specialists in private practice are contracted to acute hospitals which subsidise doctors for consulting rooms.
Insurers are thankfully warming up to the idea. Medical aid providers have agreed to enhance the fee structure for specialists when operating at day hospitals. In addition, certain schemes refer members to a day hospital for a same day surgical procedure and it is anticipated that in 2018 the concept will be further promoted during scheme negotiations as the savings that day hospitals present cannot be ignored (up to 30% in certain instances).
As with any disruptive trend, there will be losers in the game as well. Private hospitals will likely be the most impacted with lower patient volumes likely to weigh on top-line growth along with efficiency. Fortunately, this is not a zero-sum game, while insurers, consumers, and day hospital operators will eat private hospital’s lunch, the public sector and uninsured patients will also be net beneficiaries. This will not necessarily translate to a monetary benefit but the overburdened public sector will receive so relief from heavy caseloads and private patients with may afford to have elective and routine procedures done at a reasonable cost or within a more acceptable timeframe.