Managed care: tools to manage the cost of healthcare services

In this third article in the series aimed to empower patients on their rights in the funding of healthcare, Elsabé Klinck discusses managed care.

Managed care

We have, in the second article in this series, referred to the prescribed minimum benefits (PMBs) and how medical schemes can manage the cost thereof by entering in to contracts with designated service providers (DSPs). 

They can also manage cost by implementing “managed care” strategies. These include, for example, having medicines lists, requiring pre-authorisation before certain procedures can be undertaken or before one can be admitted into hospital, or setting certain financial caps up to which the scheme will pay.

It must be noted that “managed care” applies to both PMBs, and non-PMBs.

Medicines list and treatment protocols

Medicines lists, or formularies, are ways by which medical schemes state that they will only pay for certain medicines, and not for others. Treatment protocols are step-by-step “recipes” that states how the doctor should manage a certain condition. 

One would assume, because managed care is about managing cost, that the law would say these must be set on price. However, healthcare is more complex than just what is cheap or expensive. It is about:

(a) What is, in healthcare terms, appropriate for a patient; and

(b) To cater for cases where not all patients are equally well, or well at all, on the same medicine.

In terms of what is appropriate for a patient, the medical scheme must set its medicine lists and treatment protocols based on evidence-based medicine (EBm). 

What is EBM?

EBM is defined in the law as considering, in an honest and ethical way, what’s the current best ways of treating patients with a certain condition. It then also considers the individual circumstances of the patient and the doctor’s experience in managing such diseases. Then one must also consider what research says, i.e. clinical research on patients, treatments and various products. This includes considerations that may come to light during a clinical trial, e.g. that patients with certain other conditions cannot take a specific medicine, or that in some groups, the medicine has a bad reaction. 

Scenario cases in the interest of the patient’s health

So, to cater for the patients who are not well on the medicines on the list, the law, in Regulations 15H(1)(c) of the General Medical Schemes Regulations, states that the scheme must deviate from their medicine list, in the interest of the patient’s health, under the following situations:

  • Where the medication that the scheme is willing to pay for, did not work for the patient (this is called “treatment failure”). In diabetes, this can be proven by showing that the medicine is not bringing one’s blood glucose levels within the right range. 
  • Where the scheme-recommended treatment causes, or would cause an adverse reaction. This means that the patient has experienced a side effect on the medicine on the list, or that we know, often from research and experience, that certain patients will experience a side effect. 

If the above cases are proven, the scheme must, by law, fund an appropriate alternative medicine, even if that medicine is not on their list, without a co-payment.

The same principles that apply to medicines lists or formularies, also apply to treatment protocols (regulation 15H(1)(c)). Where the patient is not well on the treatment as set out step-by-step, the scheme must pay for a deviation from the protocol. This is also in cases where the step-by-step approach is not working for the patient and his/her condition is not getting better (i.e. “treatment failure”) or where following those steps would cause, or have already caused, the patient to suffer harm.

Other important aspects of managed care to remember

One sometimes hears that a scheme says: “We are only making a funding decision, it is not a decision about your care.” This is not true where the medical scheme, or the entity that administers the scheme, is a registered managed care organisation. 

Managed care, in the law, is defined to include both the financial, and the clinical (i.e. healthcare) management of a scheme beneficiary. When they make a funding decision they must consider not only the financial impact of that decision, but also the impact on your health.

Get your healthcare providers support

Also, where the scheme has, as part of its managed care, appointed “network” doctors or hospitals, who agree to adhere to certain principles and protocols, the law set criteria aimed at protecting patients. It says that even in these cases the scheme is responsible towards its beneficiaries. The scheme or the contract may never prevent the doctor or other healthcare provider from telling the patient what care they need, and what would be best for them. Even if the managed care agreement requires adherence to a formulary or protocol. 

The scheme may also not terminate the agreement because of the provider saying they disagree with a scheme decision or when the provider assists the patient to lodge a complaint or an appeal. Patients should therefore not hesitate to:

  • Ask their doctors and healthcare providers as to whether the care is appropriate, or the best care for them; and
  • Ask for their doctors or providers’ supporting in taking up cases with the scheme and even the Council of Medical Schemes (CMS).

No kick-backs for healthcare providers

When appointing or selecting providers, medical schemes may not unfairly discriminate against any provider, and must base such selection on a clearly defined and reasonable policy which furthers the objectives of affordability, cost-effectiveness, quality of care and member access to health services.

Regulation 15J prohibits practices where the provider is rewarded for recommending inappropriate care. For example, paying a pharmacist a higher dispensing fee for switching the patient from one medicine to another where the second medicine then is not appropriate, or paying a doctor a higher fee for refraining from using care that would be medically appropriate (e.g. starting a certain type of treatment or referring the patient to a specialist) would be prohibited under this regulation.


The managed care regulations also provide for “capitation”. It literally means “per head”. So, the scheme would pay an average amount per head, for all diabetic patients, irrespective of what that patient actually costs. 

So, if a patient has complex diabetes, the amount may be too little, but if the patient is easy to treat, the amount may be more than what is required to treat the patient. However, the decisions on how to treat the range of diabetic patients, then is up to the doctor, who then undertakes the assessment as to what would be possible for each patient. 

However, if this is done, regulation 15F sets the following criteria for these capitated contracts namely:

  • It must be in the interests of the members of the medical scheme;
  • There must be a “genuine transfer of risk” from the scheme to providers, which means they must truly empower the provider to make the decisions on appropriateness per patient and to take the risk of more complicated patients; and
  • The capitated payment must be “reasonably commensurate with the extent of the risk transfer”, which means it must be certain that, overall, the doctor is able to appropriately treat all patients, even if s/he has more complicated patients than someone else to manage.


Managed care is an important aspect in medical schemes, and many patients are not aware that there are rules that frame how schemes must set, and enforce, their medicines list, or preferred doctors. 

These rules are important and protect patients who are not doing well on scheme-medicines, who require different care, or who are more complicated patients.


Elsabė Klinck (B.Iuris, LLB, BA Hons (German), BA Applied Psychology) specialises in health law, -policy and -ethics. She owns a successful healthcare consulting firm, serving various clients in the pharmaceutical, medical device, healthcare professional and health facility markets.