NHLS & CMS 2022/23 Annual Performance Plans

Meeting report

The Chairperson opened the meeting by welcoming the Members of the Committee, officials of the Department of Health, representatives of the National Health Laboratory Services (NHLS) and the Council for Medical Schemes (CMS), and all those joining the meeting on the virtual platform.

He handed over to Mr Johannes Kgatla, Parliamentary Liaison Officer (PLO), National Department of Health (NDOH), to introduce the presenters.

National Health Laboratory Services (NHLS) Annual Performance Plan 2022/23

Prof Eric Buch, Chairperson of the NHLS, thanked the Committee for the invitation to present, as it was an opportunity that allowed the management to thoroughly reassess the governance and leadership of the entity. The NHLS had gone through an extensive process of strategic planning in preparing the annual performance plan (APP) and had set ambitious targets which were possible to achieve.

Some of the key challenges that had been faced by the NHLS included tight finances. The anticipated challenges for the year included the integration of the Forensic Chemistry Laboratories (FCL) into the NHLS. The FCLs had been funded through a transfer payment from the National Treasury.

Professor Buch handed it over to the Chief Executive Officer of the NHLS, Dr Karmani Chetty.

Dr Karmani Chetty, Chief Executive Officer, NHLS, said the NHLS played a critical role in contributing toward Section 27 of the Constitution, which states that everyone had the right to health. This was achieved by the NHLS through the provision of diagnostic services to 80% of the South African population, including the training of laboratory health professionals, research and providing technical support and continual surveillance of communicable diseases.

She reminded the Committee of the NHLS Amendment Bill that had been assented to by the President, which was awaiting the finalisation of the regulations before it was implemented.

She said that the National Health Act (NHA), the Public Finance Management Act (PFMA), the National Development Plan (NDP): Vision 2030, Sustainable Development Goals (SDG) 2030, the framework for managing performance information, the policy framework for the government-wide monitoring and evaluation systems, and the NDOH plan embodied in the medium-term strategy framework (MTSF) for 2019-2024, were some of the notable policies that governed the NHLS.

Some of the future policies that would impact the NHLS included the National Health Insurance (NHI) Bill and the National Public Health Institute of South Africa Bill.  

The APP had included an extensive situational analysis of external factors such as the role of pathology and laboratory service in health care, the burden of disease and emerging communicable and non-communicable diseases, including potential pandemics. The situational analysis also involved an internal environmental analysis. The NHLS, through its network of laboratories, was able to provide equitable laboratory services to all nine provinces.

Dr Chetty said that as of 1 April, the FCLs had been integrated into the NHLS. Their main functions were the testing of biological tissues and fluids for the presence of poisons and/or drugs in instances of unnatural deaths, testing of ante and post-mortem blood for alcohol analysis, and food testing in terms of the Foodstuffs, Cosmetics and Disinfectants Act. Therefore, the strengthening and capacitating of the FCLs would be a key focus of the NHLS.

The APP also had a detailed strengths, weaknesses, opportunities, and threats (SWOT) analysis. Some of the noted strengths were that all the laboratories of the NHLS were networked using a single laboratory information system, which facilitated standardised reporting, monitoring and evaluation. However, a lot of work was necessary to strengthen the information technology (IT) infrastructure capacity. She added that there was an opportunity to leverage the current capacity to expand research and innovation, but the challenge regarding the retention of the professional staff posed a threat. Furthermore, energy and water concerns posed a major challenge to service delivery.

Mr Jonas Shai, Acting Chief Financial Officer (CFO), NHLS, said that according to the NHLS’ medium-term estimates for 2022/23, the total revenue was projected to be R11.6 billion. This was comprised of estimated test revenues of R10.6 billion, other incoming streams of revenue being R200 million, and transfers received being R772 million. The transfers include FCL transfers of R138 million in the 2022/23 financial year. The total estimated expenses for the financial year would be R11.5 billion, with a projected surplus of R66 million.

Dr Chetty said that in measuring performance, Programme One was the laboratory service, which was the core operation of the NHLS. The key performance indicators (KPIs) were aimed at monitoring the provision of timely service by measuring the turnaround time of the test results and systems to provide clinically effective and efficient services. In 2022/23, the estimated performance for the percentage of tuberculosis (TB) GeneXpert tests performed within 40 hours was 93%, the percentage of CD4 tests performed within 40 hours was 94%, and the percentage of HIV viral load tests performed within 96 hours was 82%. The 2022/23 estimated performance of the percentage of HIV Polymerase Chain Reaction (PCR) tests performed within 96 hours was 81%, the percentage of cervical smear screening performed within five weeks was 91%, and the percentage of laboratory tests (full blood count) performed within eight hours was 94%. The 2022/23 estimated performance on the percentage of laboratory tests (urea and electrolytes) performed within eight hours was 94%, the percentage of SARS-CoV-2 PCR tests performed within 48 hours was 85%, and there would be the development and implementation of a point-of-care-testing (POCT) plan and the implementation of a digital pathology system.

Programme Two was focused on academic affairs, research, and quality assurance to provide high-quality service. The NHLS also manages the proficiency testing schemes (PTSs) for all NHLS laboratories, private pathology laboratories, and 24 African laboratories. The 2022/23 estimated performance on the percentage compliance achieved by laboratories during annual quality compliance audits was 93%, and the percentage of laboratories achieving proficiency testing scheme performance standards of 80%, was 92%. She added that in the 2022/23 estimated performance, there was a 30% increase in the implementation of the pathologists’ national coverage plan, with 660 articles published in peer-reviewed journals.

Programme Three was the surveillance of communicable diseases. In the 2022/23 estimated performance, the percentage of identified prioritised diseases under surveillance was 90%, the percentage of outbreaks of Category One notifiable medical conditions responded to within 24 hours after notification was 100%, and the percentage of National Institute for Communicable Diseases (NICD's) laboratories that were accredited by the South African National Accreditation System (SANAS) was 100%.

Programme Four was occupational and environmental health and safety, and the estimated performance on the percentage of blood alcohol tests completed within the normative period of 90 days was 60%, the percentage reduction of backlogged cases was 20%, the percentage of perishable food samples tested within 30 days of sampling was 50%, and the percentage of non-perishable food samples tested within 60 days of sampling was 50%.

Programme Five was the FCLs, which had been integrated into the NHLS. Their main functions were the testing of biological tissues and fluids for the presence of poisons and/or drugs in instances of unnatural deaths, the testing of ante and post-mortem blood for alcohol analysis, and food testing in terms of the Foodstuffs, Cosmetics and Disinfectants Act.

Programme Six was focused on administration, which played a critical role in the delivery of the NHLS’ services through the provision of a range of support services such as organisational development, human resources and labour relations, information technology, property management, security services, legal services, communication, and integrated planning. For the 2022/23 performance estimates, the ratio of current assets to current liabilities was 2:1, the cash flow coverage ratio (operating cash in-flows/total debt) was 2:1, the number of creditor days was 30 days, the number of debtors' days was 100 days, the percentage turnaround time for awarding tenders that were below R10 million within 180 days was 75%, and the percentage turnaround time for awarding tenders that were above R10 million within 180 days was 70%. Furthermore, the audit opinion of the Auditor General (AG) had been unqualified.

Dr Chetty said that five major risks had been detailed in the APP. These were: skills shortages, the rising cost of employee compensation, supply chain management (SCM), inadequate information communications technology (ICT), and an insufficient budget allocated by the NDOH to the provinces.

Discussion

Mr T Munyai (ANC) asked the NHLS to reconsider the removal of the KPI that had to do with data analytics, as it would be useful in providing real-time data with integrated new technologies, especially when testing viruses.

He said the aim should be to have one blood bank instead of two.

He asked what the critical drivers or impediments were to drastically improving broad-based black economic empowerment (BBBEE) compliance. What capacity should be developed to realise the role of the NHLS in the report?

Did the NHLS have the capability to increase the number of items above 250 in the outer years, and what would be required to realise the increase in training and skills development?

What was the NHLS’ plan to respond to key risks of skills shortages and the inadequacy in ICT infrastructure sectors?

Ms H Ismail (DA) wanted clarity on whether the NHLS was planning to retain all the staff who had played a key role throughout the COVID-19 pandemic. What was the percentage of staff that had been lost to COVID-19, given their first-hand experience with specimens?

Did the NHLS employ foreign nationals? If so, what were the critical skills that they were bringing to South Africa?

She asked the NHLS to update the Committee on the various efforts made to overcome all cancers in the country.

Considering the NHLS’ weaknesses and threats identified in the SWOT analysis, she asked if the NHLS would be able to provide effective service delivery.

Ms M Clarke (DA) referred to the risk of skills shortages and asked what specific skills these were and how this would impact the performance of the NHLS.

What percentage increase in the budget would be sufficient to operate efficiently? How could the shortage of funds negatively affect the quality of the NHLS services? Did it foresee a risk in operation under the NHI, considering tight budget allocations?

Based on the current statistics of COVID-19 infections and deaths, she asked if COVID-19 was still a threat to South Africa and if there would be a need in the future to have restrictive measures to curb COVID-19 infections.

Ms A Gela (ANC) asked what the plan was to ensure the work of the NHLS was not affected by the budget constraints.

When would the NHLS regulations on the implementation of the NHLS Amendment Bill be finalised for the regulations to be in effect? When would the NHLS regulation on the implementation of the National Public Health Institute Bill [B16 – 2017] be finalised for the regulations to be in effect?

How would the NHLS manage the threat of energy and water in order for it not to impact its service delivery?

Ms N Chirwa (EFF) asked about the measures to respond to racism in the NHLS.

How had the system to flag corruption in the NHLS been strengthened?

What was the NHLS doing to address the issue of in-sourcing security and cleaning staff members?

What were the reasons for the decline in the annual performance of the NHLS?

What process had been involved in the moving of the FCL from the South African Police Service (SAPS) to the NHLS?

Ms E Wilson (DA) congratulated the NHLS on the progress that had been made over the past years to ensure proper management and financial stability. ‘

She asked the NHLS to compile a report on the condition of the FCL that they had taken over, as many of these laboratories were poorly managed.

Did the NHLS have power generators to respond to the threat of load shedding?

Dr X Havard (ANC) asked what risks existed in the NHLS' supply chain management, and how it had responded to such risks.

What were the revenue streams that the NHLS had developed to increase its revenue?

Mr A Shaik Emam (NFP) asked what measures had been put in place to retain the human resources of the NHLS.

What would the impact of the National Health Insurance (NHI) be, given the already limited resources?

The Chairperson asked what the relationship was between the training done by the NHLS, private hospitals and public hospitals. He pointed out that Programme Five depicted relatively low performance targets. He therefore asked what factors were leading to lower performance on output indicators on the percentage of blood alcohol tests completed within the normative period of 90 days.  He asked what interventions had been put in place to improve the performance of Programme Five.

NHLS' response

Prof Buch said that the blood bank was not part of the NHLS -- it was a private not-for-profit organisation which was out of the NHLS' scope of control.

Significant progress was being made to address the various risks faced by the NHLS. For example, there had been a series of ICT upgrades to curb corruption.

Staff members of the NHLS were not being lost to COVID-19, because they worked in laboratories with precautionary measures. Staff members who had been infected with COVID-19 were mostly infected from their communities outside of the NHLS.

Prof Buch said that although the NHLS was not responsible for cancer interventions, he was proud of the improvements in the work of the National Cancer Registry to support cancer efforts in South Africa.

The NHLS had worked, and continued to work, on strategies to retain human resources which were in high demand.

He said that if the financial model of the NHI had a similar model, where the NHLS was paid for the services provided, then it would be sustainable to provide its services as the demand grew.

It would continue to ensure that it delivered value for the public money, and different ways were being looked at to deliver value for money, such as staff distribution.

He clarified that regulations were issued by the NDOH, and the NHLS followed those promulgated regulations, therefore making regulations was beyond its scope.

Security and cleaning staff members had already been in-sourced in an agreement with the union. The in-sourced staff were now paid more by the NHLS, compared to when they were outsourced.

The FCL had moved to the NHLS on 1 April, and the Committee would be kept abreast of the progress that had been made.

There were several improved systems to deal with corruption and ensure control measures including, for example, a properly digitised procurement register.

Dr Chetty said that the KPI that had to do with data analytics had not been removed, but had been added to the central data warehouse report. The Board had mandated that data analytics was a priority for the NHLS. Furthermore, the Research and Innovation Committee had requested that a business intelligence unit be established so that there could be a more in-depth analysis of the data that would have an impact on policy decisions.

She added that there was an extensive plan to address the issue around the critical drivers and improvement in employment equity by working with human resources.

The issue of skills shortages, especially in ICT, was something that was being focused on, as the NHLS wanted to attract more data analysts. Several registrars were being trained in pathology, with a specific focus on pathologists and anatomical pathologists, as these were critical skills that were needed.

Dr Chetty said that there were 25 foreign nationals in the NHLS, mainly in the areas of pathologists, epidemiologists, and medical scientists. Of the 25, nine were permanent and the others were on contract.

Budget pressures had not impacted the KPIs of the NHLS.

She said the NHLS would not tolerate racism and any allegation where people felt that they had been disadvantaged because of perceived racism or bias should be brought to the attention of the management of the NHLS so that it could be dealt with accordingly.

The FCLs had not been transferred from the SAPS to the NHLS. The SAPS still retained its forensic services, which were different to the forensic services of the NHLS.

All NHLS laboratories had power generators. However, the NHLS was highly dependent on hosting hospitals, and due to the state of the power generators in the hospitals, there was a consideration to have standalone power generators to service the NHLS laboratories.

Mr Shai said that 76% of the NHLS budget went to the laboratory services. He stressed the importance of balancing the revenue in line with the increases from the departments. There had already been engagement with the National Treasury in the current year for the 2022/23 financial year.

The NHLS was looking at exploring different revenue streams and there were already strategic discussions looking at areas with opportunities.

The cost reduction strategy included certain lines in the NHLS’ statements of financial performance, including travelling.

Prof Adrian Puren, Executive Director, National Institute for Communicable Diseases, said that South Africa was coming out of the lowest point in terms of the Omicron resurgence, with the numbers per day, including hospitalisations and deaths, remaining low. He said that there should be no complacency about COVID-19.

Dr Chetty added that the NHLS was consulting on the digital pathology system at a global level, and was therefore drawn from the experiences of others.

Council for Medical Schemes (CMS) Annual Performance Plan 2022/23

Dr Sipho Kabane, Chief Executive Officer, Council for Medical Schemes (CMS), said the work of the CMS was guided by Chapter 2, Section 27, in its Constitutional mandate. It was also guided by the legislative mandate which included the Medical Schemes Act, the National Health Act, the Financial Advisory and Intermediary Services Act, the Promotion of Access to Information Act, and the Promotion of Equality and Prevention of Unfair Discrimination Act. It was also guided by policy development frameworks such as the National Development Goals 2030, and the strategic goals of the NDOH.

The five-year plan of the CMS was focused on improving regulatory effectiveness and efficiency, including positioning it as a key player in the implementation of the NHI. This was aligned with the vision of the CMS, which was to be an agile and transformative regulator to promote affordable and accessible healthcare care towards universal health coverage. This was under the regulatory philosophy that was transparent, fair, independent, equitable, consultative, cost-effective, firm and proactive.

The CMS was guided by the strategic goals of promoting the improvement of quality and the reduction of costs of the private health care sector, encouraging effective risk pooling, ensuring that all regulated entities comply with national policies and regulations, being a more effective and efficient organisation conducting policy-driven research, and collaborating with local, regional and international entities.

Looking at the positive side of the industry trends, Dr Kabane said that there had been a surplus of R19.93 billion in 2020, as opposed to the R1.03 billion surplus of 2019. This was mainly due to the lower utilisation of health services and because some of the elective procedures had been deferred due to the pandemic.

The industry solvency levels had significantly improved from a ratio of 35.61% in 2019 to 44.55% in 2020. This was still higher than the statutory requirement of 25% throughout the period under consideration. The number of schemes that failed to meet the 25% statutory solvency had remained at seven between 2014 and 2020.

The proportion of beneficiaries covered by the Efficiency Discounted Options had increased from 25.3% to 28.8% in 2020.

On the negative side, COVID-19 had adversely affected the global sphere and had claimed more than 500 lives in the medical schemes sector by August 2021.  

Dr Kabane said that the medical aid industry had been faced with serious sustainability challenges. A negative beneficiary growth had been experienced due to COVID-19 and other socio-economic challenges, resulting in more principal members exiting at a slightly higher rate than dependents.

Despite the challenges presented by COVID-19, the CMS had had an overall achievement of 90% in 2020/21.

The key focus areas for the 2022/23 financial year were the standardisation of medical schemes' benefit options, the development of a guidance framework for the low-cost benefit options, a review of the prescribed minimum benefits, the consolidation of medical schemes with fewer than 6 000 members, the consolidation of government-funded schemes, the development of a central beneficiary registry, the prevention of fraud waste and abuse, and collaboration with local, regional and international regulators.

Ms Andisa Zinja, CFO, CMS, said that the proposed levy increase for 2022/23 was 4.23%, and the proposed budget for 2022/23 was R194 million.

The compensation of employees (CoE) had increased by 7%. This was because there had been several vacant positions in the CMS, especially at the executive level. However, it was in the process of filling those vacant posts.

Dr Kabane added that the CMS had appointed a total of 12 employees on internship and fixed-term contracts. The interns had been appropriately placed in units with agreed work plans to achieve experiential learning at the end of the internship programme.

The immediate challenges faced by the CMS included significant budgetary constraints. There was inadequate funding. The CMS had a budget of over R194.48 million to execute its mandate in the 2022/23 financial year compared to R219 billion of contributions to medical schemes in 2020/21. The new funding model, however, was focused on reviewing tariffs, introducing new tariffs, standard increases in levies, and growing contingency reserves.

Discussion

Ms Ismail asked the CMS to update the Committee on the review of benefits in line with the Health Market Enquiry recommendations.

How did the CMS anticipate the lifting of the disaster management regulations would have a positive impact on its function?

She asked for an update on the progress made with the disciplinary cases that had been raised.

Given the budget constraints, did the CMS have the capacity to attract critical skills?

She asked for an update on the CMS’s organisational restructuring which was to be concluded in 2023.

Ms Clarke asked if there was a way to cut the costs of the CMS leases by exploring cheaper options, such as using government buildings.

What were the regulatory and compliance litigation costs in terms of monetary values?

What was the CMS's current vacancy rate? What were the main reasons for staff turnover, and what measures had been put in place to reduce it?

Had there been a research project that had placed a focus on the NHI? If so, what were the conclusions on the impact and feasibility of the NHI on the functions of the CMS?

Would the budget constraints affect the functions of the CMS?

She asked if there had been cases of non-compliance and non-consequence management.

Ms Gela asked what the potential socioeconomic development opportunities were due to the increased industry solvency and the net health care result surplus. How would the net health care result surplus benefit members in reducing costs or out-of-pocket payments?

What were the drivers of the low uptake of efficiency discounted options which had remained at 23.5%, and what could change this distribution? How was the CMS assisting in the process?

Dr Havard asked which areas of legislation misalignment were being addressed by the CMS, and what the specifics of such engagements were.

The Chairperson asked what regulations had been put in place to address the poor governance and financial management issues that had been raised in the CMS, including the consequence management that could be reported.

Was the CMS planning to increase its capacity to process complaints within 120 days to ensure the resolution of challenges?

CMS's responses

Dr Kabane said that the review of the prescribed minimum benefits predated the Health Market Enquiry. The overarching idea of the review was to update the diagnostic and treatments, including the chronic disease list, which was currently in the prescribed minimum benefit. While doing that, the CMS also sought to introduce a strong primary health care element. The delay had been because the process was highly a consultative one, which included various stakeholders. This had also been costed by conducting an affordability study and a willingness to pay study, so the CMS already had recommendations to be presented to the Minister of Health.

Based on the recommendations of the Health Market Enquiry, one of the basic key milestones of the CMS would be to develop a comprehensive primary benefit option across all schemes. This was what the CMS was trying to achieve through the prescribed minimum benefits review.

The impact of the lifting of the National Disaster Management regulations was something that the CMS was closely monitoring. However, as the current numbers of infections looked, members of schemes would be able to access their service providers. Therefore, the reserves and surpluses that schemes had made were expected to decrease, as scheme members would access health services.

Dr Kabane requested that the CMS be allowed to produce a report that would provide details on all the disciplinary cases, including the implementation of consequence management. He also asked that the CMS be given the time to compile a comprehensive report on the restructuring process. The CMS could still fill the key posts that were critical, though not all the vacant posts would be filled because of the budget constraints.

The CMS had been participating in the policy development of the NHI since the Green Paper and had done pieces of research that had informed the process of the NHI. He indicated that the NHI was feasible, though there were challenges with resources, the phasing in, and the detailed implementation plan.

The budgetary shortfalls would impact some of the priority projects of the CMS.

He said that schemes were allowed to invest some of the surpluses in certain financial instruments to ensure that those surpluses were not eroded by inflation and other consequences. However, given that these surpluses were due to low claims because of COVID-19, the CMS was expecting schemes to pay out the legitimate claims to reduce the out-of-pocket expenditure of members. He added that schemes were expected to utilise their reserves and surpluses to reduce the annual contribution increases.  

He said that the reason for the delays in the complaints adjudicating unit had been because several stakeholders needed to be consulted. However, the CMS was working on this issue.

Dr Kabane said that medical schemes were, by design, non-profit making. The board was elected through a voting system to look after the interests of the scheme. However, medical schemes often did not follow this process, which resulted in poor governance and the mismanagement of financial issues. For the medical schemes’ financial health, it was important to comply with a solvency rate of 25% all the time. However, there were medical schemes that did not comply with that due to poor management. As a result, the CMS placed such schemes under curatorship to ensure that they did not collapse while the interests of their members had not been fulfilled.

Mr Michael Willie, General Manager: Research and Monitoring, CMS, said the CMS had dedicated resources to provide technical support to the NHI committee.

Mr John Letsoalo, Acting General Manager: Legal Services, CMS, said that another issue that had been noted by the CMS was related to the essence of how medical schemes ought to operate. The CMS had always been of the view that medical schemes did not operate in the formal tradition of insurance products. However, the Financial Sector Regulation Act (FSRA) allowed medical schemes to function within the typical insurance space, and such a misalignment did not give the identity of medical schemes.

The Chairperson welcomed the presentation and thanked the CMS. He requested a comprehensive report on the challenges it faced.

The meeting was adjourned.