Graduate School of Business


Doctor of Business Administration (DBA)


Ronald Morgan


Pay-for-performance, Cost-control, Medical Schemes, Hospital Costs, Outcomes


Business | Health and Medical Administration


Hospital costs are the most significant portion of health-related costs incurred by non-profit health insurers registered as medical schemes in South Africa. Medical schemes continue to use retrospective reimbursement models for hospitals despite general acknowledgment that these models do not limit hospital costs and utilization. Although medical schemes are interested in implementing alternative reimbursement models, such as pay-for-performance (P4P), they are uncertain about which P4P models they can use to reduce hospital costs, resulting in their inability to make critical changes to their costs from traditional fee-for-service models. This qualitative exploratory multiple case study used 17 open-ended case interviews to explore the perceptions of seven South African medical schemes regarding P4P as a cost-control model. The participants confirmed they were not satisfied with how their current reimbursement models control hospital costs and outcomes. They perceived P4P could result in better cost-control and better-quality outcomes. The participants acknowledged P4P is a complex model with significant implementation barriers, and they were also concerned that hospitals could manipulate the model to their benefit. The participants described the enabling factors that could facilitate their selection of P4P as a cost-control model. The participants recommended a patient-centric P4P model that encompasses five broad principles: (1) Paying for measured outcomes, (2) paying specialists for the coordination of care, (3) rewarding hospitals for excellence by directing patient volumes, (4) measuring patient-reported outcomes, and (5) relegating the hospital’s role to that of a supplier rather than a coordinator of care. The study provided a recommended framework that may assist medical schemes in selecting and implementing P4P models.