Australians spend over nine per cent of GDP on health each year. Financial design for health care organisations is a complex issue with many different aspects to consider, each of which needs to be controlled. Implementation of most reform involves financial risk and while in many cases change is warranted it needs to be properly developed and administered effectively.

Putting evidence into practice

Our team uses advanced methodologies, industry knowledge and an evidence based approach to evaluate, design and implement sustainable processes that improve operations and patient outcomes within realistic cost frameworks. Our experience includes:

• Design of lifetime health cover – we advised the DHA on the introduction of lifetime health cover
• M&A and valuation – we advised parties in most health insurance transactions occurring since 2003
• Capital requirements – we review capital adequacy requirements capital management – we assist health funds in the development of their capital targeting, management and monitoring processes
• Hospital procedure costing – we assisted a hospital to better understand the true cost of undertaking certain procedures, involving not only assessing marginal costs but appropriate allocation of overheads and capital charges.
• Evaluate strategic benefits – we assisted a health fund to identify and evaluate the strategic benefits arising from their ownership of a private hospital, and whether these would in future justify holding the asset as a “strategic” investment instead of simply one of the assets in the fund’s investment portfolio.
• Hospital growth strategy – we advised a private hospital on their growth plans, marketing strategy and likely financial outcomes
• Hospital recovery – we assisted a group of hospitals to turn from a loss making position to a profit position. This included the analysis of cost and revenue drivers and the implementation of a range of quick wins and short-term recovery strategies.
• Evaluation of public health programs
• Brand and product valuation – we used industry profiling, analysis of referral patterns, and an actuarial model to assist in the valuation of our clients products.

Private health insurance is taken up by nearly 50% of Australians. It is important for any insurer that their finances and products provide both security and value.

Deloitte Actuaries & Consultants and health care specialists are experienced at providing effective financial outcomes through a combination of sound logic and innovative thinking. Our experience includes:

• Product design and pricing – we advise insurers on design and pricing of health insurance products
• Capital management – whether proprietary or mutual, an insurer's capital stock is precious and must be managed effectively. Our combined ‘Commercial/ Technical’ capital management approach allows insurers to resolve some fundamental tensions
• Risk equalisation – we advised the DHA on both the 1999 and the 2002/3 rounds of reinsurance reviews
• Appointed actuaries – we have supplied appointed actuary services to both Australian and overseas insurers
• Redesign of insurance – Deloitte Actuaries & Consultants has the proven experience in redesigning health insurance models
• Hospital contracts – a crucial part of health insurers’ cost structure is hospital contracting. We can provide an unbiased ‘outside view’ of the financing implications, flow on to pricing, incentive effects and other outcomes of hospital contracting approach
• Merger/acquisition – we have advised on the purchase price and strategy for health insurers
• Market entry – we advised potential market entrants on opportunities and strategies.

By modelling for the future, assessing risks and quantifying financial implications we help our clients to make informed decisions. Our team applies vigorous quality assurance standards to all our work and have particular expertise in setting, reviewing and fine tuning health care premiums in both the Australian market and abroad. Our experience includes:

• Health fund pricing – we have worked with a number of funds in recent years in the submission of their price increase applications
• Experience analysis – underlying the role setting process is a requirement sound data analysis. We provide this using a range of software tools, either in a one-off special investigation or as an ongoing service
• Market survey – not just the technical processes but also the commercial decisions have to be ‘right’ for a winning set of premiums. Our independent knowledge of the health market is an asset for any insurer
• Risk equalisation – the impact of risk equalisation on health premiums is substantial. Our knowledge and historic involvement with this topic means we can assist with optimising the impact on premiums.

A crucial part of health insurers’ cost structure is hospital contracting. Deloitte Actuaries & Consultants can provide an unbiased ‘outside view’ of the financing implications, flow on to pricing, incentive effects and other outcomes of hospital contracting approach. Our experience includes:

• Procedure costing
• Financial modelling
• Funding models; review of funding policies & strategies
• Predictive modelling of facility and resource needs
• Analysis of the potential impact of alternative reimbursement methods
• Evaluation of the financial impact of changing clinical practice
• Mobility and other experience analysis.