The Value Chain
CHAPTER 3 CASE STUDY
Monitored Healthrisk Managers (pty) Ltd. (MHM) is a joint venture company formed approximately 8 years ago. It operates within the medical aid and wellness industry in South Africa with clients in Cape Town, Durban, Johannesburg and Pretoria. MHM's two primary shareholders are Bay Union Financial Services and Managed Healthcare Systems (MHS). MHM is managed by three directors, a director employed from each of its parent companies and a managing director employed directly by MHM. Without delving into the details of the management structure of MHM yet, it is important to note that the primary responsibility for running the MHM business rests with the managing director, while the remaining two directors play an executive role in terms of providing an advisory I consulting role to MHM. The need for the creation of the services offered by MHM initially arose within the medical aid industry, with MHS providing the necessary expertise and Bay Union the brokering experience to land the deal.
Bay Union is a financial service consultancy offering a host of financial products from short term insurance brokering right through to employee benefits. It operates within the Kwazulu-Natal region only, with the majority of its clients falling into the SMME category. This being said, there are a number of large corporates serviced by Bay Union, which provide a large portion of their commission income. Although operating independently of Bay Union, MHM does offer a suit of products that Bay Union offers as a value add to its current client base. This is an area under development, with MHM increasingly looking towards Bay Union for sales leads and networking opportunities. In terms of Bay Union's contribution to the joint venture (over and above capital investment and access to an extensive client base) it is required to provide MHM with corporate offices. MHM currently operates from the Bay Union head office in Cowey road, Durban.
Managed Healthcare Systems (MHS) is the largest independent managed healthcare company in South Africa. MHS's suit of products is targeted specifically at medical aids and related companies I individuals e.g. general practitioners, medical scheme administrators etc. The managed healthcare industry is extremely competitive with companies under increasing pressure to be able to effectively measure and report on the impact of their products on service delivery and profitability. In essence, the concept of managed care revolves around the analysis and containment of costs. Medical schemes and administrators have been forced to operate in an environment heavily legislated by South African law. A key development is the restriction on sliding scale premiums based on risk ratings. What this effectively means is that medical schemes have no way of being able to selectively exclude individuals from membership nor can they make adjustments to premiums for certain high risk members e.g. diabetics, members with cardio vascular diseases etc.
This is an extremely important concept and has been a contributing factor to the success and longevity of the managed healthcare industry. The implications of this legislation are that high risk individuals are absorbed into the "risk pool" of funds, ultimately claiming at a higher rate than would ordinarily be the case for their monthly I annual contributions. This obviously has an impact on the sustainability of a medical scheme with the result being a focus on cost containment and wastage within the administration and authorisation of medical claims and expenses. The success of any managed care organisation can be attributed to a number of factors:
- The ability to effectively profile the entire population of the medical schemes and group them accordingly. Key to success is to identify those individuals most susceptible to an intervention to reduce costs. Examples of these kinds of interventions would include counselling sessions, the introduction of education material and creating an awareness of the effective use of the benefits as provided by medical schemes, to name a few.
MHM first and foremost is a wellness company. It was formed in response to the needs of the medical industry to be able to offer a suite of "wellness products" to its consumers. The concept of wellness in itself is extremely vague with a resulting confusion surrounding the form that it should take within the corporate and medical scheme environment. Ultimately, wellness encompasses any initiative which attempts to address the health of any individual, often taking the form of loyalty programs to encourage participation, meal planners and fitness programs. A number of other programs can be added on to this including health days, vaccinations, AIDs programs and absenteeism initiatives. This listing is hardly exhaustive but includes a number of products offered by MHM.
MHM itself is comprised of approximately 20 employees. The majority of these employees are skilled specifically to operate within a medical environment, general practitioners, nurses and psychologists. This in itself has a number of distinct advantages and disadvantages. With so many experienced practitioners working in the same company, there is seldom the need to seek external consulting services with regards to clinical matters surrounding product rollouts etc. Further to this, the development of in house products (an area of strategic advantage that MHM prides itself on) is based at the outset on established and recognised clinical principles, often a key differentiator when operating within the wellness industry. Unfortunately, this wealth of clinical expertise does not incorporate hard-nosed business skills, an already recognised shortfall limiting the future growth of the organisation. This is an area that MHM has acknowledged and has actively sought an individual to operate at a senior management level to help guide the operations of the company.
MHM's vision is detailed as follows:
"Energi strives to bearecognised leader in the wellness industry in the provision of services and tools that support healthy behaviour change, resulting in enhanced performance and productivity.
Our abilityto customise our service offering ensures that we meet and surpass the unique needs ofour clients who include individuals, companies, healthcare insurers and sports teams.
During its development as a company, MHM primarily functioned as the back-end support to products and services offered by other role players. It was effectively the engine that drove service delivery and plugged seamlessly into the offerings of a host of clients. As such, there was no definite need for a strong brand to support the operations of the company.
However, having recognised the need to become identifiable as a separate entity in order to drive growth, particularly in the corporate sector, MHM underwent a process of rebranding. Hence the development of the corporate brand Energi.
Monitored Healthrisk Managers as a company name carried with it a certain stigma due to its perceived links with Medical Aids and their products and as such it was difficult to market corporate products under these circumstances.
Energi is the recognised corporate brand with which MHM takes all its products to market. Energi as a brand encompasses the vibrancy and energy of the organisation as a whole. While not specifically dealing in the medical aid industry only, MHM's core focus is definitely health. Its ultimate goal, to help people achieve the optimal level of well being resulting in superior levels of performance.
Improved health brings with it higher levels of Energy, with the brand Energi signifying this link.
As such, the associated product listing inserted as Figure 3.1 falls under the Energi branding structure.
Figure 3.1 MHM Corporate Brochure