Fraud and corruption are widespread in the local medical industry, involving doctors, medical administrators and pharmaceutical companies
Belinda Beresford
South Africans are paying an estimated extra R8-billion a year in medical costs because of fraud, corruption and perverse incentives spread throughout the country’s Alice in Wonderland health care system.
The private sector spends approximately R30-billion on 7,5-million people or about R4E000 a person. In contrast, the state spends about R26-billion on health care for roughly 35,5-million people.
The Board of Healthcare Funders (BHF), which represents the medical schemes, estimates about 25% of all private-sector medical claims are questionable – about R8-billion.
The CEO of the Medical Schemes Council, Patrick Masobe, says this percentage is probably on the low side and that most of it is orchestrated fraud within the medical industry. “Member fraud is very tiny compared to the orchestrated things like the … so-called incentives,” he said.
Dr Aslam Dasoo of the BHF is outspoken about the distortions and fraud in the medical world. “[This] short-term, grubby, quick-money approach threatens the entire profession. It makes the system unwieldy and will lead to collapse.”
Direct fraud is rife, according to every member of the health profession to whom the Mail & Guardian spoke. One company director talked about the frustration of working in an environment where doctors demand cash in exchange for using your products or services. Dasoo says the BHF has encountered one hospital where people in the accounts department could allegedly earn a R2 000-a-week cash bonus if they doubled the bills of patients leaving hospital. Patients often don’t see, let alone check, their bills and this kind of action goes unnoticed.
Dr Richard Tuft, president of the Radiological Society of South Africa, says that while most radiologists are ethical, a small proportion are not. “The major casualties are the patients who are abused, the medical schemes who foot the bill. The ethical problems are obvious … The moral hazard of any financial arrangement between referring doctors and radiologists or any other specialist is too great to allow it to exist.
“Year after year as costs have risen, medical schemes’ response has been to increase the benefits paid to the profession at rates less than inflation. This has resulted in the profession, especially the general practitioner being remunerated at totally inadequate levels.
“Doctors only receive a small percentage of the health care pay-out, but are responsible for spending 75% to 80% of it through their decision-making and dispensing.
“The other culprits are of course the hospital industry and the pharmaceutical industry, both of whom are known to bribe the profession to use pharmaceuticals or increase hospital admission rates.”
The Democratic Party has called for a commission of inquiry into the allegations about the medical industry while the Department of Health says it is probing the matter.
Private sector spending on health care makes up approximately 4% of gross domestic product.
“It is an artificial economy; there are more than 200 hospitals running at 58% occupancy, but subsidised by the medical schemes. Private hospitals are cash cows,” says Dasoo.
Hospital groups often use their size to demand pharmaceutical discounts, but this can lead to perverse results. Pharmaceutical companies cut the impact of the discounts (of up to 60% in some cases) by raising their prices.
Some pharmaceutical insiders say hospitals sometimes ask for discounts, but then demand that this be hidden from the medical schemes. According to one woman: “They will not do business with you if you reflect the discount. They don’t want the invoice to reflect the true price but the list price, which is what is going to the medical aid. The difference between the list price and the discount price is their profit.” Some companies are asked to supply two invoices – one for the medical aids to see and one for the correct records.
Another pharmacist said there have been estimates that such illusory “perceived” savings amount to R2-billion on pharmaceuticals alone.
Some dispensing doctors succumb to the incentive to over-prescribe. While patients may be getting their medication cheaper than at a pharmacy they may be taking unnecessary drugs. Straight fraud also occurs when doctors claim to dispense an expensive brand and replace it with a cheap generic.
Medical aid administrators are also part of the paradoxical situation. A medical scheme is a not-for-profit mutual fund owned by its members.
As Tuft points out: “The medical aid administrators are usually paid in proportion to turnover – this has not led to any need to reduce costs, in fact exactly the reverse situation is in place.”
Meanwhile there are also allegations of fraudulent behaviour by medical aid administrators. The Medical Schemes Council says it is about to release information on medical aid administrators reinsuring medical schemes where there is no need. The administrator gains – especially if it owns a stake in the brokerage which does the deal – the broker wins, the reinsurer wins. Only the medical scheme itself and the consumer lose because they pay unnecessary extra costs.
Pathology labs are currently under the spotlight after revelations of “brand loyalty” schemes which result in doctors receiving financial or in kind inducements to send patients for tests.
According to Roger McCallum, director of medical risk managers Veripath, and a former employee of the Lancet pathology group, the incentives add to laboratories’ costs, which in turn encourages deviant behaviour.
“The only way that Lancet and other laboratories can survive in this incentivised environment is to encourage some doctors to over-order tests, and the laboratories to over-serve and over-bill medical aids and patients, thus creating the perverse incentive environment which most labs deny exists. There are many other examples of such scenarios.”
Another example of problems is the supply of nurses to doctors’ practices where the pathology company pays the nurse’s salary. This is justified on the grounds the nurses draw blood for testing. It becomes unjustifiable when the nurse works full-time for the doctor, providing a financial benefit which is possibly not declared to the South African Revenue Service.
Tuft says the solution is obvious: “There needs to be a serious round-table discussion involving the profession, the funders, the hospitals, the pharmaceutical industry, the health professions council and our legislators to look at all areas of abuse in the health care system. The quality of care and outcomes are generally good; we just need to take the waste and abuse out of the system.”