Embattled medical scheme Pro Sano spent more than R17-million on advertising and marketing campaigns in just more than three years, with no net gain in membership.
Its reserves of R314-million could be depleted within three years if current losses continue, curator Joe Seoloane said in a report to the Cape High Court. The report was made public on Monday, when Judge James Yekiso granted a final curatorship order.
Seoloane, appointed as provisional curator on March 30, said that last year alone the scheme spent R9,3-million on marketing ”with no tangible results”, while there was an outlay of R3,8-million in the first few months of this year.
The whole R17-million was channelled through one service provider, he said.
”Continued expenditure of this magnitude on a single service provider over the relevant period, in the absence of tangible results, would appear prima facie to have been reckless usage of member funds,” he said.
Seoloane said there had, in fact, been a constant shrinkage in membership over the past five years, from 45 361 to 34 585.
Implementation of the Government Employees’ Medical Scheme will accelerate losses, as about 60% of Pro Sano’s members are government employees.
He said a takeover of 4 832 members from Eskom in 2004 was done without proper underwriting and ”under desperate measures to grow membership”.
Average claims per member increased by 14% in 2006 compared with a contributions increase of 5%, while administration costs rose by 34% in the same year.
As a result of its consistent losses, the scheme is unsustainable in the medium to long term under current financial performance.
”The scheme’s reserves (accumulated members funds) of R314-million, which is above the 25% required by the regulator, could be depleted within three years if the current losses are left to continue unabated,” Seoloane said.
A new strategy focusing on recruitment of non-government members is urgently needed to make the scheme sustainable. Consideration should also be given to a merger with a ”complementary scheme”.
Seoloane said he had discovered that a company named Primed, which was not accredited as a managed-care provider, was paid a capitation fee of about R1,6-million without a signed contract.
There was only an oral agreement on a R18 000-a-month arrangement with a provider of medical advice services.
It also emerged in Seoloane’s report that the Cape Law Society and Bar Council are conducting enquiries into whether Cape Town attorneys Mallinicks and unnamed advocates are guilty of overcharging for their services in an arbitration hearing involving Pro Sano.
Seoloane urged that R1-million in scheme money held in trust by Mallinicks be recovered immediately. This money was paid over without the knowledge of the Pro Sano board or the scheme’s accounting officer.
Seoloane said he agrees with an earlier report by PricewaterhouseCoopers that the board is virtually dysfunctional and does not act in the best interests of scheme members. He has been mandated to try to bring Pro Sano’s affairs back on to an even keel, paving the way for election of a new board.
Registrar of medical schemes Patrick Masobe said members of the scheme have no cause for concern.
”The scheme has the funds to meet all its obligations, and I have every confidence that members’ interests will be paramount under the management of the curator,” he said. ”Our primary concerns were with the governance of the scheme, and these concerns have now been effectively addressed with the appointment of a curator.” — Sapa