Private hospitals in South Africa could be facing demands to repay about R1-billion they allegedly charged medical schemes over the past three years for overpriced theatre gases that were not used on patients.
Trustees of the medical schemes were reminded that they could be held accountable if they fail to retrieve any funds that were paid erroneously to hospitals.
This news comes as the private hospital groups meet Minister of Health Manto Tshabalala-Msimang on Friday to discuss her concern about escalating medical costs.
Late last year the minister convened a private healthcare indaba to address the problems of rising medical costs, stagnant medical scheme membership and the long-term unsustainability of the private healthcare system.
Hospital-related payments are the largest consumers of medical scheme payouts and as such are the relatively low-lying fruit for government and regulatory attempts to reduce medical costs and increase access to healthcare. The meeting with the minister is seen as an attempt to head off attacks on the fees increases, including legal action from the industry regulator, the Council for Medical Schemes.
The council has criticised hospitals for their above-inflation proposed price increases, after being approached by medical schemes that were concerned about their viability if the costs continued to escalate. The council calculates that hospital costs increased by 60% in real terms between 2000 and 2006. The council asked the hospitals to justify an across-the-board increase of 9% to 10%, plus additional tariff increases from 8% to 33%. The actual increases are confidential between the schemes and the hospital groups, but Oxygen Medical Scheme says it is facing increases of between 6% and 48% on ward theatre and equipment costs. The council gave the hospital groups until January 15 to halt or justify their increases.
Some of the increases, described as ‘cost neutral†by hospital groups, and as ‘profit neutral†by one irate medical scheme representative, are to boost profits, which were cut when hospitals were prevented from putting additional mark-ups on consumables such as bandages, catheters, swabs and tubing.
The minister said: ‘I find it unacceptable that the private hospitals continue to increase ward and theatre fees simply because they no longer receive kickbacks from suppliers of medicines, surgical and consumables.â€
The Board of Healthcare Funders (BHF), which represents the interests of medical aids and their beneficiaries, estimates that in 2007 hospitals billed more than R300-million for anaesthetic gases that patients did not receive.
In 2004 new legislation was introduced that compelled hospitals to bill patients at cost for consumables. This single exit price, set by the manufacturers, also regulates how the amount consumed by each patient will be calculated. For anaesthetic gases hospitals were required to bill patients at cost price per millilitre used instead of per minute. This technical difference in charging mechanisms has a huge impact on costs — about R300-million in 2007, according to the BHF.
Rajesh Patel, BHF head of benefit and risks, says hospitals are charging a mark-up of about 66% on anaesthetic gases they are billing to the medical schemes. The ‘significant financial benefit under the status quo†means that the private hospital industry has no incentive to change its practices to follow the legislation, says Patel. He estimates that overcharging and non-compliance with pricing mechanisms means medical schemes — and thus their members — are ‘bearing an additional cost of R1-million per dayâ€.
In November the head of legal services at the BHF sent a letter to all medical schemes: ‘Private hospitals are in possession of medical scheme funds to which they are not legally entitled. Trustees could be held accountable for non-recovery by schemes of the overbilled amounts from hospitals and should therefore ascertain the amount of such funds in respect of their particular scheme and take appropriate action.â€
Whether medical schemes step forward to reclaim their alleged overpayments is questionable. Schemes are concerned that their members will be penalised if they take such action, says BHF CEO Humphrey Zokufa.
Hospital Association of South Africa (Hasa) chairperson Kurt Worrall-Clare says that ‘robust†negotiations between medical schemes and hospital groups are creating a range of contractual agreements, which are confidential.