Attorneys representing clients in the private healthcare industry have branded last week's proclamation of the Competition Amendment Act as a move to launch a "draconian witch hunt" into price setting in the private healthcare industry. The Act gives the Competition Commission the power to investigate the general state of competition in industries.
The lawyers claim Health Minister Aaron Motsoaledi used his executive powers to push the Act through so that prices charged by private doctors and private hospitals can be decreased significantly in time for the implementation of the National Health Insurance scheme (NHI).
Motsoaledi denied that he fast-tracked the Act. "No ways," he said. "I don't even know how that process works," he said.
President Jacob Zuma announced recently that the NHI will "start moving" in 2014.
Given the general poor state of public health facilities in South Africa, the NHI would be compelled to contract private healthcare providers to provide services if it is to operate efficiently.
Prior to the proclamation, the Competition Commission only had the power to conduct inquiries into specific companies in an industry and mostly only after a formal complaint of misconduct had been laid. The commission is now able to conduct an inquiry if it has reason to believe that any feature of a market prevents, distorts or restricts competition.
"Why has the government now taken out this legislation and dusted it off?" asked Paul Coetser, director of Werksmans Attorneys's competition and anti-trust law practice. "It is undoubtedly to enable the commission to carry out an extensive investigation into the private healthcare industry."
Act in limbo no longer
The market inquiry provisions of the Act will come into force next month.
Coetser described this as "a great surprise" because the Amendment Act has languished in limbo for the past three and a half years, after being signed into law by acting president Kgalema Motlanthe in August 2009.
"At the time there was great uncertainty about the desirability and constitutionality of certain provisions of the Amendment Act [and] after such a long time people started thinking, or perhaps hoping, that the Act had been shelved for good," said Coetser.
In September, the Competition Commission announced its intention to investigate rising costs in the private healthcare industry. But it would not begin the probe in the absence of the market inquiry provision because of stakeholders' potential resistance to co-operating with the investigation.
The commission conducted an inquiry into the banking industry in 2006, during which banks and other market participants co-operated willingly, according to the commission. Coetser was adamant that he had it on record that a representative of the commission said: "We don't believe that all healthcare players will be providing the information we are looking for voluntarily."
The director of Werksmans, Neil Kirby, said: "The increasingly acrimonious relationship between the government and the private healthcare industry, in which the health department is only interested in setting unreasonably low guideline tariffs for doctors and hospitals and is not prepared to take seriously the cost arguments of the industry" makes him highly suspicious of the possibility of a fair and transparent investigation.
He also said that he's "too cynical" to dismiss the possibility that the new Act was "pushed through" by the health minister because of "yet another failed attempt" by the Health Professions Council of South Africa and the health department to implement guideline tariffs for doctors and dentists.
In August last year the council published guideline tariffs that were significantly lower than what most private doctors and dentists charge, and also less than what medical aids are prepared to pay. The council retracted the tariffs after medical professionals threatened it with legal action and then opened up the process for public participation.
As a result of this and several other unsuccessful efforts to control medical fees in South Africa's private healthcare industry, the setting of prices in the sector is unregulated: there are no ceiling tariffs and medical professionals and hospitals set their own prices.
Private heathcare just too expensive
The council said it regularly receives complaints from patients who say that doctors charge them up to five times more than medical aid rates.
Last year the health department claimed that the country's private medical industry is five times more expensive than those of many European countries. However, the private sector disputed this, saying the figures the department used in its calculations were incorrect.
Over the past two years, Motsoaledi has been vocal about private healthcare costs and said repeatedly that they are "spiralling out of control".
The commission said it would announce the terms of reference of an inquiry into the private healthcare sector within the next three months.
Motsoaledi said he was "delighted" that the investigation is set to proceed, because "the rising prices in the private healthcare industry are unacceptable, not transparent and unsustainable".
Trudi Makhaya, the Competition Commission's advocacy and stakeholder relations manager, said the body had no control over the timing of the proclamation of the Act and it was "merely on the receiving end" of the legislation.
However, she said that an urgent investigation into the private healthcare sector is needed to establish "why the free-market system has not worked in this sector, why competition hasn't managed to drive down prices and what alternative model may work better".
The South African Dental Association's chairperson, Maretha Smit, said that her organisation would "no doubt" threaten the commission with legal action if dentists perceive the investigation to be unfair, unscientific and not transparent.
The Private Practitioners' Forum chairperson, gynaecologist Chris Archer, said he would welcome an investigation. "It will finally give doctors the opportunity to show that what we charge is not excessive and how medical aid rates do not meet our costs," he said.
"I charge R680 for an initial consultation, but most medical aids are prepared to only pay R300."
Hospital group Medi-Clinic's funding relations and contracting executive, Roly Buys, said his company has "nothing to hide" because its financial information is "public anyway" because it is listed on the Johannesburg Stock Exchange.
"I think an investigation will be good for transparency, but given the tension between the private health sector and the government that has built up over the past few years I approach this issue with a certain amount of caution," said Buys.
The Competition Commission investigations are generally headed by independent investigators such as former judges. The investigator may summons industry players to question them under oath. According to Werksmans Attorneys, failure to comply may lead to a fine of R2000 or imprisonment of up to six months. Companies and individuals are expected to cover their own legal costs.
According to the social justice organisation Section27, the new legislation is essential. Senior researcher Sha'ista Goga said: "The Act provides a framework and structure for a sorely needed investigation into price setting in the industry. If it results in better methods of reaching agreed prices and it removes market distortions it could potentially lead to better prices and greater efficiency."
The 2006 banking inquiry did not result in lower bank fees for middle-class consumers as the commission had hoped, but it did lead to reduced fees for lower income consumers – particularly with regard to penalty fees that lead to greater indebtedness.
"In addition, several measures related to transparency have been implemented, such as ATMs now displaying messages if additional fees are to be charged when the bank is not part of the network," Goga said, adding: "If the private healthcare industry market inquiry goes ahead with greater buy-in, alignment and participation from the regulators such as the health department, medical professions council and the Council for Medical Schemes, it could potentially have an even greater effect."