Consumers get the short end of the private healthcare stick, commission finds

To reduce the dominance of one or more companies in the sector, the commission recommends that it reviews possible mergers that may contribute to an anti-competitive market. (Paul Botes/M&G)

To reduce the dominance of one or more companies in the sector, the commission recommends that it reviews possible mergers that may contribute to an anti-competitive market. (Paul Botes/M&G)

The Competition Commission has laid the blame for the rising cost of private healthcare at the feet of the national health department.

This was disclosed on Monday at the release of the commission’s health market inquiry report which found that the health department’s failure to hold regulators sufficiently accountable has led to uncompetitiveness and inefficiencies in the private healthcare sector.

The inquiry was initiated by the commission to investigate increasing prices of private health care, which only a minority of South Africans could afford. The release of the report comes ahead of an intended rollout of the National Health Insurance, expected to be fully operational in seven years.

In the health facilities market (everything from hospitals to the beds in them), the five-year long investigation found that the dominant service providers in private health care are anti-competitive, leading consumers to pay above-inflation prices for health.
The report found that the three large hospital groups — Netcare (33%) Mediclinic (28.6%) and Life (28.5%) — are able to secure “steady and significant profits year on year”, making it difficult for new entrants and smaller service providers to grow and compete on merit.

The dominance of these groups also lures the best medical specialists to their hospitals by enticing them with lucrative benefits which smaller entrants cannot afford.

The other private service providers are only able to access to 10% of the market due to the dominance of the three large hospital groups. This has led to little to no improvements in health services.

“Facilities operate without any scrutiny of the quality of their services and the clinical outcomes that they deliver because there are no standardised publicly shared measures of quality and healthcare outcomes to compare one against the other,” the report finds.

Health practitioners have also been found guilty of over-servicing or using higher levels of care than required. This practice, the report found, may lead to a waste of resources and may also negatively impact of the patient’s health. The costs of this practice is carried wholly by the consumer who is often uninformed and may not be aware of the anti-competitive behaviour of the practitioner.

“It pushes up the cost of care and, if it is high enough, it will make it unaffordable and threaten the sustainability of the healthcare market.”

With regards to funders, the commission found that Discovery Health had sustained high profits, way above those of its main competitors. These profits, earned by the company because it assumes limited risk compares to consumers or providers of private healthcare, result from the high barriers to entry to the medical aid scheme market.

“The existing administrators do not seem to impose a significant competitive constraint on Discovery Health. Additionally, the lack of transparency on prices has meant that patients live in a world of price uncertainty. And, absent from an ability for funders to negotiate meaningfully with numerous practitioners, the default payment mechanism of fee-for-service continues to dominate the market.”

The commission has recommended various sweeping systemic changes that should be implemented to move it towards a more pro-competitive market. The commission recommends that a supply side regulator for healthcare be established in order to effectively regulate the suppliers of healthcare.

To promote a more competitive market in the sector, the commission recommends that a new standardised payment option must be made available by all medical aid schemes. The new base fee will enable consumers to effectively compare prices and would reward schemes that are able to innovate and create better health packages for consumers.

To reduce the dominance of one or more companies in the sector, the commission recommends that it reviews possible mergers that may contribute to an anti-competitive market. This would also ensure that practitioners are also guided on about what constitutes pro-competitive conduct.

Read the report below:

  Health Market Inquiry Report by Mail and Guardian on Scribd

Thando Maeko

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