Private healthcare in South Africa isn’t working

 

The investigation ran over five years and included 43 million individual patient records, 11 million admissions, specifically commissioned studies, written submissions, public hearings and seminars. The investigation focused on hospitals, doctors, and funders. Funders include the medical schemes that purchase healthcare on behalf of members, and the administrators and managed care organisations that medical schemes contract with.

South Africa’s Competition Commission set up the inquiry in response to prices in the private healthcare sector, which, it said, only a minority of South Africans could afford. 

The country has a two-tiered health system. 71% of the population uses public sector healthcare, while the private sector serves 27%, the remaining 2% uses neither. 

Competition should translate into lower costs and prices, better quality, and more value for money for customers. In its final report the inquiry found that competition wasn’t working, as it should in private healthcare. The sector was characterised by high and rising costs, significant overuse, and no discernible improvements in health outcome. 

The report found:

  • Netcare, Mediclinic and Life Healthcare dominate the market. They account for more than 80% of the hospital beds and 90% of all admissions. These three hospital groups, both individually and collectively, are able to secure steady and significant profits year-on-year. 
  • Barriers to entry are high. Hospitals do not attract patients, as they compete for doctors who admit patients. Most doctors have contracts with the big three. Successful entry by new hospital owners is very difficult, as they cannot attract doctors easily. 
  • Market overcapacity. Hospital groups are also able to build additional hospitals even where they aren’t needed, resulting in an oversupply of beds and ultimately overuse of services. 
  • There are no measures of quality of care in the public domain. This means that members of medical schemes and funders (who purchase healthcare on behalf of medical scheme members) are not able to judge if the care provided by doctors and specialists is effective.
  • Doctors use a fee-for-service billing model. This means they bill patients for each service they perform during a consultation. In this system, the more you do the more you earn. The inquiry found doctors and specialists worked as individuals, not as a team. There is growing evidence and acceptance internationally that team-based care is better and more cost effective. 
  • Medical schemes are not transparent. These schemes compete for younger and healthier individuals. To do this, there are numerous benefit packages, but these packages aren’t comparable. Medical schemes have done this in response to the absence of a mechanism for equalising risk between the schemes. Members do not know what they are paying for, neither are they able to judge the quality of care. 

The report’s recommendations are aimed at creating greater competition, transparency, and accountability on how medical scheme member’s money is spent. They also aim to increase competition on the supply side (hospitals, doctors, and specialists) and on the demand side where funders represent the consumer.  The recommendations include:

  • A national private healthcare regulator to assist provinces in issuing licenses for hospitals.
  • A platform for price setting for doctors.
  • All medical schemes must offer one comparable insurance package.
  • Government should introduce a mechanism to equalise risk between medical schemes so that they compete on the merits, not on risk or age selection.

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