On 5 July 2018 former Chief Justice Sandile Ngcobo announced the provisional findings of the Competition Commission’s Health Market Inquiry, an investigation initiated based on escalating prices and expenditure in the private healthcare sector.
Ngcobo said that the inquiry’s primary focus was on understanding the factors that are preventing, distorting and lessening competition in private healthcare.
In his presentation, Ngcobo highlighted four broad areas of key findings and expanded on each point accordingly:
Expenditure and supply-induced demand
Ngcobo said that this section was one of the key reasons for the inquiry and that one of the panel’s first tasks was to understand factors driving the expenditure in the private healthcare sector.
- High, unexplained increases in claims cost – the inquiry identified reasonable claims costs, which are known to influence expenditure, but the remaining, unexplained claims costs remained and could not be attributed accordingly.
- An increase in in-hospital claims, which were much higher than out-of-hospital claims.
- Utilisation rates are worrying because they're higher than 15 other countries part of the Organisation for Economic Co-operation and Development (OECD).
- ICU admission rates in the private sector were also higher than eight other countries the panel had data for.
He added that, in short, utilisation rates are worrying and these findings are concerning.
The state of competition in funder markets
In his presentation, Ngcobo noted that competition in the funders market is “neither as vigorous nor as effective as it could, or should, be. In fact it appears to be almost absent”.
- Discovery is the market leader and other schemes mainly follow their lead.
- Concerns about the nature of competition among funders, where there is competition taking place. There is limited competition between schemes aimed at improving affordability and value for money.
Ngcobo added that “there are failures in regulation, governance and adverse incentives associated with the current market structure which contributes to the lack of competition on value and prices and that limit innovation.”
Consumers, generally, aren't able to diagnose themselves and therefore place trust in their healthcare professionals, relying on them to give them sound advice and guidance on their illnesses and ailments.
Ngcobo said, "Practitioners therefore have the ability to drive nearly all healthcare expenditure by virtue of the agency role they play."
- Little competition between practitioners across various specialties.
- Most practitioners work as individuals in their own private practice, charging on a fee-for-service basis, and not creating practices with various disciplines and specialties, which could deliver better value for money.
- There are regulatory constraints – practitioners are not obligated to report on quality of services provided, which, in turn, makes it difficult to track performance and measure outcomes against best practices.
It was noted that South Africa has a highly concentrated private hospital market, with three major groups at the helm, namely Netcare, Life Healthcare and Mediclinic.
Ngcobo said that there isn’t really any competition among these hospitals for patients, but it is rather a competition for patient referrals from practitioners.
- The inquiry identified various incentives and arrangements between facilities and practitioners, which is meant to maintain or increase admissions.
- New entrants into the market follow the same model as three major groups.
The report is going to be open for public comment until 7 September 2018 before the final report is published in November this year.
“We are encouraging stakeholders to engage constructively on the proposed report. We would like to them to submit their recommendations, which are substantiated and backed by evidence, and we will take it into consideration before publishing the final report on 30 November 2018,” said Ngcobo.
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