The claim that building more hospitals is one of the reasons for the steep increase in medical scheme contributions is not based on robust research, economists at Econex say.

Recently, both Discovery Health, which administers Discovery Health Medical Scheme, the country’s largest medical scheme, and the Government Employees Medical Scheme have attributed the steep increase in their hospital-related costs to, among other things, the opening of new hospitals in certain parts of the country.

But Marine (accent on e) Erasmus and Helen Kean say it is notoriously difficult to prove what economists call supplier-induced demand – in this case, that the provision of more hospital beds has resulted in more medical scheme members accessing healthcare services – and that it requires robust research.

Erasmus and Kean say doctors are generally the agents of hospitals, and hospitals cannot induce care.

They say a sustainable future for medical schemes requires a good understanding of what is driving their costs.

In order to conclude that the increase in the supply of hospital beds is inducing demand for healthcare services, researchers would have to prove that supplying more beds has, in fact, caused the increase in costs, not simply prove a statistical relationship between hospital costs and beds.

Erasmus and Kean say researchers would have to establish what the pent-up demand for services is. For example, if scheme members are experiencing long waiting times, or have to travel far for healthcare services, the opening of a healthcare facility will bring supply and demand closer to equilibrium. But it would be a mistake to interpret the initial demand in relation to the supply as excessive.

They say the supply of beds may be high because the demand for them is high, but it is not correct to attribute greater demand after a shift in supply to supplier-induced demand. This is particularly relevant in the South African healthcare sector where there is a lack of resources and hence some degree of pent-up demand, Erasmus and Kean say.

They say that any study of supplier-induced demand needs carefully to establish the state of the market before the increase in supply and any observable change in demand after the supply has been increased.

Erasmus and Kean say a number of factors influence doctors' decision-making, and it is unlikely that all but a few doctors would knowingly perform unnecessary surgery just because there is an empty bed in a hospital.

The two economists also say that an increase in unnecessary hospital admissions brings into question the effectiveness of medical schemes’ managed care organisations and their pre-authorisation processes.

It is only possible to determine whether or not surgery was necessary by considering the health outcomes of that surgery, Erasmus and Kean say.