Johannesburg - A protracted and costly legal battle looms between Fedhealth Medical Scheme and its former administrator, Fedsure Health, in which each party plans to sue the other for amounts in excess of R200 million.
Fedhealth will be launching a bid to recover more than R200 million for what it says was maladministration by Fedsure Health.
Fedsure Health on the other hand is in the process of taking action to sue Fedhealth for more than R250 million it says is owed to it in outstanding administration fees and a R200 million cash injection given to the scheme last year.
The first round of this battle has already been won by Fedhealth. A court late last year upheld a joint application by the scheme and the Council for Medical Schemes that Fedsure Health pay the scheme back R70 million of member funds held in contravention of the Medical Schemes Act.
Poor management at Fedsure Health had allegedly resulted in Fedhealth's membership falling from 150 000 to 100 000 and almost caused the scheme to go insolvent, Tom Borrill, the chairman of Fedhealth, said yesterday.
The scheme's legal team was taking samples of the 50 000 lost members and adding up lost income by calculating the difference between their contributions and claims, he added.
Jeremy Yatt, Fedhealth's principal officer, said the administrative failure of Fedsure Health was allegedly responsible for losses of about R200 million to the scheme.
Dean Kowarski, the chief executive of Fedsure Healthcare, refuted the allegations.
"We are in the process of drafting an affidavit to claim R250 million from Fedhealth in administration fees as well as a rebate of R200 million we injected into the scheme last year. I don't think there was any maladministration."
But Borrill said Fedhealth had refused to pay Fedsure Health as the administrator did not deliver on many of its undertakings and had failed to deliver a proper service, which had resulted in the scheme withholding payments for June and July.
Kowarski said Fedhealth should have ended its relationship with Fedsure Health earlier if it was unhappy with the service levels.
"We had a good relationship with the trustees of the scheme and they never mentioned problems," Kowarski said.