Private hospitals need to be transparent about their pricing, says the government.  Photo: Matthew Jordaan
Private hospitals need to be transparent about their pricing, says the government. Photo: Matthew Jordaan

Pricing in health sector under fire

By Marianne Merten Time of article published Jul 31, 2011

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The Health Department is putting the cart before the horse by insisting private hospitals should be transparent about their costs now – and in the process demonising them – rather than finalising a regulatory framework for pricing transparency, according to health economists.

At the centre of the government’s push for regulation, particularly of private hospitals, is the need for an exemption from the Competition Commission so all industry players can negotiate pricing structures without falling foul of the anti-collusion and competition regime.

Discussions between Health Minister Aaron Motsoaledi and his economic development colleague, Ebrahim Patel, have been under way since at least the start of the year.

There is no indication of when the much-needed exemption could be expected, despite the ministry’s repeated statements that it was “determined” to establish a regulatory body. Health officials say such a structure, first mooted in a discussion paper in late 2010, would also be one of the steps towards the roll-out of a national health insurance to broaden access to health care.

“If they want to resolve this, then minister Motsoaledi and minister Patel must sit to-gether and sort it out and to demonise the private industry is nonsense... It’s setting up a coherent price-determining system and then the other things like quality assurance,” said Professor Alex van den Heever, chairman of social security systems, administration and management studies at the Wits University Graduate School of Public and Development Management.

The Health Department did not respond to a request for comment on why the process towards an exemption was taking this long.

Meanwhile, South Africans, including the 8.2 million on medical aid, face what was described this week as “an oligopoly” or concentration of private hospital players – Netcare, Life and MediClinic – which account for 88 percent of private hospital beds.

And during Tuesday’s National Assembly health committee public hearings on private hospital regulation, questions were raised about the relationship between private hospitals and specialists, who refer patients for procedures and thus fill beds.

Tensions rose at the hearings over the issue of pricing information. Health Department financial planning and health economics cluster manager Anban Pillay told MPs there were deep concerns that private hospitals preferred legal challenges to constructive engagement. That made it “more difficult to proceed, because it becomes more difficult to get an exemption” under the competition rules, he said.

As the Council for Medical Schemes and the Board of Healthcare Funders also pointed out that their requests to private hospitals for information about prices and input costs had been unsuccessful, Pillay told MPs that only an opportunity to look at documents “in a room (with) lawyers watching” had been offered, but not the verification of such costs.

The Hospital Association of South Africa, which represents about 97 percent of private hospital beds, insisted the annual reports of its members contained such information.

Health committee chairman Bevan Goqwana repeatedly asked all groups how it was possible that private hospitals charged vastly different prices.

Goqwana confirmed to the Tribune the committee would hold further meetings on regulations.

“The private hospitals are needed, but we need to find a way to protect communities,” he said. “It’s not to kill the industry, but to stop overcharging.”

Mariné Erasmus, senior economist at Econex, said it was of concern that the debate often led to populist rhetoric critical of the private health-care sector, without the necessary intervention in the inefficient and badly managed public sector, which served the majority of South Africans.

While supportive of private health-care regulation, given the concerns around pricing, Erasmus said the quality of care in the public sector must also improve.

Even if a national health insurance was rolled out from tomorrow, private health care would remain important.

During Tuesday’s health committee hearings, the Board of Healthcare Funders, the medical schemes council and Health Department agreed on the need for an independent regulatory body. In response to the committee chairman’s repeated probing, the hospital association indicated its willingness to accept regulation.

According to the department’s broad outline, the regulatory body would be a technical entity with the skills to unpack complex pricing structures and an arbitration system to resolve disputes. - Political Bureau

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