Claims for in-hospital care have shown the biggest increase in South Africa.Photo: Bongani Shilubane/African News Agency (ANA)
JOHANNESBURG - The competition Commission released its provisional report on the Health Market Inquiry (HMI), giving stakeholders until Friday, September 7 to comment.

The panel is expected to release its final report by November 30.

The mammoth inquiry had taken four years, in an effort to increase competition, innovation and accessibility in the private healthcare sector, explained the chairperson of the HMI, Judge Sandile Ngcobo, a retired Chief Justice of the Constitutional Court, at the release of the report in Sandton, Johannesburg.

The commission instituted the inquiry after being alerted to increases in prices and expenditure in the private healthcare sector, which had reached levels few South Africans can afford, the judge said.

The inquiry looked at factors driving increased costs and the competitive dynamics at play, the judge said, noting that the inquiry experienced “significantly and sometimes cynical delays in the submission of data by stakeholders. This prolonged the process of data collection and included a number of engagements with lawyers representing various stakeholders.”

The HMI said that the difficulties it had experienced in data collection and processing highlighted an urgent need to develop a “comprehensive national health information system, which will require stakeholders to provide information relating to health financing, the pricing of healthcare services, business practices involving hospitals and healthcare providers, and the publication of various types of information in the public interest and for the purpose of improving access to healthcare, as well as the effective and efficient utilisation of health services as envisaged by the National Health Act”.


The judge noted private care was expensive and costs were rising, while public healthcare was much cheaper, but generally of poor quality, which private patients were “barely inclined” to use.

The inquiry was scathing in its assessment of the Health Department and regulators, blaming them for implementation failures and a lack of stewardship, because some of the nine recommendations it had considered were already provided for in current legislation.

Judge Ngcobo said concerns about affordability and cost escalation were “well-founded”.

Average expenditure per private medical scheme member had increased by 9.2percent a year. Adjusting for inflation, age, plan type, gender, disease profile and membership movement, the residual increase in spending for each member was still greater than 2percent a year in real terms.

“To put this in context, 2percent of spending amounts to around R3billion in 2014 terms, that is R330 per beneficiary per annum that could not be explained by factors rationally expected to drive expenditure.”

Most of this increase in claims cost can be attributed to in-hospital rather than out-of-hospital care, which he said seemed to indicate a shift in claims costs towards hospital-based care.

These unexplained factors accounted for 32percent of in-hospital claims cost against open schemes and 27percent for restricted schemes. Compared to out-of-hospital care, only 16percent of claims costs were unexplained for open schemes and 2percent for restricted schemes.

“The high proportion of unexplained claims cost increases for in-hospital care is concerning and our findings suggest that this is, in part, due to high utilisation (that is, a higher number of admissions) and increases in cost per admission,” he said.

South Africa’s hospital admission rates were also higher than all but two of the 17 Organisation for Economic Co-operation and Development (OECD) countries compared against. For six of the seven procedures studied, utilisation rates were higher than the OECD standard, while rates of cataract surgery, arthroplasty (joint replacement or reconstruction), tonsillectomy and caesarean sections were the highest.

'Startling' cost

ICU admission rates in the private sector were also higher than the eight countries for which they had data, with “startling” cost implications. An ICU stay cost around R38000 more in the private sector than in a general ward.

“If the South African private ICU admission rate per head of population were reduced to half of its current level; that is, to between the rates of Belgium and the US, and half of the costs associated with these avoided ICU admissions were reinvested in better ward-based care, we would still save approximately R2.7billion annually, which amounts to just over 2percent of private healthcare spending overall for the period studied,” the judge said.

Discovery Health’s dominance was a further concern, because analysis conducted from 2006 to 2015 showed it had recorded sustained high profits that were much higher than its closest competitors, Metropolitan and Medscheme. Netcare, Life Healthcare and Mediclinic share 90percent of private hospital admissions and 83percent of the registered beds in the country, giving them massive bargaining power for contracts with funders.

The inquiry said it was concerned about the high levels of concentration in the hospital market. It wants Certificates of Need to replace hospital licences, which is already provided for by the National Health Act of 2003, and proposes alternatives, including divestiture, and a moratorium on issuing licences to the three large hospital groups.

The provisional report is now available on the website of the Competition Commission.