Let doctors own hospitals
They’d be motivated to go the extra mile
THE PROPOSED 26% cap on doctors’ joint shareholding in hospitals is proving contentious. Some listed private hospital groups are objecting to it, as is the representative body of independent private hospitals. It could also have implications for medical scheme members.
The Health Professions Council of SA (HPCSA) has made a submission to the Competition Commission to limit the shareholding of doctors in hospitals to 26%. One of its arguments is that if doctors own hospitals they might try to generate excessive returns through self-referral and overservicing.
But the submission also lacks clarity. Currently, there’s nothing to stop doctors – acting as private investors – from buying shares in listed hospital groups, such as Netcare and Medi-Clinic. It seems the HPCSA is more concerned about individual hospitals, where doctors have or might build up a private equity stake.
Medi-Clinic says some of the hospitals it now owns – typically small hospitals in smaller towns – were originally established and financed by doctors. Without that, Medi-Clinic says, those hospitals might not have been built at all.
There are at least two possible implications for medical schemes. If the HPCSA’s fear that doctors will generate excessive returns in hospitals they have a stake in is correct, that should be a concern for medical scheme trustees. However, Otto Wypkema, CEO of the National Hospital Network, says medical schemes “have designed very sophisticated pre- and ongoing authorisation processes” that would rule out over-servicing by doctors. “The HPCSA must have a jaundiced view of its members,” he says.
The counter argument is that doctors with an ownership stake in a hospital would be motivated to ensure the facility was well run, provided good services and kept costs down. The last point is particularly important for medical schemes faced with runaway healthcare inflation.
One of the aims of the National Hospital Network’s board of directors is to ensure its 74 member hospitals “provide superior service and a cost-effective option for medical schemes and their members”.
Wypkema says the proposed 26% cap raises many issues. “For starters, it discriminates against independently owned hospitals. Listed companies aren’t specifically addressed in the application. The ownership structure and viability of listed hospital groups are therefore not affected by that ruling and individual doctors and other professionals, as well as their families, can buy shares of listed hospitals on the JSE.”
Second, and this is the big issue for the National Hospital Network, Wypkema says there are practical questions HPCSA has failed to consider. “Questions such as who would be willing to buy the 74% excess equity in a clinic or hospital. Independent hospitals are already vulnerable to takeovers from the larger groups.”
While the listed hospital groups have been considered sound, defensive investments, Wypkema questions whether that’s still the case in the current environment. “It’s been repeatedly demonstrated that hospitals and clinics make less profits than many other investments listed on the JSE – even before taking the excessive business risk and regulatory compliance issues into account. Looking ahead, with regulatory uncertainty surrounding the hospital sector, it’s possible potential investors may well choose to invest elsewhere. I’m not quite sure if the HPCSA has thought through those issues.”
However, he adds the central issue for the National Hospital Network is the view that “doctors and medical professionals can be trusted with peoples’ lives but not their money”.
“It’s infuriating for doctors that they stand accused of over-servicing or profiting from hospital ownership when there’s no evidence to substantiate that view. In fact, in our experience the opposite is true: doctors who own hospitals tend to go the extra mile to ensure their establishments have reputations for good clinical outcomes.”
Wypkema says SA’s health policy makers have identified the shortage of viable alternatives to hospitals as one of the main factors leading to the increase of proportional spending in hospitals over the past 10 years. “How is it that those formulating health policy can identify a need for independent hospitals and alternative facilities on one hand and seek to destroy their viability on the other? In our view, the regulatory bodies should work together on this issue.”
Private hospital groups hope new Health Minister Barbara Hogan will pull the disparate parts of Government health policy together. Submissions and proposed amendments to Acts have often been contradictory in the past.
HPCSA must have a jaundiced view of doctors. Otto Wypkema