Inquiry into private healthcare will recommend regulated tariffs ‘if necessary’

The Acting Competition Commissioner does not want to say whether an inquiry into the private healthcare sector will recommend that medical tariffs be regulated, but he says the inquiry is free to make any recommendation it deems fit based on the evidence before it.

Tembinkosi Bonakele, the acting commissioner who addressed the annual conference of the Hospital Association of South Africa (Hasa) in Cape Town this week, was responding to a presentation suggesting that the Competition Commission should be wary of becoming embroiled in making recommendations to regulate prices. The inquiry’s terms of reference include making recommendations aimed at making highquality healthcare accessible and affordable.

At the Hasa conference, Anthony Norton, director at law firm Nortons Inc, said the commission should shy away from making recommendations about regulating prices, because such regulations could have unintended consequences.

The Competition Commission should be seen to be impartial and should maintain its institutional independence, he says.

Price regulation is generally the responsibility of specific entities such as the National Energy Regulator of South Africa or the Independent Communications Authority of South Africa, Norton says.

Bonakele told the conference that the aim of the inquiry is to understand the forces that prevent, distort or restrict competition in the private healthcare sector, and how these forces affect you, the healthcare consumer.

The extent of competition and the way in which it works in the private healthcare sector are unclear, and the commission wants to understand how factors – such as the imbalance of information between healthcare providers and consumers, and relationships between consumers and intermediaries, including brokers and certain providers – distort or restrict competition, Bonakele says.

Minister of Health Dr Aaron Motsoaledi asked the Competition Commissioner earlier this year to conduct the inquiry.

Motsoaledi told the conference that he does not, as is rumoured, have a secret agenda, and the intention of the inquiry is not to destroy the private healthcare sector.

The intention is to improve the public and the private healthcare sectors so that both sectors will able to provide everyone with quality and affordable health care, he says.

Bonakele told the conference that information published by the Council for Medical Schemes on the amounts that medical schemes pay to providers shows a huge increase in the cost of private hospitals and specialists since 2000. This increase is out of proportion to the cost increases in other sub-sectors, he says.

The acting commissioner says he is aware that the source of this information has been contested, but the information is in the public domain and people are asking questions about the escalation in the cost of private hospitals and specialists. The commission expects the inquiry to address these questions, he says.

Bonakele told the conference that there has been much criticism of the Competition Commission’s decision in 2003 that the annual negotiations between medical schemes and healthcare providers on the tariffs that providers would charge for their services constituted collusion and were therefore in contravention of the Competition Act.

Medical schemes represented by the Board of Healthcare Funders, Hasa and the South African Medical Association paid fines as a settlement of these contraventions, and there have been no further collective negotiations on tariffs.

The Competition Commission’s decision has been criticised for enabling healthcare providers to implement higher-than-inflation tariff increases, resulting in a widening gap between what providers charge and what medical schemes pay for their services. Members have to make up the shortfall out of their own pockets.

Bonakele says the commission is certain that its decision was correct in law, but it wants to see what the impact of its decision has been and is not afraid to debate how the decision may have contributed to rising prices.

The commission received many responses to the draft terms of reference of the inquiry, which were published in May and has considered them seriously, Bonakele says.

The final terms of reference, which will be published before the end of this year, are likely to broaden the scope of the inquiry, he says.

The commission understands that there is a certain level of mistrust and misapprehension about the inquiry, and it has therefore decided to appoint an independent panel to conduct it, Bonakele says.

The panel of eminent people, who will have an appropriate mix of skills, will be announced before the end of this year, he says.

The inquiry should begin early next year, and the aim is to publish a draft report by September 2015 and a final report by the end of 2015, he says.

Although the date is “not cast in stone”, because inquiries tend to take on a life of their own, the commission is determined to finalise the inquiry as soon as possible, because many issues, such as investment in the private healthcare sector, are hanging on the outcome of the inquiry.