TOUGH TREATMENT

Have you ever suspected that your extra day’s stay in hospital or costly medical procedure might not be necessary? Well, the Competition Commission’s inquiry into the private health market suggests this isn’t just paranoia.

In its provisional report, released last week, the inquiry found that “overservicing” by medical practitioners and medical facilities is one of the factors driving up costs. To remedy this, it proposes a radical overhaul of the private health market.

This includes creating a supply-side regulator to set tariffs for doctors and other practitioners, standardising medical aid scheme options and possibly limiting any new licences for the three big hospital groups — Mediclinic, Netcare and Life Healthcare.

Coming in the wake of equally radical proposals in the National Health Insurance Bill and the Medical Schemes Amendment Bill, the farreaching proposals could upend the way in which the health sector has operated for decades. For one thing, they will help “disempowered and uninformed” consumers navigate their way through the myriad medical aid scheme options, and free them from handing over money they shouldn’t.

The provisional report will be made final after public comment is considered.

Perhaps most controversially, the inquiry, which was tasked with highlighting the constraints on competition in the private healthcare sector in a context of rising costs, has come out in support of regulating pricing.

As it stands, hospitals and doctors charge on a fee-for-service basis. But the report says this stimulates oversupply, which “results in wasteful expenditure, and incentivises practitioners to provide more services than needed”. And this is all made worse by the fact that prices aren’t regulated.

The upshot is more admissions to hospitals, increased length of hospital stays, higher levels of care, and the use of more expensive forms of care than is necessary.

Until 2004, this wasn’t the case. But then the competition authorities decided that putting in place tariffs amounted to collusion and infringed the Competition Act.

Now, one of the most frequent complaints made to the inquiry was that there is a “tariff vacuum” in the private health-care sector, which makes it difficult for medical aid members to compare the cost of care.

“Fee-for-service prices are now largely determined bilaterally between individual providers and funders (medical aids or their administrators) or between associations of providers and funders.

“Fee-for-service tariffs, regardless of how they are negotiated, are a reflection of market failure in the private health-care system. These prices do not consider quality of care, nor do they consider or try to reduce supplyinduced demand.”

The inquiry panel recommends that a “supply-side regulator” be created to oversee medical practitioners and determine tariffs.

It recommends that tariffs for prescribed medical benefits (which cover a group of diseases like asthma, heart attacks and cancer) should be binding, and tariffs for nonprescribed medical benefit conditions should be “reference tariffs” — more of a guideline, in other words.

The SA Medical Association (Sama), which represents doctors, has welcomed this proposal. But its support is premised on the condition that doctors should not get paid less than the cost of providing services, and that they get a reasonable return on their investment in their practices.

So two alternative methods of setting tariffs have been suggested by the panel: they could be determined through extensive consultation with stakeholders in a public forum; or through a price-setting mechanism in which stakeholders conduct tariff negotiations and reach agreement under a negotiation framework determined by the regulator.

Compulsory arbitration will follow if no agreement is reached.

But one potential problem is that the appointment of the regulator must be fair and untainted by politics — which hasn’t always been the case when government has had a say. One option mooted is for parliament to play a role in the nomination process.

Sama chair Mzukisi Grootboom says the regulator must be completely independent of the health department.

When releasing the report, the inquiry chair, former chief justice Sandile Ngcobo, said the supply-side

What it means: The report recommends the introduction of a supply-side regulator and binding tariffs, and the standardisation of medical scheme options