Hospital groups ‘tried to stymie price probe’
Panel chairman says lawyers stalled report every step of the way
● The chairman of the Competition Commission inquiry into healthcare has accused South Africa’s three main private hospital groups of trying to undermine the probe, which detailed the lack of competition between them.
The privisional report also noted that the hospital groups had fought about the handling of their data, disagreed with the methodology used to calculate their profits and used lawyers every step of the way.
Former chief justice Sandile Ngcobo said there had been “long and cynical delays in the submission of data by stakeholders that involved long engagements with lawyers”.
The result was a delay of several months in the release of the inquiry’s preliminary report, on Thursday.
The four-year healthcare market inquiry was set up in 2013 amid concerns about the ever-increasing costs of medical aid and hospital care. It was supposed to take two years. The final report is due by November 30 after the panel has considered responses from stakeholders.
Lawyers including Netcare’s Anthony Norton sat through months of public hearings taking copious notes.
The hospital group delayed the start of the inquiry for seven months by challenging the involvement in it of KPMG, which had done work for Netcare and had access to some of its confidential data.
In legal papers at the time, the commission said: “Netcare’s broad strategy is to force the commission to delay the inquiry for as long as possible . . .”
One of the delays in the release of the provisional report was caused when Netcare and its rivals Mediclinic and Life Healthcare asked for access to the data used in the report’s conclusions. They said it would be “procedurally unfair” for them not to see it.
Delay on top of delay
Inquiry director Clint Oellermann said in a statement a “data room” was made available to the hospital groups, which used it this year from January 25 until the end of March.
The report was delayed again when the three hospital groups and Discovery Health said some of the information in it was subject to “confidentiality restrictions”. By agreement, when the report was released on Thursday it gave no figures for the companies’ profits. The document of more than 500 pages details how the hospital groups rejected the inquiry’s methodology for analysing profitability. The analysis aimed to identify excessive profits, which would point to a lack of competition.
The groups suggested up to 11 ways of analysing profitability, and the report describes the protracted debate over the issue. In the end, hospital group profits were referred to simply as “consistent and sustained”, and the report said: “However, the margins do not appear to be excessive.”
The report said there is no competition
between the hospital groups and that the increasing number of hospitals drives “supplier-induced demand”, to the benefit of medical professionals and company profits and the detriment of patients, who get treatment and bills that are unnecessary. It wants a regulator to put the brakes on the number of hospitals built.
The inquiry also found Discovery Health has a monopoly as medical scheme administrator and makes profits “multiple times” those of competitors.
Intentional complexity
The panel concluded that consumers are “disempowered” and deliberately confused by the number of medical aid options available — and that medical aids do not fight for the best deal for them on hospital prices.
It wants medical aids simplified so consumers can make sense of them, with a standard base level of benefits across all plans.
The government came in for criticism, with the report saying medical aids were expensive because of “incomplete regulation” and “inadequate stewardship” over the private sector.
Netcare spokeswoman Melanie da Costa said the group “participated extensively” in the inquiry, “making numerous and extensive submissions”. It filed various reports by independent financial, actuarial and economic experts. “This was a requirement of the inquiry, which we embraced, and which required advisers,” Da Costa said.
A Life Healthcare statement said the company had “continuously co-operated” with the inquiry “in good faith”. It had never objected to the release of the report “but requested that due process was followed in the publication of confidential information”.
Mediclinic said it was still studying the report, and Oellermann did not respond to questions.
Discovery Health CEO Jonathan Broomberg said the company had co-operated fully with the inquiry “from the outset”. When it learnt its concern over confidential information might delay the release of the report, it told the panel to go ahead with publication anyway.
He said Discovery Health owed its market position to factors including “continuous innovation and greater operational efficiency”.