The 800-page report found that Mediclinic International Plc, Netcare Ltd and Life Healthcare Group Holdings Ltd have a combined 90% market share of the private hospital market, while Discovery generates far higher profit than its competitors. In addition to detailing the state of the industry, the report provides recommendations aimed at regulators who “are not as sensitive to core competition concepts as they should be”.
The panel responsible for the report has announced that a new regulator will be chosen through a public process of nominations and a vote in parliament. It has been recommended that this regulator sets tariffs for health services.
“In the majority of local markets, concentration levels are alarmingly high according to several recognised metrics commonly used to screen for concentrated markets. One of the challenges of this, from a competition perspective, is that it affords the three biggest hospital groups ‘must-have’ status in bargaining for contracts with funders which reduces funders’ countervailing power,” the report states.
“There is limited competition between schemes on factors that increase the value of medical scheme cover (in terms of both cost and quality) and limited evidence of efforts to design and implement alternative reimbursement models to contain expenditure and encourage value-based contracting.”
As a result of these findings, the Commission has proposed divestments and imposing a moratorium on issuing new licences to the three large hospital providers until such time as their national market share is no higher than 20%. It has also recommended the introduction of a stand-alone, standardised, obligatory ‘base’ benefit package that all schemes must offer. The package must include cover for catastrophic expenditure, which is basically the current Prescribed Minimum Benefits, and must make provision for treating PMBs out of hospital. The standardised package should also include primary and preventative care.
According to the Department of Health, South Africa spends roughly 9% of gross domestic product on healthcare. More than half of that is spent by about 16% of the population with private medical schemes. In light of the inquiry’s findings, the proposed changes will not only make hospital plans obsolete, as they will be replaced by the obligatory standard package, but will allow for that 16% of the population to gain the same value for a far more reasonable cost
Considering the fact that South Africa’s public health system is strained beyond capacity, these changes will also allow more people to gain access to private healthcare, perhaps even boosting
Minister of Health Aaron Motsoaledi's efforts to cut costs for patients. Whether the changes will impact the proposed National Health Insurance, however, will remain to be seen.