Menzi Simelane

Competition body to probe 'clubby' healthcare industry

The Competition Commission is set to probe tariff setting by the Hospital Association of South Africa, various independent practitioner associations representing doctors, and the Board of Healthcare Funders (the body that represents the medical scheme industry), says Advocate Menzi Simelane, commissioner of the Competition Commission. The Board of Healthcare Funders sets tariffs as a guideline but the upper end of these parameters tends to become a minimum. Service providers charging less are often ostracised, and relationships between parties in the industry perpetuate inefficient allocation of resources, not to mention spiralling costs. Many of these issues were highlighted at the Board of Healthcare Conference held this week in Swakopmund. Price setting between large provider groups - hospitals and medical practitioners - and healthcare funders remains clubby, with restricted competition, high profits and little incentive to reduce costs. The fee-for-service reimbursement model, whereby patients pay for every medical service at market-related rates, encourages over-servicing by providers. The more you do for a patient, the more you earn. Pharmaceutical costs make up a large part of the healthcare spend and these continue to rise. Branded pharmaceutical groups seek to protect their turf and oppose the use of generics. Groups lobby together when faced with the threat of discounts. Pharmacists, for example, boycott medical schemes when they try to impose discounts. Healthcare professionals cry foul when funders seek to restrict costs by imposing restrictions on choice. The objectives of the government's health policy are to broaden access to affordable healthcare and address growing inequities between the public and private sector, but progress has been negligible. In addition to private sector participants fighting for a larger chunk of the turf, the public and private sectors blame each other for not broadening access. Jonathan Broomberg, a director of Praxis Capital, points to problems in both government policy and the private sector as contributing to these trends. He says public policy has been unfocused and too broad in scope. For example, prescribed minimum benefits have had the unintended effect of raising the cost of entry for the employed and uninsured. In the private sector, there are few examples of genuine innovation such as provider risk-sharing models and similar mechanisms used overseas. Providers and funders remain comfortable with the present arrangements. This entrenches cost inflation and lack of access by uninsured people, says Broomberg. Partnerships between the private and public sectors have also been slow to get off the ground. Meanwhile, the system faces other challenges. Most doctors and dentists work in the private sector, providing services to a small, affluent minority and leaving most of the population out of the net. The population is ageing, which means there are fewer young people entering the system to cross-subsidise the older and more sickly. Health insurance makes up a rising proportion of payroll costs and employers are reluctant to increase their contribution levels. There is consensus that the industry needs a more effective mechanism to deliver healthcare to the consumer. Talks are taking place between some of the larger funders and providers in this regard. The overall impression from the conference is that the industry needs an overhaul to focus on containing costs, and that a more trusting relationship between providers and funders is needed. If this cannot be achieved, role players will continue to fight to obtain a larger slice of the pie as parties protect their own stakes at the expense of the long-term interest of the system. (Source: Business Times, 12 May 2002)