Healthcare price probe 'must go beyond hospitals'

Kurt Worrell-Clare, the chief executive of the association, which represents most of the country's private hospitals, told Business Report that the scrutiny and criticism of hospitals' prices was welcome. But he said hospitals only made up 30 percent of the total cost.

"The supply chain is a lot more complex than just the hospitals. We need to say what can we do to provide affordability. We need a strategy that will include the pharmaceuticals, the medical aid funders, the surgical items suppliers and the doctors." Private hospitals' pricing policies have come under scrutiny following allegations that they are overcharging for medical materials, devices and anaesthetic gases. The department of health has begun an investigation into private healthcare costs following reports last week that private hospitals were submitting inflated invoices to medical aid schemes. Fresh concern over the prices private hospitals charge was sparked after Rajesh Patel, the head of the benefit and risk department at the Board of Healthcare Funders (BHF), told a conference that these practices cost health schemes billion of rands over the past seven years, estimating that the inflated invoices had left medical schemes with a R2 billion bill this year.

Worrell-Clare said an investigation would be welcome because transparency was in the best interest of the industry and the consumers. Hospital groups have pointed out that the probe should extend beyond prices set by hospitals. "At the moment everyone has focused on only the 35 percent of the bill. There is another 65 percent which has not been explained," said Richard Friedland, the chief executive of Netcare , South Africa 's biggest private hospital group. He admitted that Netcare received discounts on surgical items, but said: "We pass those savings back to the patients because we have kept our ward fees, which are 55 percent of the bill, very low." Friedland said hospitals made the lowest returns of all stakeholders in the private healthcare industry, but he would not say who got the biggest slice.

A health analyst who did not want to be named said that even though drug prices had come down, pharmaceutical firms were still the ones that benefited more from the costs of the private healthcare, followed by hospitals and specialist doctors. Koert Pretorius, the operations director at Medi-Clinic, said a law that prohibited private hospitals from employing doctors contributed to the high charges of private hospitals. "If we had a more controlled environment and we could agree with the doctors to certain protocols, there would be a difference. If we could also find a way of building cheaper hospitals, that would help, because at the moment, to develop a new hospital costs between R1 million and R1.5 million per bed," said Pretorius. Life Healthcare has asked the BHF for a public apology, saying hospital costs had increased by less than 6 percent over the past few years, which was below the inflation rate.

Worrell-Clare said the shortage of nurses was another factor in the costs because their pay increases were always higher than the inflation rate. "Seventy-five percent of the operational costs of the hospitals are spent on salaries because it is a labour-intensive industry. Nurses can demand high salaries because they know that there is a shortage. We need more nurses, we need to change the law that prevents hospitals from employing doctors, and we need more partnerships between the private and the public sector." The government will soon release the final regulation on the national health reference price list, which it hopes will help reduce prices in the private healthcare sector. The list will not force private hospitals and practitioners to charge the rates on the list, but it will serve as a guideline on reasonable fees.

A draft regulation was published in December and all the stakeholders were given an opportunity to make submissions until the end of January. Anban Pillay, the director of pharmaceutical economic evaluations at the department of health, promised to give more details on the investigation, but at the time of going to press, Business Report's questions were unanswered.