The Health Market Inquiry into Competition in the Private sector …….Made Easy
The HMI was initiated in 2013 and finalised its duties in Sept 2019. It was mandated to look into the private sector healthcare market.
Extracts from the initiating statements were to look into:
“ ….. if it has reason to believe that any feature or combination of features of a market for goods or services prevents, or restricts competition within that market” “at levels which only the minority of South Africans can afford” “healthcare expenditure and prices are rising above headline inflation”
There were certain “Theories of Harm” which formed part of the line of investigation:
- Was there market distortion and market power in healthcare financing?
- Was this in relation to healthcare facilities?
- Was this in relation to healthcare practitioners?
- Were there barriers of entry and barriers to expansion at various levels in the sector?
- Was there imperfect dissemination of information?
- Was the regulatory framework robust?
Barriers to entry into the healthcare market include:
- Access to land,
- Access to capital,
- Access to Infrastructure,
- Access to equipment,
- The current licencing regime by the licencing authorities which has its emphasis more towards acute care facilities,
- The relationship between certain facility Groups and Practitioners and their ability to gain recognition as a service provider to facility groups,
- These have been described as matters which are not anticompetitive per se, and do not therefore fall into the categories which have to be notified and approved by the CC but whose collective effect is anticompetitive.
Licencing of and Shareholding in Private Hospital Facilities:
There were 409 private healthcare facilities reported as at 2016 which supported 16.4% of the population compared to 405 healthcare facilities available to the public sector to cater for the balance of 83% of the population.
Excluding speciality hospitals, the HMI highlighted that the state acute hospitals and day hospitals facilities did not offer any viable threat or competition to the private sector facilities.
Pricing for private hospitals is negotiated nationally with the Funders and is subject to local geographic market variation and influences.
The benefit designs of the funders favour Hospital in house treatment.
Netcare, Mediclinic and Life Healthcare collectively had a concentration of 90% of the market share. Payment methodologies were mainly Fee for Service and DSP arrangements remained an ineffective alternative.
After the change of government in 1994, the licencing of hospital facilities was centralised. Unfortunately the licencing was not linked to a needs based analysis. This will be one of the most immediate matters which need to be addressed by the Supply Side Regulator of Health (SSRH).
The HMI has advised the Competitions Commission to investigate shareholding by practitioners in Hospitals as it is viewed as anticompetitive.
It also found that current incentives offered to practitioners working in these facilities, are mostly perverse incentives, and that the HPCSA has not taken a leading role in addressing these. In the future the SSRH will address these incentives.
This will be one of the areas where practitioners will most probably be pursued by the CC. as they will be charged with anticompetitive behaviour.
WE HEREBY WARN ANY DOCTORS WHO HAVE BEEN INVOLVED WITH THESE INCENTIVES EITHER IN THE PAST OR CURRENTLY, TO HAVE THEIR AGREEMENTS SCRUTINISED BY AN ATTORNEY WHO SPECIALISES IN COMPETITION LAW.
Hospital Admission Rates:
Hospital admission rates are extremely high in RSA, and admissions to ICU are higher than any other comparable country.
The highest costs per admission are, per discipline, are Paeds, then Physicians, and then Orthopaedic Surgeons.
Demand by patients is out of synch with the disease burden and it is indicative of Supplier Induced Demand.
Supplier Induced Demand (SID):
Hospital rates in private have increased by ± 2.17% per annum.
The HMI states that 1 % increase in demand can be attributed to explainable factors but the balance of 1.7% is unexplainable, and is suspected as being by Supplier Induced Demand driven.
The length of stay contributed to 38% of the unexplainable costs. The HMI however took a relatively narrow interpretation of the disease burden profile and ONLY considered diseases linked to AGE, SEX AND HIV STATUS. Comorbidity or subsequent in hospital diagnosis was not included in these numbers!
HMI regards the high % of costs above CPI as a result of Supplier Induced Demand (SID), but stated that the actual profitability was NOT EXCESSIVE.
Supplier Induced Demand is exacerbated by:
- Open ended FFS
- PMB legislation
- Schemes benefit design
- Buying down phenomenon
- Ease of access into Hospitals
- New technology
- No Obligation to report on quality
- Defensive Medicine
The Key Recommendations:
A two phase hospital licensing process is suggested. Temporary licences will be afforded initially based on needs and will lapse after 2 years unless certain conditions are met.
Licencing of hospitals and practices will be taken over by the SSRH.
All sales of facilities or sale of licences must be notified to the SSRH, the CC and the Provincial DOH and approved for prior to sale.
Public sector should commence purchasing beds from the private sector.
There is significant asymmetry of information between doctor and patients.
The HMI also found that the Funders have an countervailing power against the practitioners. (We find this bizarre as Family Practitioners are price takers and not price makers. This possibly is more appropriate a finding in Private Specialist Practice) (Ed).
Patients do not receive value for money, and are subjected to unnecessary, expensive treatment. There is also no coordination of care, (something the GPs and FPs have been complaining about for years) (Ed). HMI found that there is not a scarcity of doctors but rather it was the behaviour of the doctors which caused a problem.
Barriers of entry for practitioners are:
- Start-up costs
- HPCSA regulations
DSPs and PPNs and Practitioner Models To Be Investigated By CC:
Practitioners generally opt out of DSPs and PPNs, (Private Practitioner Networks) to further exploit their power over patients and funders. Again this does not seem as appropriate finding at GP level (Ed).
Certain practitioner groupings are a platform for collusion and they should be subjected to the following tests on their business model:
- Does their conduct fall foul of section 4 (1) (b) of the Competition Act?
- Does their conduct fall within the scope of the section 4 (1) (a) of the Act?
- If yes, are there efficiency arguments which may be put forward to justify the conduct?
- Certain Doctor groupings fall foul of the CC through dissemination of Fees, thereby acting collusively. In this regard the HMI singled out Surgicom, Healthman and SAMA.
- The HMI advises doctor groupings to separate their academic and business functionalities
The HMI discovered a lack of stewardship by the HPCSA.
It was recommended that modification of the following rules of the HPCSA be urgently considered:
- Rule 7 on Fees and Commissions
- Rule 8 and 8a on partnerships, juristic persons and the sharing of rooms
- Rule 18 on professional appointments
- Rule 23 on shareholding in hospitals
General Recommendations of the HMI:
- There must be significant improvement on competition in the private healthcare sector.
- The sector needs to report on outcomes and quality of care.
- Doctor associations need to change their modus operandi.
- SSRH must oversee coding and registration of practitioners.
- Practice code retention must be linked to Quality.
- HPCSA rules must be urgently revisited.
Determination Of Tariffs In Future Bargaining:
Supply Side Regulator (SSRH) and Multilateral Negotiation Forum (MLNF):
The HMI recommended the establishment of a Multilateral Negotiation Forum (MLNF) comprising Funders, Practitioner Groupings, Government and Civil Society. It will be overseen by the SSRH.
The Hospitals will not be part of the MLNF but the Pathologists and Radiologists will be part of the MLNF.
- The Forum will use anonymised data upon which to base its negotiations.
- No Balance Billing will be permitted on PMBs.
- All bilateral agreements will be submitted to and published by the SSRH.
- Until the SSRH and the MLNF are formed, the CMS will perform these functions.
The HMI suggested that,
- The Competition Commission review their approach to creeping mergers to address high levels of concentration through effective merger review and, to that guidance is provided to practitioner associations about what constitutes pro-competitive conduct and have suggested a method to evaluate the functioning of those associations.
The SSRH will have four main functions:
- Healthcare facility planning (which includes licensing);
- Economic value assessments;
- Health services monitoring and
- Health services pricing.
The SSRH will have the following duties:
- Capacity planning and issuing of facility licences along national guidelines (to be developed) by a technical team.
- Develop a multilateral negotiating forum for all practitioners to set a maximum price for PMBs and reference prices for non-PMBs.
- Maintain a health professionals’ numbering system linked to required annual reporting of current working address, area of speciality, full/part-time status and report on outcomes.
- Review codes in consultation with practitioners and funders.
- Ensure that practitioners report on health outcomes
Fee for Service or DSP Negotiated Fees?
- Practitioners who do not want to engage in fee-for-service contracts may enter into bilateral negotiations with funders, which must include a value component and risk transfer, and must not be in contravention of the Competition Act. The CMS and the SSRH must approve these contracts prior to implementation.
- Value-based contracts with practitioners and facilities may be closed networks because upfront negotiation of contract terms is essential. However, they must also be transparent and be limited to 3 years before new contracts must be initiated.
Fee for service practitioner networks must accept all willing providers and offer a 3 to 6 month notice period.
- Separation of the academic and business functions of practitioner associations.
- The HPCSA must ensure that curriculums include awareness training of the cost implications of their decisions.
Single standardised Basic Benefit Option:
All funders must offer a single, comprehensive, standardised basic benefit option so that consumers can compare products. There should be a mechanism of risk adjustment linked to this basic benefit option to remove competition on risk matters.
Outcomes Monitoring and Reporting Organisation (OMRO):
The HMI recommended the creation of an Outcomes Monitoring and Reporting Organisation (OMRO) as a platform for providers, patients and all other stakeholders in the provision of healthcare to generate patient-centred and scientifically robust information on outcomes of healthcare.
Dr Tony Behrman and the Qualicare Team