BHF and Discovery challenge section 59 report’s conclusions

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The Board of Healthcare Funders (BHF) and Discovery Health have rejected the findings in the Section 59 Investigation Panel’s final report, saying they are based on methodological and interpretive flaws.

The panel’s final report, which was handed to Minister of Health Dr Aaron Motsoaledi on Monday, found that, between 2012 and 2019, the fraud, waste and abuse (FWA) systems used by certain medical schemes and administrators discriminated against black healthcare providers.

The report’s findings apply to the Government Employees Medical Scheme (GEMS); Medscheme, which administers 16 medical schemes, including Bonitas and Fedhealth; and Discovery Health, which administers 18 medical schemes, including Discovery Health Medical Scheme (DHMS).

Read: Panel upholds findings of racial bias in medical scheme fraud investigations

The BHF’s South African membership comprises some 40 medical schemes and six administrators.

GEMS, which belongs to the BHF, said it was considering the implications of the report.

Neither Discovery Health nor DHMS, the large open medical scheme in South Africa, belong to the BHF.

“We are deeply concerned that the panel’s conclusions are based on flawed methodology, unscientific assumptions, and misinterpretation of complex data,” said Dr Ron Whelan, the chief executive of Discovery Health. “We are currently reviewing the report in full and considering our options, including a formal review of the findings.”

Whelan said no evidence was presented to support the allegations that Discovery Health has investigated or sanctioned any healthcare professional in a biased or unjustified manner.

“In fact, the panel’s own interim report in 2021 confirmed that the processes used by medical schemes were legally sound and showed no explicit evidence of racial bias. Furthermore, all complaints submitted to the section 59 panel by healthcare providers against schemes administered by Discovery Health were shown to have legitimate grounds for investigation, with no evidence of racial profiling.”

He said Discovery Health has undertaken multiple independent reviews of its FWA investigation processes since 2019, but none found any evidence of explicit or implicit bias.

Whelan said Discovery has a zero-tolerance stance towards any form of racial discrimination and rigorously investigate any such allegations. “Notably, almost all provider complaints reviewed through the Council for Medical Schemes’ appeals process have consistently been resolved in favour of the medical schemes – reinforcing the fairness and integrity of existing procedures.”

Impact on efforts to combat FWA

The BHF and Discovery Health said the report’s findings will, if acted upon, undermine efforts to combat fraud and corruption in the healthcare sector. This will ultimately have an impact on the sustainability of medical schemes and result in higher healthcare costs and increased contributions for members.

Fraudulent claims, over-servicing, the abuse of benefits, and improper billing practices cost medical schemes about R30 billion annually, said the BHF, adding that FWA inflates healthcare costs, reduces member benefits, and drives up premiums, placing disproportionate financial strain on working‑class families.

“The BHF and its members schemes have a legal and moral imperative to tackle unethical and exploitative practices in the interest of all South Africans. We will not be deterred by unfounded claims of racial bias – corruption is corruption and must be rooted out,” said Dr Katlego Mothudi, the BHF’s managing director.

‘Methodological and interpretive flaws’

The BHF said it has yet to study the final report. However, based the comments made by the panel during Monday’s media briefing, the BHF believes the report is underpinned by the same serious methodological and interpretive flaws that the organisation raised following the release of the interim report in 2021.

The BHF cited three issues.

First, it said the investigation relied on unscientific methods to assign race, using surnames to categorise providers, despite well-documented inaccuracies and lack of scientific validity in this approach. “The analysis also inappropriately included non-individual entities, such as state hospitals and corporate groups, with race assumed based on practice names, despite these not being subject to the same FWA processes.”

Second, the investigation failed to account for exposure bias, which occurs when a group is more likely to be involved in a process or activity because of greater contact or interaction.

“For example, one of the large schemes investigated, which is a member of the BHF, serves a member base that is 91% black, which logically results in a higher rate of member interactions with black providers. The result is that black providers appear more frequently in fraud investigations conducted by this scheme, not because of bias, but because it serves a disproportionately large share of scheme members.”

Third, the BHF said the investigation appeared to confuse correlation with causation. It assumes discrimination without rigorously considering other relevant variables, such as provider billing patterns, patient load, or socio-economic contexts.

“For example, the investigation found that black physiotherapists were nearly twice as likely to be flagged for FWA, but it does not account for other possible explanations. For instance, many black physiotherapists practise in high-claim regions where schemes conduct more audits, or that some may see higher patient volumes and therefore submit more claims, increasing the likelihood of being flagged regardless of race.”

The BHF said that taken together, these weaknesses undermine the panel’s central finding that black providers were nearly twice as likely to be investigated. In fact, adjusted analysis, controlling for all variables, within the large scheme mentioned above, shows the likelihood was significantly lower (1.28 times more likely) once demographic exposure was considered, weakening the inference of racial bias.

Reforms to improve fairness

The BHF said discrimination, whether overt or systemic, has no place in the healthcare system. However, it recognised that valid concerns have been raised by some providers about how fraud investigations are conducted.

In response, the BHF said it and its members have undertaken reforms to strengthen fairness, transparency, and accountability, including:

  • A comprehensive review of FWA protocols, incorporating procedural safeguards to ensure fair treatment of all providers.
  • Implementation of open-door engagement platforms with provider groups to resolve disputes, clarify processes, and build mutual understanding.
  • Education and training initiatives to improve provider awareness of billing codes, scheme rules, and audit expectations.
  • A shift in communication tone and practice: audit notices now emphasise respectful language, reasonable timelines, and non-punitive dialogue.

Response from GEMS

In a statement on Tuesday, GEMS said it is reviewing the contents of the report and considering its implications.

Dr Stanley Moloabi, the principal officer of GEMS, the scheme has always supported efforts to ensure fairness and transparency in the industry, and it co-operated “extensively and consistently” with the panel.

“GEMS reaffirms its commitment to the principles of human dignity, fairness, and equality as enshrined in the South African Constitution. We also remain committed to realising universal health coverage, transformation within the industry, and treating medical professionals fairly within the ambit of the scheme rules and the provisions of the Medical Schemes Act.”

 

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