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Health Market Inquiry report – Different views from opposing perspectives

On Monday, the Competition Commission released the findings of the Health Inquiry. The report was published after years of extensive consultation with industry experts, government officials and the general public. In their review of the South African private healthcare market they found that it is characterised by high and rising costs of healthcare and medical scheme cover, and significant overutilisation without stakeholders having been able to demonstrate associated improvements in health outcomes.

In the Executive Summary of the 256-page document, the Competition Commission shares some of their findings. “We have identified features that, alone or in combination, prevent, restrict or distort competition. The market is characterised by highly concentrated funders and facilities markets, disempowered and uninformed consumers, a general absence of value-based purchasing, practitioners who are subject to little regulation and failures of accountability at many levels.”

Although the report’s objective was to primarily focus on issues that affect the private sector, they took cognisance of the impact of the proposed National Health Insurance Fund (NHI). “Full implementation of the NHI is some years away, with the Fund scheduled to be operational by 2026 at the earliest. The private sector will continue to operate in the interim and also after 2026”, the report shares.

A key finding is that the private sector is neither efficient nor competitive. A more competitive private healthcare market will translate into lower costs and prices, more value-for-money for consumers and should promote innovation in the delivery and funding of healthcare. According to the Commission, competition should occur on price, cost and quality, not on risk avoidance. “The risk adjustment mechanism is a regulatory component designed to eliminate fragmented risk pools but, more importantly, it is an essential market mechanism to ensure that purchasing in the market becomes more effective by forcing funders to compete on value and, therefore stimulate competition between and the efficiency of providers.”

Three hospital groups, Netcare, Mediclinic and Life, dominate the facilities market. In 2016, their market shares based on beds (and admissions) were 31% (33%); 26.8% (28.6%); and 25.3% (28.5%) respectively. The report points out that “the hospital groups make it very hard for newcomers and fringe-players to grow and to compete on merit.” Without much competition, the three major hospital groups “…all but dictate year-on-year price and cost increases…” for medical aids and administrators while reaping the benefits of over-treatment at their facilities.

With regards to medical schemes the view is that the competition on benefit design is at the expense of competition on metrics which improve consumer welfare, such as procurement of value-for-money healthcare services, increasing benefits, adopting innovations, improving service quality, and/or directly competing on premiums. These and many other factors are mentioned that clearly do not foster an environment conducive to competition on metrics which would result in positive consumer welfare outcomes.

The Commission is also of opinion that the broker market is operating sub-optimally. “Most members do not derive value from brokers and there is no incentive, such as an opt-in system, to align brokers’ interests with those of scheme members”, the Commission observes.

Based upon their findings, the Commission recommends a set of interrelated interventions designed to promote systemic change to improve the context within which facilities, funders, and practitioners operate, and create a shift towards a pro-competitive environment.

Some of these include:

  • the establishment of a dedicated healthcare regulatory authority, referred to here as the SSRH. The role of the SSRH will include regulation of suppliers of healthcare services, which includes health facilities and practitioners. The SSRH will have four main functions: healthcare facility planning (which includes licensing); economic value assessments; health services monitoring; and health services pricing”.
  • The introduction of a single, comprehensive, standardised base benefit option, which must be offered by all schemes to increase comparability between schemes and to increase competition in the funders market.
  • The implementation of an active opt-in system for brokers.

Stakeholder reaction

In response, MediClinic noted that the market context has moved on since 2014, the end date for the majority of data used. “Current data must be used to find current best solutions for the unique South African healthcare market, especially as South Africa prepares itself for the introduction of the NHI (National Health Insurance),” CEO Koert Pretorius mentioned in a News24 media article.

In a CNBCAfrica interview Dr Lungi Nyathi the Executive Director for Health Management at AfroCentric also shares her thoughts on the outcome of the Health Inquiry.

Click here to read an article published by the Competition Commission about the seminars that allowed the HMI to discuss and debate with stakeholders both the approach to the HMI’s analysis, the interpretation thereof, and to engage stakeholders on the recommendations that were put forward in the provisional findings and recommendations report.

Click here to download the Executive Summary of the Health Market Inquiry that includes an infographic that summarises the outcome.

Click here to download the detailed 256-page Health Market Inquiry – Final findings and Recommendations Report .

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