Panel upholds findings of racial bias in medical scheme fraud investigations

The country’s largest medical schemes and administrators discriminated against black healthcare professionals when investigating fraud, waste and abuse (FWA) between 2012 and 2019, an independent investigation has found.

The investigation’s final report confirms its interim findings of procedural unfairness and substantive systemic racial discrimination by Discovery Health, the Government Employees Medical Schemes (GEMS), and Medscheme when addressing FWA.

The final report is the outcome of an investigation commissioned by the CMS in June 2019. This was in response to allegations of unfair treatment by medical schemes based on race and ethnicity made by a number of healthcare providers and members of Solutionist Thinkers and the National Health Care Professionals Association.

About 90% of the complaints concerned Discovery Health, GEMS, and Medscheme.

The investigation is also known as the Section 59 Inquiry because section 59 of the Medical Schemes Act (MSA) regulates how medical schemes handle payments to healthcare providers and members.

The panel was chaired by Advocate Tembeka Ngcukaitobi (pictured), who was assisted by advocates Adila Hassim and Kerry Williams.

The panel published an interim report in January 2021, whereafter it received further submissions from the medical schemes sector.

The final report was published in April this year and submitted to the CMS. The interim report found there was unfair discrimination on the grounds of race that was prima facie in breach of the Equality Act and section 9 of the Constitution.

On Monday, Ngcukaitobi officially handed the final report to the Minister of Health, Dr Aaron Motsoaledi, during a media briefing.

Ngcukaitobi said the inquiry investigated substantive unfairness – whether there are systemic patterns of discrimination on the grounds of race and ethnicity – and procedural fairness, regardless of whether it was racially discriminatory.

The inquiry’s interim finding was that the FWA procedures for the recovery of monies allegedly owed was unfair, and it violated the rights to procedural fairness of individual practitioners.

“We’ve received further submissions, but we remain unpersuaded that our interim findings were incorrect. Accordingly, we confirm the findings and recommendations in the interim report that the procedure that is followed by medical schemes when they claw back monies allegedly owed by practitioners or where they investigate instances of fraud, waste and abuse are unfair,” Ngcukaitobi said.

“The unfairness really revolves around the rights to procedural fairness of individual practitioners. They also revolve around the decision-making by schemes, which is not detached and not independent. They also revolve around the power imbalance between the schemes and the individual practitioners.”

Risk ratios

To ascertain whether there was substantive unfairness, the panel developed a risk ratio to work out the likelihood that a black practitioner would be subjected to a FWA investigation, a finding, and a penalty versus a white practitioner. The risk ratio maps in which years and in which disciplines there were more investigations and guilty findings against black providers.

Ngcukaitobi provided the following examples of what the risk ratios found:

• Regarding GEMS, black dental therapists in 2014 experienced risk ratios of between 2.7 and 3.7. In other words, they were generally about three times more likely than non-black dental therapists to be guilty of FWA. “So, they were more likely to be investigated and found guilty of fraud, waste, and abuse,” he said.
• For Discovery, black psychiatrists in 2017 experienced risk ratios of between 3.44 and 3.77. In other words, black psychiatrists were generally approximately three-and-a-half times more likely than non-black psychiatrists to be guilty of FWA.
• For Medscheme, black anaesthetists in 2018 were generally about six-and-a-half times more likely than non-black anaesthetists to be guilty of FWA.

Ngcukaitobi noted that all these risk ratios were probable risk ratios. “We do not need to make scientifically certain determinations of the risk ratios. Findings based on what is probable is enough for the purposes of this final report. These probable risk ratios only relate to the historic period, the period between 2012 and June 2019. The panel cannot and does not comment on any conduct of the schemes or outcomes for black providers since June 2019 because those were our terms of reference.”

Ngcukaitobi said the panel’s findings came with a qualification.

“We were not a court of law. We were not adjudicating individual complaints. We did not sit in a trial. We did not have to make legal findings applying the Promotion of Equality and Prevention of Unfair Discrimination Act or applying section 9 of the Constitution. But what we did have the power to do was to make findings of fact, and that finding of fact simply leads to one conclusion. The evidence of the risk ratios before us showed racial discrimination against black service providers by the schemes.”

Four new recommendations

Ngcukaitobi emphasised that the MSA and its regulations lack sufficient detail on the administration of FWA investigations and recommended legislative reforms to fill these gaps.

“Part and parcel of the problem is that the Act doesn’t actually contain procedures for the administration of fraud, waste and abuse, nor do the regulations […] They leave it up to the schemes to make individual decisions about how to claw back, or how to investigate, or how to impose penalties against allegedly errant practitioners.”

The panel’s final report includes four new recommendations that could be incorporated into the MSA or its regulations:

1. Early warning system

Schemes and administrators should develop an early warning system whereby schemes notify providers as soon as the schemes become aware of any circumstances that might lead to the application of section 59(3) of the MSA.

“Such an early warning system will not only prevent prejudice to providers who may innocently be engaging in in wasteful behaviour but will also benefit the schemes, as providers engaging in abusive behaviour are likely to adopt corrective measures rapidly, thereby preventing further or ongoing loss to the schemes,” said Ngcukaitobi.

2. Review the audit and claw-back period

The current three-year retrospective clawback period was deemed excessive and potentially harmful, sometimes forcing practitioners to close their practices. The retrospective claw-back often comes as a surprise to practitioners who may only be notified years after the fact.

The panel said the claw-back period needs to be reconsidered because the existing framework disproportionately favours medical schemes and lacks procedural fairness for individual practitioners.

3. Support and representation mechanisms

The panel highlighted the power imbalance between medical schemes and individual healthcare providers during investigations into alleged FWA. Often, schemes conduct these investigations in a manner that leaves providers isolated and without adequate means to defend themselves. Providers may face interrogations by scheme-employed lawyers or investigators, sometimes under intimidating circumstances, without legal representation or support. This situation forces many practitioners into vulnerable positions where they might feel compelled to sign acknowledgments of liability or debt, to avoid further conflict or loss of payments, even when they may not be guilty.

To address this imbalance, the panel recommended establishing formal mechanisms to assist providers during these processes. One key suggestion was the creation of a tribunal or similar independent body that would oversee investigations and provide a fair platform for practitioners to respond to allegations.

4. Transparent digital tools

Medical schemes use software, algorithms, and artificial intelligence tools to detect FWA. The panel found that these algorithms operate as “black boxes” – their inputs, decision-making criteria, and functioning are largely unknown not only to affected practitioners but also to the regulators. Without insight into how these algorithms work, it is impossible to determine whether they are fair or discriminatory.

The panel proposed that if schemes do not voluntarily provide transparency, legislation should be amended to compel them to do so. It recommended that the CMS must have full access to the algorithms and their inputs, ensuring that these systems are accountable to a public regulatory body. Such oversight would balance the need for confidentiality – necessary for fraud detection effectiveness – with public accountability, preventing discriminatory outcomes and unjust targeting of providers.

Click here to download the final report.