The Council for Medical Schemes (CMS) has already implemented a number of recommendations arising from the Special Investigating Unit’s investigation into alleged misconduct by its employees, and it plans to increase its tariffs for regulatory services.
CMS chief executive Dr Sipho Kabane told Parliament’s Portfolio Committee on Health that the SIU indicated in October that it will conclude its investigation by the end of January next year.
“We are still waiting for a final report, and we will certainly act on it.”
Some of the recommendations received so far related to “policy shortfalls”. Dr Kabane said a specific example was that the CMS should have employees make conflict of financial interest declarations each year.
The investigation has cleared one employee of allegations of a “lavish lifestyle” that did not seem reasonable considering his or her income.
The SIU has also investigated a number of employees doing compliance and investigation work. All the employees investigated to date have been cleared of wrongdoing, Dr Kabane said.
He said the CMS had “invited” the SIU to investigate not only CMS employees, but also to look at the larger industry, “because these allegations not only involved CMS officials but also pointed to unethical and corrupt relationships with other key players in the industry”.
Tariffs will increase
The CMS is in the process of adjusting its levies and tariffs.
The CMS derives 89% of its revenue from levies on some 4.1 million principal scheme members. Dr Kabane said it was a problem that no standard has been established whereby these levies increased by CPI each year.
National Treasury and the Department of Health agreed with the CMS that levies needed to increase to keep pace with inflation, Dr Kabane told the committee.
He said the CMS was largely dependent on levies, because the tariffs it charged for regulatory work (rule amendments, registration and accreditation) have been adjusted “perhaps only once” since the CMS was established.
“That lag in funding means that when we do this work, we achieve less than cost recovery. In a sense, it also means we are subsidising the schemes industry instead of getting the value of what we input into the process.”
Dr Kabane said the CMS was “implementing a process” that, in the next two to three financial years, will reduce the regulator’s dependency on levies charged to members, “but those entities such as administrators – that are largely profit-making – will start making their contribution to the services that CMS provides”.
The CMS ended the 2020/21 financial year with an accumulated deficit of R17.9 million, slightly up from R17.6m in 2019/20.
Chief financial officer Andisa Zinja told the committee that the CMS was “facing liquidity challenges”, because cash and cash equivalents constituted only 16% of total assets and 12% of current liabilities.
Although the CMS received an unqualified audit, irregular expenditure of R5.3m had been detected. Most of this (R4.7m) was the result of the CMS establishing a panel of lawyers in previous financial years without going through a bidding process, as required for procurement above R500 000.
Zinja said the CMS has re-established the panel in line with the procurement legislation and was transferring the contracts from the old to the new panel. The CMS was in the process of applying to Treasury for condonation of this irregular expenditure.
She said the council’s finances had been impacted by approval for the 2020/21 levy increase being granted after the financial year had ended. The CMS was working to ensure this did not happen again, and levies were approved before the start of the financial year.