It has taken the Competition Commission five years to conclude its investigation into the private healthcare market – and the final results are damning: the industry cannot continue to operate as it has been.
“People keep saying don’t take my private market away; we are saying it’s not serving you nearly as well as it could and should,” says Health Market Inquiry panelist professor Sharon Fonn.
This is the crux of the findings detailed in the 256-page report, released by the commission on Monday.
The inquiry found that the private healthcare market is uncompetitive and failing consumers on many levels, as they pay more and more for services without any real value for money in terms of health outcomes.
The commission began its probe in 2014, and its findings, which are largely in line with its provisional findings in 2018, were informed by information received in written submissions, public hearings, seminars and information given by experts in the health sector.
Market ‘prevents, restricts, distorts’ competition
The report arranges its findings in three markets – namely health facilities, practitioners and funders – under which it identifies certain aspects about the market which alone or in combination prevent, restrict or distort competition.
The report’s findings are expected to have implications for the contentious National Health Insurance Fund, which is scheduled to be operational by 2026, by possibly creating an enabling environment for it to function within.
Three hospital groups, Netcare, Mediclinic and Life Healthcare, account for 90% of the private hospital market in terms of beds and admissions.
The inquiry raised concerns about the highly concentrated nature of the market, which it says makes it more vulnerable to collusion, both through the formation of cartels and informally.
The lack of competition allows the three hospital groups to secure steady and sizeable profits every year by making it difficult for newcomers to enter the market because, according to the report, they are able to “distort and prevent competition by binding the best medical specialists to their hospitals with lucrative inducement programmes”.
Fonn says one of the more significant findings of the commission, derived from extensive evidence and analysis, is the practice of “massive overutilisation” in the market. This speaks to overtreatment of patients through frequent hospital admissions and extended stays, and increasing the level of treatment where there are lesser alternatives.
This is incentivised in the market in what the commission calls “perverse incentives” especially in a “fee-for-service” market where the more services a healthcare professional renders, the more profits they are able to make. Medical aid schemes also have to fully reimburse prescribed minimum benefits (PMBs) at cost, which allows practitioners to determine their own degree of intervention, knowing this will be fully covered by funders.
“It means as a practitioner I have more power, I can set my own reimbursement level,” says Fonn. “I know if you [the patient] have a PMB [condition] and I do extra investigations to make 100% sure that my diagnosis is right, and I give you this treatment and that treatment, I can determine how much health costs there are.”
This has the effect of pushing up medical aid contributions as schemes and administrators aggregate for the care they pay for year on year.
“They [the three large groups] facilitate and benefit from excessive utilisation of healthcare services, without the need to contain costs, and they continue to invest in new capacity beyond justifiable clinical need without being disciplined by competitive forces,” the report states.
Are you even healthier?
Despite the administration of excessive treatments that consumers pay a premium for, the commission said there is no way of measuring improved health outcomes for patients from the services they receive from individual practitioners or health facilities.
Among the commission’s recommendations is the formation of an independent and private ‘outcomes monitoring and reporting organisation’ that will provide patient-centred and scientifically-backed information on the outcomes of healthcare.
“There’s nothing wrong with spending more and having more tests, as long as it results in improved outcomes – and that is what we don’t know,” says Fonn.
Beyond patients not being able to compare outcomes based on interventions and practitioners, the monitoring organisation will also allow practitioners to benchmark their performance against their peers, which in turn will encourage greater innovation in healthcare. From a funder’s perspective, schemes will be able to contract practitioners based on value for money.
High levels of concentration and weak regulation were found in the healthcare funders market as well.
The commission names Discovery Health as one of the administrators that has enjoyed the benefits of this environment.
“Discovery Health has, over a sustained period, earned profits that are a multiple of those of its main competitors with no sign of effective challenge from incumbents or new firms,” the report reads.
The commission also takes issue with the number of incomparable medical aid benefits that consumers can choose from, saying this often leaves them disempowered. They are also unable to swiftly leave schemes when offered better benefits from other providers. In addition, the schemes market their plans based on risk, mainly looking to attract young and healthy people.
“Absent this disciplining effect arising from consumers, schemes have no pressure to compete on pro-consumer metrics and to offer better products,” says the report.
To remedy this, the commission has recommended that the industry introduce a single, standardised benefit scheme that is designed to attract members irrespective of their age, health or risk profile.
“It will enable consumers to compare products, reward those funders which are able to innovate to offer lower prices and/or higher quality, and, thereby, both discipline and reward the market.”
The recommendations include the establishment of a “supply-side healthcare regulatory authority” that would be responsible for issuing licences for new healthcare facilities, among other things. The commission says provincial departments are currently unable to report how many licences they have issued.
The regulator would also be responsible for measures aimed at bringing healthcare prices down, such as setting up a multilateral negotiating forum where practitioners can set a maximum price for PMBs and reference prices for other healthcare services.