Medical specialists seem to be the cowboys on the cattle field, charging high fees and guiding patients into the wide open gates of expensive private hospital groups.
They are of particular interest to Health Minister, Dr Aaron Motsoaledi.
“Profit-maximising specialists and hospitals are able to exert their dominance through price increases and price discrimination with relative impunity, and currently have no need to compete on either price or quality in order to attract patients,” he states in the Department of Health’s (DoH) submission to the Health Market Inquiry.
Together with private hospitals, they are viewed as the drivers of price changes as well as the utilisation of services, as their diagnosis and treatment recommendations direct patients to hospitals where treatment is provided.
“Specialists are, therefore, the main drivers of demand for all expensive services, including hospital, medicine, devices and diagnostic services,” says Professor Alex van den Heever, Chair of Social Security at the University of the Witwatersrand, in his Review of Competition in the South African Health System.
Medical schemes expenses on specialists and hospitals have indeed increased significantly over the past decade. Total healthcare benefits paid per beneficiary per month increased by 42% from R623 in 2000 to R882 in 2011 in real terms.
It appears to be largely driven by the increase in benefits paid for private hospitals (an increase of around 82% since 2000) and medical specialists (an increase of around 74% since 2000).
Submissions from the role-players however differ markedly on the underlying reasons for the high expenditure.
The South African Medical Association (Sama) says it is not doctors who are driving up healthcare costs. A closer look at the expenditure of medical schemes shows that hospitals, allied health professionals and non-healthcare costs consume together 54% of medical scheme risk pool funds.
When radiology and pathology costs are removed, specialists represent 12.7% of medical scheme risk pool expenditure and consumed R12.2 billion in 2011, which is close to the R12.1 billion spent on non-healthcare expenses by medical schemes.
“Specialists have been maligned in the medical and lay press for being the major cause of healthcare inflation, but have only gained 10% market share from 18.3% to 20.3% from 1997 to 2013 (including radiology and pathology costs) thereby disproving these allegations,” Sama argues.
Medical scheme rates
Most specialists charge a higher fee than medical scheme rates, with medical scheme members paying the difference out of their own pockets.
The Board of Healthcare Funders says specialists are charging up to 300% more than the amounts medical aid schemes allow, but according to the South African Private Practitioners Forum (SPPF) over 80% of practices in the specialist disciplines of physical medicine, psychiatry, radiotherapy, cardiology and oncology, charge no more than 120% of scheme rates.
Specialists with the highest overheads and malpractice premiums are plastic surgeons – of these practices 44.9% charge between 100% and 120% of medical scheme rates; orthopeadic surgeons (53.5%); and gynaegologists (60.3%).
The reason for this difference is inappropriate pricing guidelines, according to the specialists.
They have argued now for years that pricing guidelines were not cost-based. In 2010 the Reference Price List of the DoH was set aside by a high court ruling. It is now in the hands of the Health Professions Council of South Africa (HPCSA), and not the DoH to provide guideline tariffs, and this is still an ongoing process.
“In the past there has been a tendency to focus on containing medical scheme expenditure (costs) and to ignore the fact that medical practioners themselves experience costs in the service. Medchanism prices must enable doctors to make a living,” says the SPPF.
They don’t mind a pricing mechanism, but it should be cost-based, “free of political interest and influence”.
‘Perverse provider incentives’
Hospitals compete in a variety of ways to attract doctors to establish practices at their facilities. These include providing consulting rooms; facilities and equipment; hospital shareholding opportunities; and relocation incentives.
The DoH asks that a closer look should be taken at what it calls “perverse provider incentives associated with reimbursement structures”.
Life Healthcare (LHC), Mediclinic and Netcare have shareholding relationships with doctors. Doctors are required to conduct this in accordance with the Ethical and the Professional Rules of the HPCSA.
Rule 23A of the HPCSA, which relates to Financial Interests in Hospitals, provides that: “A practitioner may have a direct or indirect financial interest or shares in a hospital or any other health care institution: Provided that – such interests or shares are purchased at market-related prices in arm’s length transactions;… (c) the returns on investment or payment of dividends is not based on patient admissions or meeting particular targets in terms of servicing patients;… (f) such practitioner does not engage in or advocate the preferential use of such hospital or health care institution”.
“HPCSA initially imposed a cap on doctor shareholding but later removed the cap as it found that the shareholding did not function as a perverse incentive,” LHC says.
Mediclinic for instance offer shares to doctors who use the hospital’s facilities, to be purchased at market value. No single doctor may hold more than 2% of the total issued shares relating to the relevant hospital, although it inherited existing, higher shareholding structures due to the acquisition of some hospitals.
A doctor may only hold shares in one Mediclinic hospital at any one point in time and are no conditions on the doctor shareholder to admit patients to the hospital in which he holds shares.
While many people can’t afford specialists, South Africa also cannot afford to lose their skills.
The country suffers from a chronic shortage of specialists across all categories in both the public and private sectors.
It has around 20 specialists for every 100 000 people. This is one of the lowest ratios of doctors (GPs and specialists) to population of the BRICS countries (Brazil, Russia, India, China and South Africa), shows research from Econex.
Reasons include emigration and medical school constraints, but their scarcity also gives the specialists market power, says the DoH.