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The Health Market Inquiry

The Competition Commission’s Health Market Inquiry (HMI) commenced in 2014 and was established to probe the dynamics in the private healthcare market, to determine whether there are barriers to competition as well as to examine the factors driving private healthcare costs.

 The Competition Commission released their Healthcare Market Inquiry: Provisional Report, on 5 July 2018

 A brief summary of the key provisional findings and recommendations of the comprehensive report are detailed below.

 Key Findings:

 

  • The South African private healthcare sector comprises a complex set of interrelated stakeholders that interact in markets that are not transparent and therefore not easily understood.

 

  • This situation is compounded by South Africa’s two tier health system where the cost of private healthcare is high and rising while public healthcare services which are affordable, are generally of poor quality. Therefore, the public health sector does not pose a significant competitive constraint to the private sector for patients or for service providers.

 

  • The market is characterised by high and rising costs of healthcare and medical scheme cover, highly concentrated funders’ and facilities’ markets, disempowered and uninformed consumers, a general absence of value-based purchasing, ineffective constraints on rising volumes of care, practitioners that are subject to little regulation and failures of accountability at many levels.

 

  • The evolution of the market to its current form is a consequence of a changing regulatory environment which has led to the status quo. The overall incomplete regulatory regime can largely be attributed to a failure in implementation on the part of regulators and inadequate stewardship by the Department of Health over the years.

HMI Findings associated with the hospital market:

 

  • The private hospital market is highly concentrated. At a national level, the three largest hospital groups have a very high market share which limits funders’ power during price negotiations.
  • Hospitals do not compete directly for patients, but rather compete for practitioners who refer patients to hospitals. Various incentives and arrangements between hospitals and practitioners were identified to attract practitioners, increasing inappropriate utilisation. The report highlights evidence of Supplier Induced Demand on the part of the practitioners and facilities.

 

Recommendations:

The recommendations are aligned with the key findings and aim to improve transparency, accountability and the alignment of interests of consumers and funders. They also aim to address the absence of measures of value (and in particular healthcare outcomes), failures in the pooling of funds, improved management of supply-induced demand and methods to address concentration in the market.

The recommendations are also aligned with the national policy trajectory towards Universal Health Coverage – the NHI. 

Overall recommendations:

 

  • Changes to the way scheme options are structured to increase comparability between schemes and increase competition in the market
  • A system to increase transparency on health outcomes to allow for value purchasing
  • A set of interventions to improve competition in the market through a supply-side regulator
  • The existing regulatory system does not go far enough in terms of achieving optimal healthcare outcomes and appropriate access to quality healthcare services and the inquiry has made comprehensive recommendations for additional supply-side regulation for the areas of:
    • healthcare capacity planning,
    • conducting economic value assessments,
    • implementation of appropriate payment mechanisms, and

HMI recommendations associated with the hospital market:

  • The provisions of the National Health Act 2003 which regulates the licensing framework have not been fully implemented and the Department of Health to implement these provisions without delay.
  • The inquiry has considered a number of alternative options on how to address the high level of concentration of hospitals including reluctantly suggesting divestiture, and imposing a moratorium on the issuing of licences to the three large hospital groups. The inquiry has invited stakeholders to make submissions in this regard.

Life Healthcare fully supports the Health Market Inquiry in its undertaking to understand the general state of competition in the industry and determine the factors that have contributed to the increase in health inflation, and will continue to cooperate with the Competition Commission over the period of investigation.

Similarly, we support the introduction of Universal Health Coverage and are hopeful that the provisional report will contribute to the development of solutions needed to meet this objective.