After almost six years of work and almost R200 million spent on its investigation, the Competition Commission’s Health Market Inquiry into the private health market has finally concluded its probe with the release this morning of its Final Findings and Recommendations Report. Published more than year after its Preliminary Report, the final findings and recommendations remained almost the same, painting a picture of an unregulated market fraught with problems that have led to rising healthcare costs, overutilisation, supply-induced demand and market concentration without stakeholders been able to demonstrate associated improvements in health outcomes.

“The market is characterised by highly concentrated funders and facilities markets, disempowered and disinformed consumers, a general absence of value-based purchasing, practitioners who are subject to little regulation and failure of accountability at many levels,” the report found.

Findings on practitioners

According to the report, the private healthcare market is characterised mainly by stand-alone single practices or in some disciplines, single-specialty group practices.  This limits up and down referral, leading to an irrational use of care where specialists are performing functions that other practitioners may do without a loss of quality.

It found that utilisation rates, particularly hospital utilisation rates, were higher than can be explained by the burden of disease and that excessive utilisation was a significant driver of healthcare costs.

“Over servicing or using higher levels of care is not necessarily better care and leads to a waste of resources and may even be disadvantageous to patients’ health. It pushes up the cost of care that is threatening the sustainability of the healthcare market,” the report noted.

Incentives in the market such as the fee for service model promote overutilization while evidence of possible supply-induced was found in areas where there was a higher concentration of practitioners, particularly specialists.

According to the HMI, current regulation of health professionals by the HPCSA has significantly limited the evolution of innovative and integrated models of care such as the employment of doctors, fee-sharing models and multidisciplinary practices.

Findings on private hospitals

The HMI reiterated that the level of concentration by the three main private hospital groups, Mediclinic, Life Healthcare and Netcare was concerning.

“Concentrated markets are more vulnerable to collusion and the collusion in these highly complex markets is very hard to detect. It also limits the extent to which funders can employ DSP networks to effectively discipline hospital groups,” the report notes.

It found that the three large hospital groups, both individually and collectively, are able to secure steady and significant profits each year. They also make it very hard for newcomers to grow and compete on merit.

The three groups are able to distort and prevent competition by binding the best medical specialists to their hospitals with lucrative inducement programmes. The three groups also dominate DSP arrangements and dictate year-on year price and costs increases for funders, the HMI found.

“They facilitate and benefit 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. Additionally, facilities operate without any scrutiny of the quality of their services and the clinical outcomes they deliver because there are no standardised publicly shared measures of quality and healthcare outcomes, making it impossible for patients, funders or practitioners to exercise based on value.”

Findings on Funders

The report found that funders compete in an environment characterised by an incomplete regulatory framework that distorts the parameters of competition. Failure to introduce a risk adjustment mechanism while introducing PMB legislation that forces medical schemes to pay for these conditions at cost and open enrolment have led to members carrying the costs through increased premiums.

Recommendations

For effective and efficient regulatory oversight, of the supply-side market, the HMI reiterated its recommendation for the establishment of a dedicated healthcare regulatory authority (SSRH). Its role will include the registration of suppliers of healthcare services, including healthcare facilities and practitioners. It will have four main functions: Healthcare facility planning, including the licencing of facilities, economic value assessments, health service monitoring and health service pricing.

The SSRH will also be responsible for setting up a multilateral negotiating forum for all practitioners to set a maximum set price for PMBs, and reference prices for non-PMBs. It will run a committee to set and regularly review codes and an “intelligent” health professional’ numbering system linked to required annual reporting of current working address, health outcomes and area of specialties.

It recommends that the fee for service model be scrapped within the next two years and replaced by alternative reimbursement models that will be approved by the Council for Medical Schemes and the SSRH. Changes are also needed to the HPCSA ethical rules to promote innovation in models of care to allow for multidisciplinary group practices and alternative care models so that fee for service models ceases to be the dominant payment mechanism.

“The forum to establish reference pricing and to set prices for the PMBs, and coding will provide certainty and guidance which will obviate the need for associations to do it, which does amount to anti-competitive behaviour,” the report notes.

With regards to benefit options, the HMI suggests the creation of a standardised base benefit option to remove any incentive to schemes to compete on risk.

Referring to the inclusion of the findings and recommendations in the National Health Insurance plan, HMI panel member, Prof Sharon Fonn, noted that the full implementation of NHI is still seven years away and that the private sector will in, the meantime, continue to operate in its current form. However, she said it is hoped that the implementation of the Inquiry’s recommendations will provide a better environment in which a fully operational NHI can function.

The final report is available on: http://www.compcom.co.za/wp-content/uploads/2014/09/Health-Market-Inquiry-Report.pdf