A plea to the Minister of Health: Don’t throw the baby out with the bathwater

In order to achieve the Polokwane resolution to fast track National Health Insurance the stakeholders need to debate all proposed solutions as well as the unintended consequences of proposed legislation.

So says Otto Wypkema (pictured), CEO of the National Hospital Network, a group of 74 independent private hospitals, day clinics and specialist facilities.

He says that healthcare legislation should not be made without engagement with the healthcare industry. ‘We are eager to work together with the Department of Health meet its objective to provide better health for all,’ he said.

‘The Department is well aware that there is an acute shortage of doctors, specialists and in particular, nurses in South Africa. Hospitals compete with one another to create the environment where doctors and specialists can use their time efficiently.

‘As hospitals, we have to work hard to maintain the services of good nurses. This requires offering nurses above-inflation salary increases due to scarcity. The low number of entrants into the market indicates that this situation will remain with us for a while.

‘Taking current unemployment statistics into consideration there is a huge opportunity to train and employ nurses and to this end legislation should enable the private sector to train more nursing staff and eliminate current stumbling blocks.

In Wypkema’s view, one of the keys to price control in transparency of pricing.

‘At NHN we are fully committed to price transparency. In principle, we are in favour of a return to collective bargaining based on economic principles, equitable rate of return, sustainability of private healthcare and independent process.

‘And consumers of medical services should be better equipped to spend their healthcare resources. We find it fascinating that patients that are treated for cosmetic surgery and who pay for the procedures themselves are far more concerned out the costs and often negotiate discounted rates in comparison to patients that are on medical aid cover,’ he said.

‘To this end we believe that government should legislate that all tariffs by all the stakeholders are published annually as was done in the past by the Representative Association of Medical Schemes (RAMS) which will empower everyone in the market to make informed choices.

Wypkema, as well as the CEOs of other hospital groups complain that the main catalyst for the proposed amendment is the soaring cost of healthcare. And yet the Department of Health and its agents has not taken the trouble to actively engage with the private sector to understand the drivers of increased utilization.

‘In recent reports the Council for Medical Schemes attributed increased costs in hospitals to changes in market power and conduct, the fee for service system, super-normal profits, endemic inefficiency, over pricing and over utilization of expensive medicines and consumables,’ he said.

‘Firstly, we would urge the Council to distinguish between increases in utilization and increases in unit costs.

‘Secondly, we would appeal for the merits of the fee for service system, (which the Council says leads to ‘over-servicing’) to be better understood. The downside risk of fee for service might well be a scenario where a doctor covers his or her responsibility to a patient by performing one or two tests too many, but that the downside risk of alternative risk sharing models, could lead to under-servicing.

‘Furthermore, the fee for service model is transparent, with clearly presented line items. This is not the norm with alternative reimbursement payments options.

Thirdly, we reject the policy of the Health Professions’ Council which caps doctors’ shareholding in private hospitals at the 10% level. We would suggest that far from ‘a perverse incentive’ to abuse patients by admitting to hospital needlessly, there is extra moral and legal responsibility at the hands of doctors who have a stake in hospitals to provide patients with a safe, high quality facility.

Furthermore, we would query the breach of logic that allows doctors to own shares in listed entities such as Netcare Holdings and Medi-Clinic, but not private equity structures such as those favoured by the independent hospitals.

‘Linked to this issue research indicates that compared to other listed entities, hospitals have a relatively low return on equity. The Return on Average Capital (ROACE) of the ALSI on the Johannesburg Securities Exchange is 13.4% and is between 7.9% and 3.4% for the listed private hospitals and less for the independent hospitals.

‘On behalf of the National Hospital Network, we would request the Minister to re examine the reasons for the high prices of healthcare, and to take these factors into account in the determination of health policy and for all stakeholders to work together and to focus on the bigger objective in providing affordable and accessible quality healthcare for all South African’s,’ he said.