Inquiry into private healthcare sector to focus on cost drivers, says Competition Commission

31 October 2013 Thembinkosi Bonakele, Competition Commission

The Competition Commission’s proposed market inquiry into private healthcare, set to start in January 2014, will look into the factors driving healthcare costs and expenditure, including healthcare financing, health professionals and hospital-based services, said Acting Competition Commissioner, Thembinkosi Bonakele.

Speaking at the Hospital Association of South Africa’s (HASA) annual conference in Cape Town, Bonakele said the terms of reference of the inquiry should be finalised by December 2013, with the process of appointing panellists and an investigative team already underway.

He added that although there was no allegation of a specific prohibited practice by any particular firm, "there are features of this market that affect, distort of restrict competition.”

He said claims expenditure from various markets; namely specialists, hospitals, GPs, medicines and dentists over a 22 year period were on an upward trend. "We understand that the underlying data is contentious, so the inquiry will provide all stakeholders with an opportunity to interrogate this data, the associated trends and the underlying causes.”

HASA CEO Dr Dumisani Bomela said the market inquiry should result in a better understanding of healthcare costs and dispel some of the myths about private hospitals.

"We hope that the process will be scientifically rigorous, transparent, independent, fair and ensures wider stakeholder participation,” he said.

Bonakele explained that a market inquiry and not an investigation was more appropriate for the private healthcare market.

"A market inquiry is a formal inquiry into the general state of competition in a market for any goods or services; it is not an investigation into the conduct of any particular firm,” said Bonakele.

The healthcare market was highly complex and the state or nature of competition in health markets was not clear. "What we’re interested in is understanding what the impact is on the consumer,” said Bonakele.

The investigative phase of the inquiry would kick off in January 2014 and run for over a year. A draft report was due in September 2015, with the final report to be issued in November 2015.

"This inquiry intends to facilitate frank, open and constructive debate about the nature of competition in healthcare markets,” said Bonakele. "It will look into the effects of competition on costs, prices and expenditure and on ways in which competitive markets can contribute to greater innovation, efficiency and access to private healthcare.”

Bonakele said the Commission itself had played a role in the healthcare market, through its decisions on tariff negotiations and a number of mergers. "As a responsible public entity, it is incumbent upon us to evaluate the impact of the decisions we have made, both in enforcement cases and in mergers. This is also a reflective exercise.”

He noted that the enquiry will be conducted by an independent panel with an appropriate balance of skills.

"I want to emphasise the manner in which we wish to approach this inquiry – as a transparent, fair, and evidence-based process,” he said. ‘”We should emphasise co-operation given the challenges from within the hospital market.”

Bonakele said the inquiry will evaluate the interrelated relationships within the sector as well as information imbalances and how these may affect competition. This included evaluating the regulatory environment and how it influenced the incentives of players.

"The importance of understanding the regulatory environment was emphasised by many stakeholders in their comments on the Terms of Reference and it is one of the useful suggestions that the Commission has included in its revision,” he added.

Some of the issues the Commission would look into would be what factors determine the demand for health insurance; why expenditure on hospitals has increased; how doctors direct patients along the chain of care; how tariffs are determined and how expenditure on technology influences cost and prices.

Said Bonakele. "Ultimately what we are asking is how can more competition result in innovative, accessible, affordable high quality healthcare for consumers.”