In today’s session, the Panel sought to understand how the public and private sectors interact with one another. The Western Cape, Gauteng and KwaZulu-Natal Departments of Health all made oral submissions. All three provincial departments described the state of health services in the private and public health systems in their respective provinces, primarily using the indicator of the number of beds.

Several issues came up in all the presentations, including:

  • the Remuneration for Work Outside the Public Sector (RWOPS) policy
  • the barriers to entry for new entrants into the hospital market;
  • legal framework and criteria for licensing of private facilities by provinces and the implications of the national certificate of need;
  • the quality of care in private facilities, linked to that, the extent to which provinces share information about the quality of care with the public
  • tariffs for treatment of medical scheme members in public facilities.

Western Cape Department of Health

Licensing

The presentation by the Department focused on the regulatory framework and process of licensing of private hospitals. The issuing of licenses for private hospitals is provided for in regulation R187 in the Western Cape.  Some of the considerations that the provincial department makes in deciding whether to grant a license are the bed to population ratio, the provision for a complaints mechanism, a track record of provision of quality healthcare and optimal use of space capacity. According to the accepted norms in the Western Cape of bed to population ratio previously neglected areas such as Khayelitsha and Mitchells Plain are undersupplied and others such as the Western Sub District are oversupplied. The Department accepted that it does not proactively direct private health facilities to the undersupplied areas and have simply focused on the adjudication of the applications they received for hospitals in areas which were appealing for applicants.

After a protracted exchange with the Chair of the Panel former Chief Justice Ngcobo on the potential duality of provincial and national legislation (certificate of need) relating to licensing of private facilities, it became apparent that the Department officials did not understand the status of the certificate of need provisions in the National Health Act. The provisions found in sections 36-40 were enacted by the President and then withdrawn through an application to the Constitutional Court because the regulations required for the implementation of the relevant provisions were not in place. The provincial officials also seemed to think that the provincial regulations concerning the licensing of private facilities would continue to operate even once the national regime had been implemented.

The Panel questioned the Department on the ownership of facilities and ensuring against perverse incentives which lead to over-servicing or corrupt referrals, a point which has come up numerous times in these hearings. The Department admitted that the regulations are outdated.

Public sector dumping

In respect of the “dumping” of patients from the private sector, the Department acknowledged that generating revenue is important and billing medical scheme for patients transferred to the public sector is an important source of income for the Department. However, the criteria for admission are purely clinical and no patients are refused services.

Quality

In response to the Panel’s questions on how it tracked an applicant’s quality of service, the Department said that it investigate public complaints and followed up on whether these had been resolved and considered the infrastructure of the facility. The Department conceded that it did not conduct a detailed ‘quality of care’ analysis, and that as far as assessing staffing levels, it required an applicant to disclose the number of nurses and a nursing plan in the initial application, but once the private facility was functional, further annual inspections did not take into consideration nursing or staffing ratios. The Department further conceded that it did not do enough to maintain and monitor national core standards in the private sector.

In final remarks, the Western Cape Department said it do not consider the financial viability of a facility at the initial stage of the application process as this does not fall within its ambit, to which the Chair of the Panel expressed concern that this variable may impact on the quality of service provided.

Gauteng Department of Health

Next the Panel heard from the Gauteng Department of Health, which noted that comparably, South Africa spends more on healthcare than other low to middle income countries and should have better health outcomes considering its expenditure. Even though the Department did not elaborate on the lack of price regulation, its representatives agreed that this is a driver of the high cost of health care services in South Africa.

The Gauteng Department stated that the right of access to health care services guaranteed in section27 of the Constitution is not limited to the public sector and that the private sector also has a duty to exercise stewardship in regard to the right and put in place instruments which promote considerations of efficiency and affordability of health care services. The Department acknowledged that financial burden is inherent in the provision of health care services, but argued that access could be realised without catastrophic expenditure from users.

Gauteng has the highest population amongst all the provinces and mirrors the dual national health system. In the province, the private sector serves 28.2% of its population while 71.8% are served by the public sector. The Department stated that there are 18 833 hospital beds in the public sector in comparison to 16 276 in the private sector.

Licensing

The Department of Health in Gauteng indicated that it is guided by the old Regulation 158 made under the old National Health Act. The Department emphasised that there is a concentration of private hospitals in areas with a high population income, and that it received the most applications from these areas. Some of the factors the Department considered when adjudicating license applications are the promotion of equitable distribution, availability of human resources and health personnel, health needs, service demands and financial sustainability.

The Department grants licenses to applicants, which, for example, propose to render services to underserved areas or locations where the nearest hospital has a high bed occupancy rate and to cater for underserved health needs. The Department stated that applications were sometimes refused when they did not provide sufficient information about demand or proximity of hospitals belonging to the same hospital groups.

In the absence of the national guidance, the Department is drafting a policy to guide the licensing of facilities in Gauteng. However, the policy has not been finalised.

Barriers to entry

The Department wanted to dispel the notion that licensing limited market entry, noting that the number of private hospitals had increased from 95 in 2006 to 154 in 2015 with the use of these regulations.

The Panel questioned the Gauteng Department at length about the process involving new entrants merging with larger hospital groups after a license had been granted. The Department noted that while licenses were not transferrable, new applicants would often come back after approval saying that they may have underestimated the cost involved in opening and running a facility and sought financial investment from other hospital groups to partner with them in the venture.

Quality

The Department inspects hospitals during the application process, then at pre-registration to ensure that building specifications are met and then on an annual basis, which considers quality issues such as nursing care and staffing ratios.

The Department in response to the Panel indicated that it did not and was reluctant to publish information relating to these inspections, even though it agreed that the information may be helpful for patients and possibly enhance the quality of treatment. The Department has not previously published this information because of the potential for legal action being taken against it for publishing potentially adverse information about a hospital group. The department welcomed assistance of other bodies to enable for the publication of information related to quality of private facilities.

Like the Western Cape, the Gauteng Department does not appear to conduct adequate analysis of the financial sustainability when considering applications.

Kwa-Zulu Natal

Kwa-Zulu Natal is a largely rural province and the rural areas generally have a very low insured population and therefore no incentive for building private health facilities, the Panel heard from representatives of the Department of Health.

RWOPS

The Head of Department of the KZN department said that the RWOPS policy introduced in 2010 was detrimental to the public sector because it was abused by doctors. RWOPS was therefore suspended by the province and working in private sector whilst employed by the public sector is no longer officially sanctioned.

Treatment of TB

The HOD also confirmed submissions made earlier by some stakeholders that it is a practice in the private sector to refer TB patients to the public sector for treatment. The HOD said that public facilities did indeed have better practices compared to private facilities, for example, the public sector has dedicated TB isolation wards with adequate buffers while private facilities did not.  In respect of HIV, the HOD indicated that the public sector provided the better triple therapy while the private sector employed inferior dual therapy treatment.

Public sector dumping

The HOD went on to discuss the “dumping” of private sector patients on the public sector, often on an unfunded basis. When pressed about what he means by “dumping” the HOD explained that private patients who run out of funds were referred to the public sector to continue with the treatment and care of patients. An example was also given of patients who were admitted in a public hospital and were operated on the next day, indicating that the doctor involved was probably treating the patient in a private facility and then transferred the patient to the public hospital to conduct the surgery at a much reduced cost. However, such a practice prejudiced public sector patients because the theatre slot was taken up. Dr van Gent questioned the veracity of the claims about public sector dumping given the anecdotal nature of the claims and the lack of evidence presented on this point in the presentation. Dr van Gent suggested that it would be useful to get data in an objective manner about public sector dumping.

Licensing

Representatives reported that KZN follows a policy of a 25% to 75% split between private and public beds in the province. There are 7,843 beds in the private sector to the 23,527 beds in the public sector. However, the province is still short of 7128 hospital beds. The calculations of beds do not include beds in day hospitals.

The HOD indicated that the primary criteria for the assessment of applications for hospital licenses are secured funding, and a secured site for the hospital. In other words, the applicant must show the necessary financial backing for the project, a business plan, zoning permission. During the course of the application, applicants must invite comments from the public, which might include objections on several grounds, including the proximity to other existing private health facilities and environmental concerns.  He said that a license includes conditions relating to infrastructure, bed spacing, internal policies, incident reports and nursing care standards. These standards must be shown to have been maintained during the annual re-licensing process.

Like in Gauteng, the primary legal instrument applied in the adjudication of applications for hospital licenses is the old Regulation 158, which was passed in 1980 in terms of a piece of health legislation passed in 1977. Dr van Gent questioned the use of such outdated regulations, particularly in light of modern understanding of how a health system should work. The Judge expanded on this by referring to the fact that the legislation is from the pre-constitutional era and that the principles and values introduced into our society by the Constitution should be reflected in the regulation of the health facilities.

Barriers to entry

The Judge also asked why it was that 64 licenses had been granted but the hospitals were never developed. After some prompting, it emerged that the non-completion of hospitals upon the granting of licenses was primarily linked to new and smaller entrants to the market as opposed to the established large hospital groups. The department has concluded that these ventures were not financial viable.

The Panel seemed concerned about barriers to entry for small players in hospital market.

Tariffs for treatment of private patients in public facilities

Professor Fonn asked the HOD about the capability of the province to bill medical schemes for services rendered in public facilities. The answer was that “we are not good but trying our level best” and that the province had invested in a more advanced billing system with the aim of increasing revenue for the province. However, this seems to be done on a hospital by hospital basis. One difficulty is that the province must utilise the ICD 10 codes used in the private sector, which requires extensive training.

Quality

The HOD made the extraordinary claim that no existing facility is with fully compliant with Regulation 158. The Judge asked how that could be so, when these facilities were allowed to continue operating. The developmental approach of the department was apparent in many answers given to the Panel. In one instance, one official said that they consider compliance to be a joint responsibility between the department and facility and that is why they gave facilities an opportunity to design their own plans to remedy compliance issues.

Inspections are frequently conducted to assess the quality of treatment. Inspections involve a walkabout in wards and reviewing documentation for accuracy, treatment protocols and standard of nursing care. The information is reported to the provincial department and the facility, which is given an opportunity to respond to adverse findings. When asked by Judge Ngcobo whether such reports were published for the public, the answer was that the department had never considered publishing the reports because of concerns that the reports might contain confidential information. The judge asked whether the department considered information about how patients are treated to be confidential. After much questioning, the HOD conceded that “we’re scared of being sued”. After further discussion, Judge Ngcobo suggested that the publication of quality information should be considered going forward because it is critical information for the public to know in order to make decisions about obtaining health services.

Panellist Dr Bhengu, enquired whether there had been any lessons learned from the public-private-partnership at the Albert Luthuli Hospital, which is a high-tech and award-winning hospital. The department indicated that the unique PPP financing model worked well and was sustainable due to the strict management of contracts involving health services, hospital equipment, etc. When Dr Bhengu asked why such a model had not been replicated elsewhere in the country, the HOD deferred to the National Minister of Health.

The hearings continue with submissions from the Council for Medical Schemes and individuals on 9 March 2016 from 08:30.

For more information contact:

Umunyana Rugege at Rugege@section27.org.za

Luvo Nelani at nelani@section27.org.za