Netcare Hospital Group

Melanie Da Costa, the Director of Strategy and Health Policy at Netcare Limited led the oral submission to the Panel.  Netcare has 57 hospitals across Lesotho and South Africa and holds a 54% stake in BMI Healthcare in the United Kingdom (UK). In 2015, Netcare opened hospitals in Polokwane and Pinehaven, and has invested over R8 Billion over the last 8 years in capital expenditure. The group operates 5 nursing colleges and has trained over 40 000 nurses since 1999.  Netcare told the Panel that it would like to participate in the education of doctors but are restricted by regulation.  Ms Da Costa spoke about various corporate social investments Netcare has made such as community sponsorships, bursaries, indigent EMS, over for public sector strikes and other initiatives in which they partner in extending free access to healthcare.  Ms Da Costa also highlighted Netcare’s co-operation with the public sector giving examples of their Public Private Partnership (PPP) in Lesotho drawing attention to the structural differences between South Africa and Lesotho. However, according to the Minister of Health, Dr Aaron Motsoaledi, Netcare’s PPP has received concerning criticism from Lesotho’s Minister of Health.  Professor Fonn also raised some criticism made by the World Bank, which was a key funder of the project.

Relationships with other Stakeholders

Mark Bishop, the Head of Business Services at Netcare said that sometimes their relationship with medical schemes is fraught.  Before a patient can be admitted by a doctor they must receive pre-authorisation from their scheme, which considers the care they can received based on he benefits the member has. Mr Bishop stated that the authorisation does not however guarantee payment, and that sometimes hospitals have to continuously engage with schemes when complications occur during a patients hospital stay to extend authorisation. Netcare emphasised that hospitals don’t engage in the choice of treatment, referrals or admission of patients, and that these decisions are made by doctors. Mr Bishop advised that the accounts bill gives an unusual amount of information and that there are different accounts for doctors, the hospital and radiology (when applicable). Doctors negotiate their own tariffs independent of the hospital and do not participate in hospital revenue and that their only earnings were from their bills, as shareholding by doctors is not permitted at Netcare hospitals. Netcare has annual hospital reimbursement negotiations with medical schemes which are generally on a national basis or are included in the Designated Service Provider (DSP) arrangements. Netcare differed with National Hospital Network saying that Managed Care Organisations make geographical considerations when making DSP arrangements to manage reasonable access.

The representatives of Netcare raised the prohibition against hospitals employing doctors, citing examples of Netcare hospitals employment of doctors in Lesotho and in the National Health Service in the UK, which had proved successful.

Netcare informed the Panel that emergency departments in their hospitals are run by independent practitioners, with whom hospitals have service level agreements, saying however that if hospitals could employ doctors, quality could be better controlled and this could simplify accounts for patients.

Netcare provides users with information regarding the admission and discharge process, the service provided, what to expect with the procedure and what to look out for once a patient is back home. Other information which appears on their website or pamphlets relates to the emergency department, self-payment, services provided, information relating to specialists, a complaints process, pricing guidelines and maternity or surgical admissions.

Netcare also spoke in detail about their quality leadership framework which encompasses operational excellence, best & safest products, growing with passionate people, physician partnerships and accelerating transformation.

Regulatory framework

Anthony Norton, one of Netcare’s attorneys acknowledged that regulation is important especially in the health sector. However, it can become burdensome, constrain innovation, limit competition and  lead to increased costs, especially in South Africa’s healthcare environment. Mr Norton said that the existing regulation restricts efficiency using the exclusion of hospitals from training or employing doctors and limitations on sourcing medication in the most cost effective ways as examples.

Netcare criticised  the Medical Schemes Act saying that it introduced social solidarity principles such as PMBs, open enrolment, fixed solvency ratio’s and community rating, which were intended to be counter-balanced with further regulatory reform. Netcare said that the failure to establish further regulation has hindered sustainability of the system. The 25% solvency gross contribution from schemes does not account for the schemes size, risk profile, capital arrangements or whether the scheme is making a surplus or deficit. This, Netcare said has led to money being held up unnecessarily which could be used to benefit members. Netcare further asserted that open enrolment precludes schemes from differentiating between low and high risk beneficiaries which leads to adverse selection. They compared open and restricted schemes noting that restricted schemes, which face less adverse selection have experienced lower contribution increases over time.

Mr Norton also commented on the findings and recommendations of the Ministerial Task Team (MTT) set up by the Minister of Health to investigate issues of maladministration, irregularities, mismanagement and poor governance at the Health Professions Council Of South Africa (HPCSA). The MTT found that the HPCSA failed to carry out some its core functions such as examining and recognising foreign qualifications, carrying out professional conduct enquiries and approving the programmes of training schools.

Netcare agreed that the HPCSA is dysfunctional and the issue is particularly concerning because the country has a shortage of health professionals.  Netcare emphasised the limitations on private bodies to train professionals proposing that the inadequacy in training capacity indicates a need for private medical training.

Netcare reiterated the concerns of the other private hospital groups regarding provincial licensing for private hospitals. Netcare’s dissatisfaction with the process of licensing is that it is fragmented, unresponsive at times, inconsistent and applies the same time periods for licensing a new hospital and expanding or changing the use beds at existing facilities.

Other Issues

Netcare said that it is not simple to compare hospital prices across borders, but admitted that the issue of affordability is a serious challenge in South Africa. Like the other major hospital groups Netcare quoted payroll, drugs and consumables as high operating costs for hospitals. Also, touching briefing on utilisation as a driver of costs.  Mr Norton raised some concerns regarding the risks associated with price regulation saying it is difficult and costly to set up, discourages new entrants and generates distortion risk.

Lastly, Senior Counsel for Netcare, David Unterhlater, cautioned the Panel against exceeding the the scope of the Inquiry as empowered by the Competition Act, saying it can examine factors which restrict or distort competition and consider remedies to cure such risk. However is should not be concerned with questions about whether there should be regulations to alter market based outcomes.

Questions from Panel

The Panel was interested in the relationship between Netcare and administrators who negotiate reimbursement agreements on behalf of more than one scheme, to assess whether the activity is competitive. Unlike the National Hospital Network, Netcare finds that the relationship with ‘multi-scheme’ administrators enables the process. On the subject of licensing, Netcare confirmed that licensing is a barrier but that it has not precluded new entrants, which were sometimes favoured by the process. Netcare said that it is sometimes approached by new entrants that have received licenses to partner with them because of a lack of expertise or funding but that there have been competition implications which complicate these affiliations.

Professor Fonn raised an essential consideration regarding the argument that the burden of disease is a cost driver making the differentiation between the total population and those that are medically insured saying that the burden of disease is disproportionately borne by those who are not medically insured.

On the recurring theme of information asymmetry and quality, Panellist Dr van Gent asked whether Netcare considers itself to be responsible for providing comparable information to public about the quality of its services in comparison with other service providers. Netcare indicated that it was indeed responsible but in the absence of standards, its immediate responsibility was to contribute to an agreed methodology for measuring quality and to then to cooperate with the Office of Health Standards Compliance (OHSC) to ensure that the data was complete and accurate. Netcare went on to say that it is willing to continue with the process with speed and urgency.

When asked by the Panel what change would make the most difference to Netcare, Ms De Costa said that more doctors would make the most difference to their ability to deliver health services.

The Health Market Inquiry resumes on  Tuesday 29 March 2016