Private healthcare on warpath

Sep 11 2011 15:00
Nellie Brand-Jonker
Cape Town - The call by the Council for Medical Schemes (CMS) in its annual report for price control of the private health sector has raised the hackles of hospitals.

Professor William Pick, who chairs the CMS, said in his preface that it was clear that supply-side reform was needed.

He referred to rising costs in the healthcare industry, especially in respect of hospitals and specialists.

“The lack of effective regulation on the supply side, especially for private hospitals, is a cause for concern.”

Medical scheme payouts in the year to end-December 2010 included the following:
- Around R31.1bn was paid to hospitals. That was 37% of total medical schemes payouts. Private hospitals’ portion of that, R30.8bn, rose 10%.
- Payments to medical specialists formed R18.8bn or 22% of total disbursements. This was a rise of 12%.

Dr Monwabisi Gantsho, CMS registrar and chief executive, said “the only explanation” for the increase in medical schemes’ expenditure on hospitals was rising prices. These increases were very high and again indicated the urgent need to regulate the tariffs of private hospitals and specialists, he said.

Both Mediclinic and the Hospital Association of SA (Hasa) expressed sharp criticism of the remarks by the CMS and questioned the reliability of the report.

Hasa chairperson, Dr Nkaki Matlala, said the CMS report contained faulty and unqualified assertions about the reason for medical schemes’ rising payouts to hospitals.

Mediclinic said despite its attempts to expose the myths regarding private hospital prices through research and statistics, the comments had nevertheless come from the CMS.

Private hospitals’ tariffs are affected by rises in underlying input costs, such as those of equipment and nurses’ salaries, said Mediclinic. Hospitals were nevertheless keeping a lid on prices despite high medical inflation.

According to Mediclinic, hospital groups’ results show growth in hospital admissions, in contrast to the reduction claimed by the CMS.

“This gives rise to concern about the report’s reliability.”

Matlala said the CMS was confusing the issue of rising medical scheme expenditure on hospitals with price.

Mediclinic alleges it relates rather to the increase in services rendered because medical scheme members on average stay in hospitals longer. Scheme members have remained in hospital for an average of 3.3 days compared with other patients’ ­3.2 days.

“The CMS’s call to control private hospital tariffs is misplaced,” said Matlala. “The higher expenditure on private hospitals is not because of hospital tariffs.”

The report states that spending on private hospitals has risen by 122% from R13.9bn to R30.8bn since 2000, when it comprised almost 30% of medical schemes’ total expenditure. Over the same period expenditure on specialists has risen 104% from R9.2bn to R18.8bn.

Last year medical schemes paid out R84bn – 11% more than in the previous year. Of this, R8.3bn came from savings accounts.

Other expenditure included:

- General practitioners received R6.2bn – 8.8% more than in the previous year;
- Expenditure of medicines sold by pharmacies was R12.7bn – almost 15% up;
- Expenditure on dentists was R2.5bn – 13% up;
- Expenditure on art therapy was R1.4bn – 53% up; and
- Optometrists received R2.2bn – 16% more.

Specialists’ massive contribution:

- Gynaecologists received R1.2bn – almost 9% more;
- Physicians (specialist GPs) received R1.35bn – almost 25% more;
- Orthopaedic surgeons received R1.1bn – 14% more;
- Anaesthetists received R1.6bn – almost 9% more;
- Radiologists received R3.4bn – almost 10% more; and
- Pathologists received R3.8bn – 10% more.

Hospitals deny that they are the cause of high medical inflation.

The 11 trustees of the Liberty Medical Scheme last year earned an average R412 000.

The annual report by the Council for Medical Schemes (CMS) reflects ten schemes paying the most.

This was also the scheme about which the CMS received the third most complaints.

Spectramed’s five trustees received an average of R357 000.

This fund’s solvency ratio of 19.5% is below the compulsory level and it is one of those being strictly monitored by the CMS. It was the fund about which the CMS received the second most complaints.

Medshield, which paid the third highest amount, had elicited the most complaints. Medshield’s 13 trustees earned an average of around R292 000.

Trade union Nehawu expressed shock at the “pillage and self-enrichment” taking place within medical schemes.

The top 10 payers had awarded 127 trustees about R28.6m last year. The trustees were therefore paid an average R225 000 – or R18 746 a month.

Nehawu also expressed concern that Gems (Government Employees Medical Scheme) appeared on this list with an average R173 000 being paid to its 16 trustees.

Bonitas also appears on the list of the top 10 payers.

Medical schemes performed much better financially in 2010 than in 2009.

Gross income from contributions rose almost 14% to R96.5bn.

Of this, R84.7bn was paid towards health benefits and R11.6bn towards non-healthcare expenses.

Net operating deficit (the difference between what is received from contributions and paid out in benefits and non-healthcare expenses) was R459.6m, compared with the R2.6bn deficit of the previous year.

The schemes with the biggest deficit included Transmed and Gems.

The industry had an average solvency ratio of 31.6%, which was lower than the previous year’s 32.9%.

The requirement is that accumulated funds (reserves) should be a minimum of 25% of gross contributions.

Reserves rose 10% to R30.9bn.

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