Discovery's profits point to 'competitive advantage', not market failure - CEO | Fin24
 
  • Load Shedding

    Find the latest load shedding schedules for Joburg, Durban, Cape Town, and other cities.

  • Peter Moyo

    The former Old Mutual CEO says he wants its directors jailed for six months without option of a fine.

  • Fin24’s newsletter

    Sign up to receive Fin24's top news in your inbox every morning.

Loading...

Discovery's profits point to 'competitive advantage', not market failure - CEO

Jul 06 2018 19:35
Lameez Omarjee

Discovery Health's profitability is a result of its competitive advantage, not a market advantage, says its CEO, Jonathan Broomberg.

The company has issued a statement on the Health Market Inquiry's findings, which were released on Thursday after four years.

The inquiry began in 2014 as a result of increasing prices in the private healthcare sector. According to its report, features of the sector are anti-competitive and highly concentrated.

The report found that of 22 open medical schemes, around 70% of the market was held by just two schemes. Discovery Health held about 55% of beneficiaries, it said.

Broomberg, however, has defended DH's growth and profitability. "Our growth has been totally organic," he said in the statement.

"It is critical to note that DH’s profitability is not due to DH charging higher fees to its medical scheme clients than its competitors do, but rather due to a number of business factors, including continuous innovation and greater operational efficiency driven by management excellence, and by large investments in advanced systems and customer service technologies."

Discovery also worked hard to ensure transparency on fees charged to clients, as well as profits earned, Broomberg said.

Market failure

The commission stated that under "normal competitive conditions", DH’s profitability would attract new competitors.

"On the contrary, we see DH growing and becoming more successful over time. This is an indication of market failure and there are no signals that the market will self-correct," the report read.

"We acknowledge that much of DH’s success is partly due to a highly competent management team, but we do not think this alone explains the significant gap in profitability when compared to its direct competitors.

“Higher than necessary service fees given economies of scale, a 'locked-in' DHMS (Discovery Health Medical Scheme) that does not source services from any other industry stakeholder, risk selection and broker management contribute to its profitability," the report read.

Overall, Broomberg had welcomed the findings of the Health Market Inquiry, as it would strengthen the private healthcare system, the statement said. DH intends to provide a comprehensive response to the provisional findings before the deadline on September 7, 2018.

* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER

discovery health  |  health  |  medical schemes
NEXT ON FIN24X

 
 
 
 

Company Snapshot

#MINIBUDGET2019

Struggling power utility Eskom will take centre stage at this year's mini budget
 

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

What do you think about private healthcare in SA?

Previous results · Suggest a vote

Loading...