Private hospitals propose new model for industry

Adele Shevel

Adele Shevel

Private hospitals yesterday recommended a new model of their industry is introduced to allow for the development of low-income hospitals.

This would spur on access and affordability - two key issues for private hospitals - and could include VAT exemption, lower cost of financing and cheaper pharmaceuticals.

The government has accused private hospitals of achieving "super profits" and being a major cost driver of health costs in South Africa.

The industry initiated research, following the private hospital indaba in September, which it released yesterday.

The research refutes claims of super-normal profits - the term used when a company or sector earns cash flow returns on investment significantly in excess of cost of capital.

Private hospital claims contribute about 35percent of all scheme claims. Research showed that if all hospital profit was removed, the average medical aid contributions would decrease from R2500 to R2361 a month.

The annual cost of private health care is said to be R75billion for 7,1million medical scheme beneficiaries, compared with the public sector spend of R59million for 38million.

But the chief executive of the Hospital Association of South Africa, Kurt Worrall-Clare, said these statistics were not representative of the true situation, and it is estimated that 41percent of all interventions happen within the private sector.

"The assumption that only medical aid beneficiaries consult in the private sector is inaccurate."

Research found that consolidation among hospitals has not impacted hospital prices and hospital total price increases have exceeded the consumer price index by 1,7percent a year on average from 1999 to 2006. The research found that drivers included more utilisation, the HIV-Aids pandemic and increased chronic disease profiles such as diabetes.

Of concern to private hospitals is the way the Council for Medical Schemes, the body that represents the medical scheme industry, measures data from hospitals.

"We need to come up with a uniform measurement," said Worrall-Clare.

The research also refuted claims that medical schemes have no countervailing power against private hospitals. Though there are about 130 registered medical schemes, six medical aid administrators represent 71,6percent of medical schemes in provider negotiations - showing a centralisation of power.