National Health Laboratory Services (NHLS) Annual Report 2010/11; non/late payment to NHLS: Eastern Cape, KwaZulu-Natal and Gauteng provincial departments of health comments

This premium content has been made freely available


08 November 2011
Chairperson: Dr B Goqwana (ANC)
Share this page:

Meeting Summary

The National Health Laboratory Services (NHLS) presented its Annual Report, noting that it had achieved an unqualified audit opinion for the fifth consecutive year. However the organisation was facing a serious financial challenge due largely to non-payment by debtors.  It was highlighted that the various provincial health departments owed the National Health Laboratory Services money for services rendered.  Capital expenditure dropped to 3% the lowest in five years and an accounting surplus of over R264 million did not materialise into cash because of non-payment by provinces. On a positive note though, the overall test prices decreased by 1% well below the inflation increase rate of 4.1%.  Further prices for priority programmes of HIV, tuberculosis and pap smears were reduced on average by 10% resulting in over R217 million savings to provincial health departments.  The training of pathologists and medical officers also increased by 8.7% in the last five years and employment equity reached an 83% representation of black females and males. The executive recorded a 25% female representation. Various Information technology systems were implemented, and the electronic gate-keeping system was piloted at two hospitals in the Western Cape. The Mobilabs project which gave access to laboratory results through cell phones was also rolled out to 213 clinicians across the country.

The Department of Health and Social Development, Gauteng, noted that it was aware of the challenges facing the National Health Laboratory Services and pointed out that the organisation’s cost structure and payment model needed reviewing. The province also acknowledged its debts and committed itself to paying them. The Eastern Cape Department of Health also noted that the current business model of the National Health Laboratory Services needed review. The Department of Health, KwaZulu-Natal, also undertook that it would engage with the national Department of Health and the National Health Laboratory Services in an attempt to resolve the debt impasse.
Members welcomed the work done by the National Health Laboratory Services and noted the cash flow problem was a serious situation that needed an urgent resolution. Questions on corporate governance and whether the executive had adopted  austerity measures in light of the organisation’s financial difficulties, and the issue of how the organisation would achieve its time frameworks were also raised.

Meeting report

National Health Laboratory Services (NHLS) Annual Report 2010/11
Advocate Sesi Baloyi, Chairperson, National Health Laboratory Services (NHLS) Board, alluded to the fact that her organisation was facing a financial crunch.  She noted that the financial situation was now so dire that difficult choices were being made on whether to pay creditors or staff at the end of the month.  It was pointed out unless they was a commitment and action from provinces to pay their debts NHLS services would effectively shut down. Gauteng and KwaZulu-Natal were highlighted as some of the provinces that owed the organisation huge amounts of money.

The Committee Chairperson pointed out that the meeting would not focus much on the financial situation but rather interact with the organisation’s Annual Report.

Mr Sagie Pillay, Chief Executive Officer (CEO), NHLS, took the Committee through the Annual Report, highlighting that the organisation had received a clean audit report.  An accounting surplus of R 264 million  did not materialise into cash due to non payment by provinces. Debts had increased by R340million, resulting in a cash deficit of over R83 million.  However, prices for the priority programmes of tuberculosis (TB), HIV and pap smears were reduced, on average by 10% resulting in R217.7million savings to provincial health departments and overall test prices decreased by 1% well below the inflation rate of 4.1%.  Mr Pillay elaborated that the prices were not unilaterally determined by NHLS but were determined in consultation with the Ministry of Health.

In terms of human resources, there were over 4 796 training occurrences at a cost of R39 543 687 that was 2.8% of the payroll compared to 1% stipulated by the Skills Development Act. Employment equity also reached an 83% representation of black females and males. The representation of black executive and management appointments in 2010/11 was 67% of which 72% were females. It was noted that the NHLS trained all pathologists in the country and had reached bilateral agreements with nine universities to share joint responsibility in teaching and research. A total of 177 new research grants valued at over R178 399 660 were awarded by local and international agencies.

A specimen tracking was initiated and piloted in KwaZulu-Natal; the specimens and laboratory reports were scanned by the driver at the point of collection and delivery; the information was then transmitted via a cellular data connection  to TrakCare Lab laboratory information system (LIS). This would result in accurate measurement of information and the loss of specimens and reports while in transit would be significantly reduced. The Gene Xpert Rollout technology was also introduced to diagnose TB and rifampicin resistance. 

The National Priority Programmes Unit was established to make diagnosis of HIV, tuberculosis and cervical cancer more accessible and affordable. A total of 5.7 million HIV tests, 5.9 million and 13% more cervical cytology tests were conducted.  Partnerships with other African states was also done, in particular, training on sexually transmitted infections was given to over 100 African dermato-venereologists in Tanzania and to about 1 500 healthcare workers in Zimbabwe.

Provincial departments of health comments
Mr Sicelo Gqobane, Member of the Executive Council (MEC) for Health, Eastern Cape, thanked the Committee for inviting the Department to express its comments.

Dr Siva Pillay, Superintendent-General, Eastern Cape Department of Health, expressed dismay at the current health insurance system and hoped the coming of the National Health Insurance would to some extent assist the poor and marginalised. It was noted that the NHLS was an essential service and must not be understood in the context of being a commercial entity. He pointed out that the business model needed to be changed to a more pro-poor approach and that the National Health Laboratory Services Act was not the problem but rather the business model of the organisation.

Ms Ntombi Mekgwe, MEC for Health and Social Development, Gauteng, noted that the Department did not want to argue the existence of the NHLS. The manner in which NHLS determined its tariffs was also raised as a matter of concern.

Dr Claude Mondzanga, Chief Director: Health Services Support, Gauteng, acknowledged the debts and committed his province to settling them. He noted that a different payment model was needed for NHLS, and pointing out that his province had a huge budget for NHLS services but had still overspent.

Mr Siphesihle Mkhize, Chief Financial Officer,  Department of Health, KwaZulu-Natal, noted that the Department was looking forward to meeting with NHLS and the Department of Health in seeking to find a solution the impasse.

The Chairperson asked provinces if they had gate keeping controls so as to avoid requests for some tests that might be unnecessary.

Mr M Hoosen (ID) welcomed the work done by the NHLS as encouraging. He asked it on how it would build on its growth in the public sector considering its prices and competitiveness.  The issue of targets was also raised since only one of the five targets was met. The question on whether KwaZulu-Natal had made any payments was raised. Noting the cash flow problem, the question of whether grant funding was being used to alleviate this problem was also raised. The duplication of services was raised as a matter of concern. It was to be pointed out that an improved recording system was necessary. He ended by stating that National Treasury and the Department of Health must intervene as the consequences of the outstanding amounts would be felt hardest by the ordinary people on the ground.

Ms M Segale-Diswai (ANC) asked about the female representation on the executive. She questioned the affordability and maintenance of the Gene Xpert Rollout. A question was asked on the legal fees that were paid for a legal opinion on the KwaZulu-Natal debt.  Clarity was also requested if NHLS had meetings and interactions with the national Department of Health.

Mr G Lekgetho (ANC) stressed the relevance of NHLS; he queried the time frameworks for achieving some of the organisation’s set targets.

Ms H Msweli (IFP) asked how the NHLS was making up the loss from the reduced HIV and TB tests and if this was sustainable. She also asked for the latest update on the Standardised Laboratory Technology Framework plan and the Point of Care Technology.

Ms B Ngcobo (ANC) asked about the Auditor-General's opinion, highlighting concerns on the strategic plan not being submitted on time and whether the board of directors was now fully constituted. She asked if the management was applying any austerity measures in its travelling costs in view of the organisation's current financial situation.  Clarity was also requested on the amount of overhead costs - was the amount in millions or billions?

Ms R Motsepe (ANC) asked for a brief overview of the infrastructure plan and why certain targets set for regional laboratories were not achieved.

Mr Pillay replied that some services would decline, particularly TB and HIV because success in the treatment of these diseases would mean decline in volumes.  The loss from the reduced TB and HIV testing would be made up by a concerted effort to reduce fixed costs in the organisation and by improving on efficiency. He also pointed out that price increases had been below the rate of inflation,  thus the organisation had been able to provide more with less.

The time schedules of the laboratory working times were also changed to align them with the time in which most specimens arrived.  Mr Pillay pointed out that tariffs were agreed at national level with the Health Minister. Grant funding was not being used to alleviate the cash flow problem and a separate account was in place for grants. He emphasised that strict reporting mechanisms were in place to stop the abuse of grant funds.

The implementation of the unique patient identifier would help in reducing duplication as his organisation could easily identify the test results that had been conducted. He noted out that most of the funds collected were channelled to the payment of staff as staff retention was crucial to the organisation’s progress.  He said that creditors were now sitting at over R500 million and preference in terms of payment was given to small and medium enterprises (SMEs) in line with Government policy, but the problem was very critical and if provinces did not honour their debts the organisation would implode.

The majority of members of the executive team were still male but now four women were part of the executive although a lot more still needed to be done to improve this. Mr Pillay noted that the Gene Xpert was implemented in high burden districts and the national roll-out plan was also implemented and the costs for this would be lower after the implementation plan was concluded in three years time. He noted that the point of care technology was only relevant in small clinics because of the number of tests that could be conducted per day and a pilot project was under-way. Mr Pillay noted that the standardisation strategy was an important tool in that ensuring services become cheaper and the organisation was looking into how this could be done as a similar scenario was introduced for TB and HIV.

Mr Pillay indicated that the gaps raised in the Auditor-General’s report would be looked at and corrected and that now the strategic plan time frameworks were also being met.  On the austerity measures Mr Pillay noted that a weekly Resources Committee had been established to review whether the purchase of certain assets was necessary and investment had been done in video conferencing to reduce travel costs. The figure on the overheads was a typing error and the correct amount was in millions.  A legal opinion was obtained so to close any loopholes that might exist in dealing with the debt of KwaZulu-Natal.  A full infrastructure plan was developed and the enactment of the NHLS Act in 2000 gave the organisation ownership of various infrastructures in the provinces.

Dr Ralph Mgijima, Deputy Chairperson, NHLS Board, stated that the NHLS was a national asset which was there for the benefit of the entire nation. He appreciated the guidance that the Ministry of Health had given and their leadership was crucial at this moment in time. It was unfair that some provinces made payments and others did not and the effect of this was that services of paying provinces would be cut due to non-payment by few provinces.

Adv Baloyi noted that the Board was not fully constituted. The reason was that provinces did not have representation on the Board and this issue has been raised with the Minister of Health. The Minister was in charge of the appointments. She noted that the NHLS Act prescribed that non-payment must result in the cutting of services but the organisation had not taken this approach because the people who would be affected were the indigent members of society. The Intergovernmental Governmental Relations Act was invoked. A dispute had been declared with the Department of Health, KwaZulu-Natal, and, in accordance with the Act, the Minister of Health was mediating the issue.

The Chairperson hinted that there could not be a problem without a solution. He said that legal recourse must be the last resort and that the KwaZulu-Natal provincial government needed to be engaged in order to find a solution to this problem. 

Ms Ngcobo said that the national Department of Health, the provincial Department of Health, KwaZulu-Natal,   and the NHLS needed to meet and resolve the impasse. She also asked more details on the organisation’s funding and the default of Gauteng province was also raised. The question was asked whether Inkosi Albert Luthuli hospital in KwaZulu-Natal was using its state of the art health care system in conjunction with NHLS.

Mr Lekgetho noted that urgent intervention was needed to deal with the issue of non-payment and that President Jacob Zuma had also highlighted that creditors must be paid within 30days.

Ms Segale-Diswai emphasized that non-payment of debts was a serious financial misconduct and a resolution must be found urgently.

Dr Mondzanga pointed out that a guideline was available at district level to assist in the implementation of an electronic gate-keeping mechanism.

Mr V Ramaano, Acting Chief Financial Officer, Department of Health and Social Development, Gauteng,  noted that the Department intended to end the year on a clean slate with the NHLS and currently monthly payments of R88 million were being made though the monthly invoice came to R93 million. He also committed to paying R658 million from accruals and to increasing the monthly payments to R93 million.

Dr Pillay noted that a verification mechanism needed to be developed to ensure that the correct amount was paid for the appropriate services that had been rendered. The Auditor-General’s office made it mandatory that payment must be made only after services had been rendered. He also raised the issue of changing the business model of the NHLS to align it with the Competition Act that was promulgated after the NHLS Act.

The Chairperson asked if the professionals currently employed in the hospitals were up to standard and if their training system was appropriate.

Dr Pillay said protocols were necessary for the management of registers of patients. There was no audit of drugs and hence it was difficult to trace the dispensing of drugs.

Dr Sifiso Mtshali, CEO, Inkosi Albert Luthuli Hospital, responded to the question raised by Ms  Ngcobo, noting that the Hospital was interfacing with the NHLS laboratory information system.

Mr Pillay noted that there was funding from the Department of Health on the implementation of the Gene Xpert; however, the organisation had to generate revenue from its services.

Adv Baloyi thanked the Committee for its attention and looked forward to resolving the financial stand-off with KwaZulu-Natal.

The Chairperson thanked NHLS for the presentation of the Annual Report, noted that its operations were within the NHLS Act, and looked forward to the meeting with NHLS, KwaZulu-Natal, and the Department of Health. He also, in conclusion, questioned the training of medical practitioners, emphasising that this also needed scrutiny.

The meeting was adjourned.



  • We don't have attendance info for this committee meeting

Download as PDF

You can download this page as a PDF using your browser's print functionality. Click on the "Print" button below and select the "PDF" option under destinations/printers.

See detailed instructions for your browser here.

Share this page: