Hospital Association of South Africa on its role in the National Health Insurance (NHI) and its impact on rural areas

Meeting report

Chairperson’s opening remarks
The Chairperson welcomed Members of the Committee and the team from the Hospital Association of South Africa (HASA). He explained that ordinarily Parliament was supposed to receive presentation documents long before the meeting, but due to some miscommunication between HASA and the Committee, Members would be receiving the documents only shortly.

Presentation: Hospital Association of South Africa (HASA)
Dr Dumisani Bomela, Chief Executive Officer, HASA, said HASA supported universal access to the health services’ initiative. The private hospital industry was ready to participate in collaborative work with the public hospital industry. There was a need for service delivery in South Africa, and it could not be deferred. Private hospitals were able to deliver on public health. For example, government could contract private providers for certain procedures, to alleviate waiting lists in state hospitals.  In addition, a suitable tariff could be determined.  The private sector would be happy assist in the training of nurses and doctors. What was required was a mutually acceptable procurement arrangement with the Department of Health, and this could be evaluated and monitored by an independent advisor.

South African hospitals could also play a role in providing universal access to health services through Public Private Partnerships (PPPs).   Lesotho was an example.  Through PPPs, Lesotho was able to increase in-patient admissions by 51%, decrease the hospital death rate by 41%, the maternity death rate by 10% and the pediatric pneumonia death rate by 65%.  Some credit for these results should be attributed to improved management and clinical systems.  However, locally, PPPs were limited to build, operate and transfer.

Dr Bombela said that private hospitals were the key to sustainable health care in South Africa. The private hospital industry therefore needed to work together with the public health system in order to improve the country’s healthcare system as a whole. The country would need to tap into the expertise that already existed within the private hospital sector.

In the absence of contracting from public health in rural areas, the footprint for private hospitals matched that of medical scheme members, as medical schemes were contracted by private hospitals. It was for this reason that most private hospitals were located in urban areas. However, government needed to enter into a PPP arrangement with private hospitals to deliver care in rural areas. By doing so, private hospitals would be able to extend their footprint into rural areas throughout the county. However there were still realities which these PPPs would face. Firstly, only 50% of South Africa’s population actually earned an income and only 16% of the population was covered by medical schemes. The top three provinces with the highest distribution of medical schemes were Gauteng, Kwa-Zulu Natal and the Western Cape.  Limpopo, Free State and Northern Cape were the three provinces with the lowest distribution of medical schemes and HASA beds.

Dr Bombela said that primary health care was not a prescribed minimum benefit.  Primary health care was the bedrock of any health system. In South Africa, primary health care access in the private sector needed to be strengthened by making it a prescribed minimum benefit, according to the Medical Schemes Act. Strong primary health care and wider access to improve the country’s health outcomes, were needed. Medical schemes had limited benefits for primary health care and wellness. Doctors also needed to be integrated into the health care value chain. HASA supported the idea that Prescribed Minimum Benefits be more inclusive of primary health care benefits. It was, however, difficult for private hospitals to make a difference on primary health care due to the regulations prohibiting hospitals from employing doctors. Care continuation was therefore difficult in the current fragmented environment. There needed to be a policy of stewardship, encouraging integration between primary health care systems, hospitals and the private sector.

There were over 3 million additional beneficiaries of medical schemes since 2000, and access to private cover had also increased significantly. Demand for private hospital services had also increased, with the increased prevalence of chronic diseases between 2006 and 2011.  Price inflation in the private hospital sector was a concern, together with the overall inflation rates throughout the country, especially between 2002 and 2012. For example, between 2002 and 2012, the price of petrol per litre had increased by 239% while revenue per patient per day for the private hospital group had increased by only 109%. 

Discussion
The Chairperson thanked HASA for the presentation. He said it seemed as though HASA’s work was aligned to government policies, which included universal coverage. What the Committee needed to understand, however, was that HASA did not include all private hospitals -- some private hospitals were still not members of HASA.  It was a national decision that the private sector and the public sector should work together to boost the country’s economy. This was a policy of the broader government and not just the health sector. One of the motivations for this was that the biggest employer was the private sector.

Ms T Kenye (ANC) thanked HASA for the presentation. She said that the fees for training nurses in the private sector were too high, meaning that some communities were not able to access such training. Did HASA have any education loans, and what was the exit strategy for these nurses who received funding from HASA?  What was HASA’s strategy for attracting student nurses across the board?  How was access to training popularised in order to reach rural communities?   What was the outreach strategy?  On the distribution of private hospitals, what PPP agreements would HASA enter into so that private health care could be made available to rural communities as well?  On private hospitals in the private health system, she asked about the structural barriers and fragmentation.  Considering the high pricing in the private sector, how could rural communities benefit from the integration of private health into the mainstream health sector?

Ms M Segale-Diswai (ANC) said that according to the presentation, HASA supported universal access to health care, and the private health sector was ready to participate in collaboration with the public health system. What preparations were already in place for this collaboration?  Over the last 20 years, what had the private health sector done to increase access to health services throughout the country?  On primary health care, she agreed that there were many health matters which medical aid schemes did not cover. Primary health care was the bone marrow of healthcare. She had been on a private medical aid scheme, but because she was retiring, she would no longer be able to afford private health care. Medical aid schemes needed to be made more affordable.

Ms D Robinson (DA) thanked HASA for the presentation and said there could be a meeting point between the private health sector and the public health sector.  Synergy was possible, even though it would take some work from both parties.   The incoming Committee would surely be pushing this initiative forward, so the exiting Committee should include the suggestion of collaboration in their legacy report.  She said that young professionals could not afford medical aid. In some cases, employees of the public sector could also not afford a medical aid benefit. How would the people from deep rural areas, who mostly lived in abject poverty, be supported?  On inflation, she asked whether HASA had actually done a study on the cost of delivery care on a cost accounting basis.  There were many GPs who could not afford to retire and were struggling to survive, and regulations within the health system were therefore attributed to this struggle.

The Chairperson said there was a commission led by Judge Sandile Ngcobo on private health care pricing, and because HASA would be making a presentation to that commission, they did not have to respond to questions on pricing until then.

Ms R Motsepe (ANC) said all hospitals had hospital boards. In what way did these hospital boards attract community members, rather than the elite, to join?  What voice did local communities have?  Private medical health care was very expensive -- why was this the case?  According to the presentation, some South African medics went abroad to work in countries such as Australia. Did South Africa also receive some international medical practitioners through platforms such as exchange programmes?   The Committee was interested in doing oversight work in some of HASA’s institutions. Private health was mostly curative, and curative was very expensive. What exactly was HASA doing around the provision of primary health care? As a developing country, South Africa still struggled with some epidemics -- what role did HASA play in reducing the prevalence of these conditions in the country?

Ms Kenye asked about the millennium goals, such as the reduction of infant and child mortality. HIV/ AIDS was also one of South Africa’s greatest concerns, but HASA had not included this in their presentation.

The Chairperson said the mining sector should have also been invited to give a presentation on their health care provision, because in some cases it was different from the mainstream sector. The prevalence of tuberculosis (TB) on the mines was a serious concern.

Ms Sarika Besesar, Business Researcher, Mediclinic,  replied to the questions on pricing and said it was important to note that private hospitals did not employ doctors, so doctors were completely independent of the hospitals and therefore charged their own consultation fees on top of the hospital fees. This meant a patient would receive two bills, one from the doctor and one from the hospital.  Private hospitals had their own input costs to cover, of which nursing salaries was the largest, comprising about 50% of a hospital’s input costs. Another 10% of the input costs came from administration salaries. Thereafter there were some other input costs, such as electricity, food and laundry for staff. Because of these rising input costs, hospital costs would also increase.  In 2013, HASA had brought in an independent actuary from the University of Cape Town to do a benchmarking exercise between the costs of running a public sector hospital in comparison to running a private sector hospital. In the public sector, there was no tariff readily available. The research therefore looked at all publicly available information, together with provincial annual reports.  All these comparisons concluded that the actual costs of running a private or a public hospital were very much the same.  It was therefore difficult to say that prices in the private sector were exorbitant when there were no prices in the public sector to compare them with.  Both private and public hospitals were also competing for the same resources, such as nurses, so costs were the same.

The Chairperson said even though no research had been done on the public hospital sector, the budget for public healthcare had gone up to R 140 billion, and it was still increasing. The money appropriated for Parliament was increasing annually, and this was happening in the private health system as well.

Dr Bomela replied to the question around access to health care in rural communities, and said currently HASA had a very strict and rigid procurement rule which was overseen mainly by National Treasury. These regulations directed how the various departments set up their own procurement processes. It had been HASA’s observation that the organs of government had been constrained in their ability to engage meaningfully and take on board the ideas of HASA, such as the vision where municipalities would identify a village in distress. The relevant authority could then contact HASA’s head office for the establishment of a working arrangement in these rural municipalities.  The history of South Africa’s health system also needed to be taken into consideration.
On the questions about pricing, he said the Competition Commission was undergoing a process which could address all the questions concerning private hospitals. The report would be available in 2016. On the emotive issues which went with the realities imposed upon privately funded health services, he said it was a valid concern that some medical aids did not cover pensioners or retired members. This was an emotive issue, and could therefore not be down-played. The reality, however, was that private health services were funded privately, so if members were not able to pay for services, a donor would need to be sourced. This was the reality of the environment in which we lived.

The Chairperson said private health institutions were run privately. However, what was important was that users wanted more transparency on the rising costs. Because private health care was not regulated, irregularly high prices were a serious concern.

Dr Biren Valodia, Chief Marketing Officer, Mediclinic, replied to the question on the composition of boards within hospitals.   In the private hospital industry, more than 80% of all hospitals were listed entities, and therefore had independent boards. These boards consisted of executive and non-executive directors -- non-executive directors were from local communities and were there to drive community-based initiatives. HASA spent over R1 million of their corporate tax on corporate social investments.
On the question on nursing training, he said that there was a huge shortage of nurses throughout the country. The reason for this was the moratorium which had been placed on nursing schools in the past. As a result, private hospitals had had to take it upon themselves to train nurses.  The private hospital sector trained over 6 000 nurses per year. Mediclinic alone had six training institutions and trained over 1 000 nurses a year.  On the affordability of this training, he said the institution was responsible for all training costs and the nurses were paid a salary to study.  However, this tied them in to a bursary-type system, which meant that they had to spend time working for these institutions. The private sector had a very strict recruitment policy for training schools.  On the question of costs, he said this was a very critical component to understand.  Private health care was indeed expensive. The reason was that the input costs were expensive, but it was most important to note that costs were a combination of price and usage. The reason why private healthcare was expensive was because of utilization.  The aging population, for example, drove costs higher.  He said all groups welcomed the Committee for an oversight visit.   Because of regulatory restrictions, overseas medical practitioners could not work in the country, because they were not registered in the country.

Ms Robinson asked whether costs would be reduced if the private hospitals employed their own doctors. On medical equipment, she asked if this was also contracted out.

Ms Besesar said if the private hospitals could bring in their own doctors, input costs would definitely be reduced, because care-integration would be practised.   Regarding equipment, she said the hospitals did not own radiology and pathology, so these services were billed separately from the hospital bill.

The Chairperson agreed that employing doctors would in fact decrease medical costs for patients.

Ms Besesar said the actual costs would actually be lower than the two separate bills.

Dr Bomela responded on the management of TB patients at the mines.  He said the environment in the mining industry was a private hospital, but there was direct communication between all levels of care. Integration was therefore necessary between all health services, and structural challenges needed to be addressed.

The Chairperson thanked HASA for the presentation. He said for the country to be able to render a good health care system, the public and private sectors needed to be better coordinated.

The meeting was adjourned.