Are Medical Specialists Simply Profiteers?

Medical specialists in South Africa have been accused of increasing demand for expensive health and hospital services as well as medication and diagnostic services. They have also been accused of driving prices upwards with impunity.

This has emerged as part of the South African Competition Commission’s health market inquiry launched in January 2014.

One of the people who believes this to be true is Department of Health (DoH) Minister Dr. Aaron Motsoaledi. In the DoH’s submission to the commission of inquiry, Dr. Motsoaledi stated that “profit-maximising” hospitals and medical specialists were able to apply control through price discrimination and price increases with “relative impunity”. Yet they did not have to compete in terms of quality or price to attract new patients.

Specialist ProfiteersIn essence, medical specialists, as well as private hospitals, are viewed as both the drivers of price changes and service utilisation. This is because the diagnoses they make, and treatments they recommend, send patients directly to the hospitals where the necessary treatment is provided.

Another person who agrees is Prof. Alex van den Heever of the Wits University Department of Social Security. In his review of competition in the local health system, Prof. van den Heever stated that medical specialists were “the main drivers” creating demand for expensive goods and services. These included hospitals and medicine, as well as diagnostic services and devices.

It has emerged that expenses paid by medical aid schemes for both hospitals and medical specialists have increased substantially over the past ten years. In real terms, healthcare benefits paid out per month for one beneficiary have increased by 42 percent, from R623 to R882 from 2000 to 2011.

But the underlying reasons for the increased costs and high expenditure is not certain since the role-players making submissions to the inquiry have proposed different explanations.

According to the South African Medical Association [https://www.samedical.org/] (SAMA), it isn’t the medical professionals who are increasing health care costs. Instead, on analysis, it is the hospitals, allied health professional and other costs that do not relate directly to health care that use more than half (54 percent) of medical scheme “risk pool funds”.

After pathology and radiology costs were removed from the equation, medical specialists were only responsible for 12.7 percent of this risk-pool spend. In 2011, specialists “consumed” R12.2 billion while non-healthcare expenditure was almost the same, at R12.1 billion.

SAMA’s attitude is that medical specialists have been “maligned” by lay and medical media for being largely responsible for massive healthcare inflation. However, in reality, SAMA says that from 1997 to 2013 they only gained a ten percent market share, and this included pathology and radiology costs.

Rates for Medical Schemes

It is known that most medical specialists charge more than medical scheme rates, and members have to pay the difference.

According to the Board of Healthcare Funders, specialists charge as much as 300 percent more than permitted by medical schemes. According to the South African Private Practitioners Forum (SPPF) more than 80 percent of specialist practices including cardiology, oncology, radiotherapy, psychiatry and physical medicine charge less than 120 percent of medical scheme rates.

Generally the specialists that have the greatest overheads as well as the highest “malpractice premiums”, are plastic surgeons (who charge up to 120 percent), gynaecologists, and orthopaedic surgeons.

The differences in fees charged are due, the specialists say, to “inappropriate pricing guidelines” that aren’t based on costs. The previous official DoH reference price list was set aside by a Supreme Court ruling in 2010. It is now the responsibility of the Health Professions Council of South Africa (the HPCSA) to provide guideline tariffs.

The view of SPPF is that previously the fact that doctors and specialists had their own costs of service to cover was largely ignored. Instead the focus was on attempting to curb medical aid scheme costs. They state that medical practitioners don’t mind pricing mechanisms but want them to be based on cost and not influenced by any form of politics.

Incentives for Providers

There are a number of ways that hospitals compete to get doctors to use their facilities. These include the provision of facilities, including consulting rooms and equipment, as well shareholder opportunities and incentives to relocate.

The DoH has asked for a closer look to be taken at “perverse provider incentives” that are associated with what they call “reimbursement structures”.

Netcare, Mediclinic and Life Healthcare (LHC) all offer shares to medical specialists, in terms of the ethical and professional rules of the HPCSA. These relate to both direct and indirect financial interests in health care institutions and hospitals.

Shortages of Specialists

Even though there are many people in South Africa who cannot afford to go to medical specialists, the country can’t afford to lose the skills that the offer.

As has been noted, South Africa has a severe shortage of medical specialists in both private and public sectors. There are only about 20 specialists for every 100 000 people, which is one of the lowest ratios of medic to patient in all of the BRICS (Brazil, Russia, India, China, South Africa) countries.

According to the DoH the reasons for this include study (as in medical school) constraints as well as emigration. However this also gives these medical specialists market power.