Business

The big hospital rip-off: Here’s how you are being fleeced

2019-08-12 13:09

The cost for a natural birth at a Mediclinic facility – one of the country’s three large private hospital groups – is 76% higher than at two independent hospitals that are part of the National Hospital Network (NHN). And for Caesarean sections, it costs 26% more than at the Wilmed Park and Sunningdale hospitals, both in Klerksdorp.

This is what the Competition Tribunal revealed last week as part of its reasons for deciding to block Mediclinic’s takeover of Matlosana Medical Health Services (MMHS), which owns the two hospitals in Klerksdorp. Both are award-winning hospitals that serve a large part of the North West and the northern Free State.

In Potchefstroom there is a Mediclinic hospital that does not offer anywhere near as many of the facilities and services as the hospitals in Klerksdorp do.

Had the transaction gone through, Mediclinic would have controlled 63% of the market in the area.

Mediclinic’s listed prices would simply have been too expensive for residents in Klerksdorp to allow for the proposed acquisition, the tribunal found.

Most of the numbers in the tribunal’s report were blocked from public view. But the many medical aid funds which objected to the deal reveal that the rates paid by the various groups differ widely.

The objections show that, in general, Mediclinic’s rates are between 4% and 17% higher than the amounts that patients currently pay at MMHS hospitals.

Although this takeover was centred on hospitals in Klerksdorp and Potchefstroom, the tribunal has astonishing facts about national competition between the large private hospital groups.

Larger medical aid funds negotiate large discounts for their members with some hospital groups. This implies that other medical aid funds and private patients can no longer obtain beneficial agreements, so the hospital groups can continue to earn their profit margins.

According to the preliminary report by the commission of inquiry into private healthcare, the market is dominated by Life Healthcare (21.5%), Mediclinic (19.4%), Netcare and the NHN (23.7% each).

The NHN recently obtained exemption from the competition authorities to negotiate as a collective on behalf of its members, just as the big three do.

Larger medical aid funds negotiate large discounts for their members with some hospital groups. This implies that other medical aid funds and private patients can no longer obtain beneficial agreements, so the hospital groups can continue to earn their profit margins.

All hospital groups and medical aid funds keep their agreements strictly confidential.

Discovery Health Medical Scheme initially had no objection to the proposed Mediclinic-MMHS transaction because it would not cost the scheme more.

However, it objected later on, because of the effect that the merger would have on competition in general, even though it would not directly affect the scheme’s business.

But one medical aid fund told the Competition Tribunal that the current MMHS rate it pays for patients is 17% lower than the Mediclinic rate for acute care hospitals. According to another, it is 6.5% lower.

The tribunal found that such a situation would make it near impossible for medical aid funds to exclude Mediclinic from their hospital networks in the region – which is one of the most powerful bargaining tools a medical aid fund has.

Bonitas also objected, saying that if it had to pay Mediclinic fees for its members in the North West, it would mean a significant increase in hospital services fees for the fund and its members.

Anglo Medical Scheme, which has a high concentration of members in the area, expressed concern at the rates charged for a birth. It said Mediclinic set prices for the same birth procedure that were 76% higher for natural births and 26% higher for Caesarean sections than those negotiated by the NHN.

In its submission to the tribunal, medical scheme administrator Medscheme said that, in some cases, Mediclinic used the power of demographic exclusivity in negotiations.

If a medical aid fund did not want to comply with Mediclinic’s demands, said Medscheme, it threatened the fund, saying it would have to pay cash upfront and at private rates. Funds then usually gave in and agreed to pay more.

The tribunal also heard that Mediclinic had previously tried to abuse its position in geographical areas where it did not have competition and force medical aid funds to use more of the group’s hospital services in areas where there was competition.

Bonitas said Mediclinic usually did not give hospital discounts in regions where it was dominant.

Independent hospitals gave greater discounts to patients who did not have a medical aid fund than MediClinic did, the tribunal found. The listed giant’s hospital managers are allowed to give only a 4% discount for private patients without special permission – another reason cited by the tribunal for not approving the takeover.

If the merger were to go through, patients in Klerksdorp and Potchefstroom would have few other options besides being treated at a Mediclinic hospital.

The tribunal found that such a situation would make it near impossible for medical aid funds to exclude Mediclinic from their hospital networks in the region – which is one of the most powerful bargaining tools a medical aid fund has.

MediClinic will appeal the tribunal’s decision.

The case is expected to be heard in the Competition Appeal Court in October.

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August 25 2019