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REVEALED: These are the firms dominating private healthcare

South Africa's private healthcare sector is not competitive enough, with only a few dominant players, the Healthcare Market Inquiry has found. 

The inquiry, led by former Chief Justice Sandile Ngcobo, on Monday released its final findings and recommendations at a media briefing attended by the Competition Commissioner Tembinkosi Bonakele and Minister of Trade and Industry Ebrahim Patel.

The probe, which looked into the state of competition in the private healthcare market, has taken five years to complete and cost the state millions, Fin24 previously reported. Provisional findings were first released in 2018

On Monday, the final document, more than 250 pages long, was handed to the minister of trade and industry.


Bonakele said the Commission had "added nothing or subtracted nothing from the report", while Patel said the outcomes would be "carefully studied and read".

The minister said he would hand a copy of the report to Health Minister Zweli Mkhize, who will lead the implementation of recommendations made by the panel. The report will also be tabled before Parliament.

Rising costs

Speaking at the briefing on Monday, Ngcobo said a panel of experts in the areas of law and health economics found that the SA market had "high and rising" costs for healthcare and medical scheme cover, while stakeholders are not able to show associated improvements in health outcomes.

"The market is characterised by a high concentration of funders and facilities markets, disempowered and uninformed consumers [and] a general absence of value-based purchasing, practitioners who are subject to little regulation and failures of accountability at many levels," Ngcobo said.

"There has been an inadequate stewardship of the private healthcare sector. This is exacerbated by the failure of the Department of Health to use existing legislation to manage the private healthcare sector market, and the failure to hold regulators sufficiently accountable."

These factors have led to the private sector being neither efficient nor "sufficiently competitive", he said. 

"In our view, a competitive private healthcare sector would translate to lower cost and prices and more value for money for consumers, promote innovation in the delivery and funding of healthcare," Ngcobo added.

The dominant players

Ngcobo named the dominant players in the market.

When it comes to medical schemes (which are not-for profit and owned by members of the scheme) in the open market, Discovery Health Medical Scheme has been the largest scheme. Its market share grew from 35% in 2005 to as much as 56% in 2017.

The next largest scheme is Bonitas Medical Fund; its market share grew from 10% in 2005 to 15% in 2017.

"Over the same period, the remaining 19 medical schemes each have less than 6% of the market," Ngcobo said.

As for restricted medical schemes, in 2017 the Government Employees Medical Scheme had a market share of 46%. This was followed by the South African Police Service Medical Scheme which had a share of 13%.

"The remaining 58 schemes each have a market share below 6%," Ngcobo added.

In the administrator market (for-profit businesses that provide administrative services to medical schemes), there are also high barriers to entry, with "little to no" entry over the past several years, according to the panel's report.

Discovery Health, in particular, has earned profits "that are multiple" to those of its main competitors, Ngcobo said.

There appears to be no challenge to the firm by incumbents or new entrants, he added. "The existing administrators do not seem to impose a significant competitive constraint on Discovery Health." 

In 2017 Discovery Health had a share (based on gross contribution income) of 40%, followed by Medscheme with a share of 39%. MMI has 5% of market share.

"For the period 2005 to 2017, the top three administrators (Discovery Health, Medscheme, and MMI Health) combined market share increased from 57% to 84%," the report read.

The 14 self-administered medical schemes collectively account for 10% of the market, according to the report.

Further to funding, the ownership structure of funders in private healthcare is also complex, Ngcobo noted.

Two holding companies, Remgro and Afrocentric Investment Corporation, have a number of holdings across the market.

For example, Remgro has indirect holdings of 7% in MMI Holdings and 7.5% in Discovery Limited. In turn, MMI Holdings has interests in three groups – MMI Health, Metropolitan Health and Momentum. Remgro also owns 42% of Mediclinic, which has been identified as one of the three largest hospital groups in the country.

"In total, 56.9% of the total scheme beneficiaries under administration are administered by entities or administrators in which the Remgro corporate group has a stake," the report read. 

"The Remgro corporate group has interests in four medical scheme administrators, six MCOs (managed care organisations), and four brokerages."

Newcomers can't compete

On the other hand, AfroCentric has holdings in Medscheme. "Just over twenty two percent (22.6%) of the total scheme beneficiaries under administration are administered by entities in which the Afrocentric corporate group has a stake," the report read. Effectively, AfroCentric controls one administrator, one brokerage and two MCOs.

Sanlam, which has a 23.7% share in AfroCentric Health Investments, has a stake in two administrators, one MCO and one brokerage.

The ownership of these firms in the sector may prevent "vigorous competition" as firms try not to disadvantage their returns to companies within the group, Ngcobo warned. This could give rise to conflict of interests and adversely affect competition.

In terms of facilities, particularly hospitals, there are three dominant players. They are Netcare, Mediclinic and LifeHealthcare group of hospitals, Ngcobo said.

The three large hospital groups make it hard for newcomers to grow and compete in the sector.

The groups can also "distort and prevent" competition by binding the best medical specialists to their hospitals, the inquiry found.

In his closing remarks at the briefing, Patel said he hoped that players in the industry would study the recommendations made by the panel.

It is possible for industry players to challenge the findings and recommendations, Commissioner Bonakele added.