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Health-market inquiry blames private hospitals for 'driving up costs'

The Competition Commission’s health-market inquiry has cast the spotlight on the role that private hospitals play in driving up healthcare costs, saying they are responsible for a significant portion of the above-inflation increases in expenditure reported by medical schemes.

The inquiry was established to investigate the dynamics at play in the private healthcare market and to determine whether there are barriers to effective competition and patient access. Industry players have consistently argued that private healthcare expenditure costs have risen largely as a result of increased utilisation, rather than price hikes.

The inquiry published six diagnostic reports on its website on Friday including an extensive analysis of the most comprehensive data set yet compiled for the medical scheme industry. It found medical scheme expenditure rose by an average of 9.24% a year between 2010 and 2014, about four percentage points more than consumer price inflation, which was on average 5.6% per year for the period under review.

Only part of the above-inflation increase in expenditure could be explained by changes in age, gender, disease burden and plan choice, leaving a residual 2% real increase that warranted further scrutiny, said the inquiry.

"To put this in context, 2% of spending amounts to about R3bn in 2014 terms — R330 per beneficiary per annum or a total of R1,650 per beneficiary over the five-year period," it said in its report on claims data.

"Little of the unexplained cost increase appears to be for out-of-hospital care. In-hospital care is a far more important driver," it said, noting the steady rise in hospital expenditure was in sharp contrast to flat or declining hospital-based spending in many other countries.

The analysis found hospital tariffs had not increased much above the consumer price index during the period but there was a significant increase in the cost per hospital admission.