Provinces doing ‘poor job’ of licensing new private hospitals

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Provincial health departments are doing such a poor job of issuing operating licences to private hospitals that they are stifling competition and potentially depriving patients of cheaper and more innovative care, Business Day reports the Competition Commission’s healthcare market inquiry has warned. It has suggested a new regulatory regime for licensing healthcare facilities that is likely to stir the pot with both provincial health departments and private hospitals.

The report says not only is it proposing a national set of rules that eliminate provincial health departments’ powers to set their own licensing criteria but it also suggests that provinces consider the need for the services offered when considering whether to award hospital licences.

Many licences seem to have been awarded in markets with “excess capacity” and many areas remained underserviced, it said. And, the report says, the system has created a submarket for the sale of hospital licences, but changes in ownership are not scrutinised by provincial health departments or the competition authorities, it said. “This may impact on competition and present a distorted picture of the market,” it warned.

The inquiry was established to investigate the dynamics in the private healthcare market and to determine whether there are barriers to competition and patient access.

The report says private hospitals are required to obtain operating licences from provincial health departments before they can open new facilities or extend existing ones. Two years ago, private hospitals presented evidence to the inquiry’s hearings, arguing that the current licensing processes were a barrier to entry and expansion because provincial departments take different approaches and use different criteria to evaluate applications.

Seven of the nine provincial health departments use regulation 158 of the Health Act, but the Western Cape and the Free State provincial departments have enacted their own regulations.

The inquiry also heard that the cost-effectiveness of day hospitals and other more effective ways of delivering healthcare services were not considered in the licensing process.

In its discussion document the inquiry agreed that the use of different regulations by the provincial departments created inconsistencies in the interpretation and application of the licence regulations, the report says.

Business Day report
Competition Commission Health Market Inquiry statement

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