Not much has changed in the private healthcare sector over the past half dozen years, and the absence of regulatory intervention, as well as ongoing market dominance – and a lack of competition – means a handful of private hospitals and medical scheme administrators are still raking in hefty profits.
This is according to a recent report from advocacy group Open Secrets, reports BusinessLIVE. Six years after the Competition Commission raised concerns about the private healthcare sector, there have been no significant shifts, according to the report.
After an extensive health market inquiry, the commission had concluded that the concentrated ownership structure and cross-shareholdings between private hospital providers and medical scheme administrators could dampen competition and foster collusion.
“If anything, the grip of entrenched players has tightened, with ownership patterns remaining stubbornly unchanged, and market power concentrated in the hands of a few corporations that continue to post eye-watering profits,” said Open Secrets, which has previously published research on economic crime and corruption in SA.
The private hospital sector is still largely controlled by Mediclinic, which is jointly held by Remgro and MSC; Netcare and Life Healthcare.
The open medical scheme market is dominated by Discovery Health Medical Scheme, Bonitas and Momentum, which are administered by Discovery Health, Medscheme and Momentum Health, respectively.
Open Secrets drew attention to the continued cross-ownerships in the sector, despite the HMI’s concerns.
Remgro, for example, owns 50% of Mediclinic and is the second-largest shareholder in life and health insurer Discovery, which in turn owns Discovery Health, the administrator of Discovery Health Medical Schemes.
Remgro holds 7.44% of Discovery’s shares, according to the report. It also holds an 8.8% stake in the Momentum Group, which owns Momentum Health.
Undermines
“Cross-ownership legalises vertical and horizontal co-ordination in the market (and) undermines free competition,” said Wits Chair of social security systems administration and management studies Alex van den Heever.
“Where holding companies establish relationships across hospitals and the administration of medical schemes, given the high levels of market concentration, it can result in collusion on strategic issues, for instance, the retention of fee-for-service contracts…” he said.
Van den Heever said the report referred to well-established ownership issues but was analytically weak.
“It relies on simplistic narratives of ‘financialisation’ rather than the systematic, evidence-based approach of the HMI, which identified the real structural drivers of cost escalation and proposed important systemic reforms,” he noted.
Financialisation is a process in which financial markets, institutions and elites gain greater influence over economic policy and outcomes. Open Secrets said financialisation is driving inequality and high unemployment, as shareholder returns are prioritised over social benefits like fair wages.
“The HMI made important findings about the structure and provision of private healthcare. We have … tried to show how the failure to implement its (recommended) reforms is a key part of the problem,” said Open Secrets head of investigations Michael Marchant.
The report highlighted the political weight of some private healthcare players, suggesting this may help them lobby against National Health Insurance (NHI) or position themselves for future contracts with the scheme.
For example, it argues that the B-BBEE deal struck in 2021 between Momentum Metropolitan Health Group and the investment arms of two unions – the National Education Health and Allied Workers Union and the Police and Prisons Civil Rights Union – potentially set up by Momentum to bid for administration contracts when the government implements NHI, said Open Secrets.
It also highlights the influence of Discovery CEO Adrian Gore, vice-president of SA’s key umbrella group for organised business, Business Unity SA (Busa), and who was in President Cyril Ramaphosa’s delegation when he visited US President Donald Trump in May.
Gore is also co-convenor of Operation Vulindlela, a joint government-business initiative that seeks to foster economic growth and job creation.
See more from MedicalBrief archives:
Small hospital groups get further competition rules reprieve
‘No private healthcare pushback’ on Competition Commission's report
Competition Commission targets private healthcare monopoly
SA ‘needs divestiture’ to free up the private healthcare market