Smaller private hospital groups have been granted another five-year exemption from certain competition regulations by the Department of Trade, Industry & Competition (DTIC) in efforts to level the playing field in an industry dominated by Mediclinic, Netcare and Life Healthcare.
The “big three” group control 83% of the national SA private healthcare facilities market when it comes to bed numbers, which increases to 90% for the total number of admissions, says the Competition Commission.
Business Day reports that in a Government Gazette notice published last week, the department has agreed to a request by the National Hospitals Network (NHN), a lobby group for small players in the private healthcare sector, to relax competition rules for its members, who collectively manage about 12 000 beds.
The section that NHN’s more than 100 members are allowed to bypass is section 4(1)(b) of the Competition Act, which prohibits agreements or co-ordinated actions among competing companies that involve fixing a selling price, trading conditions or dividing markets.
The exemption came into effect in June and will last until May 2029. This means that NHN’s members, which include Busamed, Nelson Mandela Children’s Hospital and Raslouw Private Hospital, are allowed to collectively implement the prices negotiated and agreed on their behalf by the NHN, “with medical schemes and/or medical scheme administrators”.
The department authorised NHN to represent its members in negotiations for global fees with medical schemes, administrators, the state and healthcare providers, and to carry out centralised purchasing on their behalf. The exemption allows the NHN to establish a benchmarking system to help its members to improve efficiency.
Although the exemptions might be viewed as anti-competitive, they aligned with the Competition Act’s goal of promoting effective entry and growth of small and medium businesses, said the department, which also outlined several conditions that had to be met by NHN’s members to enjoy the exemption’s benefits.
These include that large members of the NHN who do not qualify as either a firm owned or controlled by historically disadvantaged people take practical steps towards achieving overall transformation, including changes in ownership structures.
The NHN committed to ensuring that ownership of companies in its network would reach 35% in the first year of the exemption, and up to 55% in the fifth year.
The large members in the NHN network agreed to allocate a portion of their centralised procurement spend from broad-based BEE entities. The department has set a target of NHN members procuring 10% of their goods and services from broad-based BEE entities in the first year, with this rising to 50% in the fifth year of the exemption.
The NHN must initiate a policy to promote the move from fee for service cost models between funders and facilities towards alternative reimbursement (ARM) contracting.
It was also obligated to report to the Competition Commission on the progress made on implementing ARM contracting and/or submit ARM contracts that were negotiated annually,” the gazette stated.
The NHN was established in response to the competition imbalance between the independent private hospital market and the three large hospital groups.
The healthcare market inquiry conducted by the Competition Commission a few years ago found that of the most important consequences of the dominance of the three large hospital groups was that no funder could afford not to contract with any one of the three big groups.
The commission noted that the high concentration ratio and large market shares of each of the three large groups was a “major competitive concern”.
BusinessLIVE article – Small private hospital groups get competition lifeline (Restricted access)
See more from MedicalBrief archives:
Non-profit National Hospital Network gets Competition Commission exemption
Discovery wants Competition Commission to dismiss complaint