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MED BRIEF A lot of the work contained in the Health Market Inquiry’s (HMI) Provisional Report is deficient and defective and needs to be reviewed to determine whether the real evidence supports the findings and if certain recommendations are appropriate, practical and feasible. This is according to Anthony Norton, Director of law firm Nortons Inc who has been representing Netcare in the work around the inquiry. He was one of two speakers delivering an expert opinion on the HMI report at this week’s HASA conference in Johannesburg. Norton and Econex MD, Prof Nicola Theron (on behalf of Mediclinic) expressed serious concerns about the report, particularly around the findings relating to the concentration of the three major private hospital groups, supply-induced demand and pricing, and recommendations proposing the establishment of a supply-side regulator, divestiture by the three major hospital groups and price regulation. They pointed out that old data were used to come to conclusions of market concentration, showing that since 2014 the total market share of Netcare, Mediclinic and Life Healthcare has shrunk to below the almost 90%, indicated in the HMI report, to around 75% as hospitals in the National Health Network (NHN) and other independent hospitals added almost 1297 new beds compared to the total of 846 beds added by the three biggest groups. Data on hospital beds used by the HMI only cover 2010 to 2014. “It is most concerning that the HMI recommends drastic interventions such as divestiture and a licensing moratorium to be implemented probably by next year, based on 2014 and incorrect data,” Theron said. “If you correct for the errors in the HMI database and the beds that were excluded in the HMI analysis, you find that while there is still concentration, it is only moderate.” She referred to the Competition Act’s definition of market power that places it between 35% and 45% with interventions only recommended when it is more than 45%. “Not even in the HMI analysis, one of the hospitals crosses the 35%, indicating that there is no evidence for the inquiry’s conclusion that the market is ‘highly concentrated’”, Theron noted. Norton agrees that the HMI report doesn’t provide any evidence of market power abuse or dominance by the three main groups, excessive profits or that there is a causal link between concentration in certain areas and supply-induced demand. “Our analysis shows that post 2014 there has been in fact a de-concentration of the private hospital market,” Norton said. According to Norton, the recommendations of divestiture and a moratorium on the issuing of licenses to the big hospital groups until their market share falls to 20% are unfair, unconstitutional, are not supported by any findings in the HMI report or real evidence, and lacks detail. “If you start putting artificial caps on people’s ability to expand beds in hospitals or to get new licenses you may have a whole bunch of unintended consequences such as not being able to serve consumers appropriately,” Norton said. Referring to the proposed regulation of prices, Norton pointed out that the HMI’s profitability analysis showed no evidence of excessive profits that warrants price regulation. “Economic regulations tell us that price regulation should only occur in exceptional cases – when you have statutory monopolies or serious evidence of abuse of dominance. This doesn’t exist here – there are no monopolies in the private healthcare market and findings of dominance. So, the evidence doesn’t warrant price regulations, while the often unintended consequences such as a reduction in the quality of service, innovation and entry hasn’t been considered,” Norton said. He also raised serious concerns about the proposals around an independent Supply-side Regulator to be established by the Minister of Health, its functions and the suggestion that it should be in charge of price negotiations between the respective parties to ultimately determine prices. Not only does the National Health Act not allow the Minister to set up a new regulatory body, it will also be expensive and complicated to be established and staffed. “Why don’t we get existing regulatory bodies to do it and force them to do their jobs properly, and more efficiently and effectively? The HMI has found that some of the current regulators are inefficient – how can we assume this one is going to be different and that it will be able to deal with complicated jobs such as price regulation? “I think the HMI has got to carefully reconsider its analysis that supported some of the conclusions and the real evidence and make an objective assessment,” Norton concluded. According to Theron, there is no denial that there is something wrong with the system. “However, in an inquiry like this that recommends dramatic intervention like divestiture, conclusions must be substantiated by real evidence and facts. If not, it is simply going to create more problems which are not going to foster competition or efficient outcomes,” she noted.
Created at 2018/10/23 03:22 PM by Mediclinic
Last modified at 2018/10/23 03:22 PM by Mediclinic