Adele Shevel: The Business Times,

SOUTH Africa's two largest private hospital groups have come out vehemently against the recommendation that medical schemes should bargain as a group and not individual entities. Private hospitals say this would defeat the intention of improving accessibility to healthcare as well as dilute competition. The Council for Medical Schemes has suggested collective bargaining for schemes, which has also been proposed by the Board of Healthcare Funders. Both Netcare and Medi-Clinic say not only would this contravene competition law, but it does not solve the problem of increased demand for healthcare. They say allegations that consolidation among private hospitals has led to concentration of power and expenditure increases is incorrect. The executives were irate that there had been no engagement with industry to collate information. Richard Friedland, CEO of Netcare, questioned whether the report was credible because it was based on "misinformation". Koert Pretorius, CEO of Medi- Clinic South Africa said in a statement that the Department of Health appeared to be biased in favour of the arguments advanced by medical schemes and unwilling to listen to counter arguments and proposals - including positive and innovative proposals on access and affordability - from Medi-Clinic and other private hospital groups. Pretorius said that private hospitals and medical aids were working from different sets of statistics supporting opposing conclusions. Hospitals felt sidelined in that they had not had an equal opportunity to influence legislation. Friedland said consolidation among private hospitals took place because returns in healthcare were not wonderful and single operators were struggling to survive. Private hospitals say rising spending is a product of price and volume, and in the past seven or eight years there has been a huge increase in utilisation. According to Statistics SA, private hospital inflation has come in below CPIX for the past five years. Since 1998, an additional R7-billion has been spent by medical schemes on hospitalisation, and this is attributed by hospitals to increased usage. The fear is that if this is the only information taken into account by the Department of Health, the industry might get regulation based on "misinformation". Private industry is currently tabling what it believes could be a solution to problems of accessibility. But it has not been able to present any model to the health ministry as scheduled meetings have all been cancelled. The model would incorporate several sectors of the healthcare industry, from private hospitals to funders to primary-care providers - and several of these operators are already on board. Friedland said it required "a number of indulgences" from government. This would include allowing private hospitals to buy drugs at state tender prices, which are 25% to 30% cheaper than industry prices. Hospitals are not allowed to mark up prices of medicines and make a profit from these products. It would involve the removal of VAT from the healthcare system and at the current 14% of R75-billion spent on the industry, would release about R10.5-billion. Also required would be a reduction of prescribed minimum benefits, which would reduce the minimum amount covered and costs. Friedland said Netcare could build a network of hospitals to provide this care, without duplicating the very expensive options. The current seven million people covered by medical schemes in South Africa spans Living Standard Measurements 8 to 10. The new model would allow coverage of LSM 4 to 7, covering between nine and 13 million people. This would remove a significant burden from the state. Private hospitals say the driver of access to medical scheme coverage is in fact the growth in number of employed individuals.