Mzwandile Jacks
NETWORK Healthcare (Netcare) will remove rebates on the group's surgical system after "allegations" made by the Board of Healthcare Funders (BHF) last week, according to Richard Friedland, the chief executive of the healthcare group. He said that Netcare was speaking to the Board of Healthcare Funders and that the whole matter would be finalised by the end of this month. He said that there was criticism regarding Netcare's cross-subsidised pricing model. Friedland acknowledged that the current billing system was complex and confusing and Netcare had therefore resolved to simplify the structure, including transparency around surgical discounts. Last week, the BHF said the recent media campaigns by the sector were an attempt to deflect attention from the fact that they were major drivers of healthcare inflation.
The BHF said that dilution of focus was not a solution to identified problems within a particular area. It said that while not all hospital groups engaged in the rebate and discounting arrangements with suppliers of surgical, consumables and devices, the rebate system was a key contributor to hospital inflation because it artificially inflated prices and created incentives for hospitals to purchase expensive items and to use more of them. But according to a report compiled by economist Mike Schussler for Regional Business Analytics, South Africa's private hospital industry continued to successfully contain costs over the past year. The report was released in June. This resulted in an industry-specific inflation rate of just 5.6 percent for 2006, up from 5.1 percent in 2005. The report said the private hospital industry's 2006 inflation rate was measurably lower than South Africa's overall medical inflation rate of 6.1 percent and the average increase granted to medical schemes of 7.9 percent at the beginning of this year. Surgical suppliers in South Africa submit their products and prices to MediKredit, which publishes them. Although the actual selling price is not set by the buyer, there are robust commercial negotiations. Netcare has about 900 suppliers and orders about 64 000 line items. Larger purchasers, who are able to underpin volumes, might be able to extract higher economic value.
