Principal Officer for Discovery Health Medical Scheme, Dr Nozipho Sangweni. Picture: DISCOVERY
Principal Officer for Discovery Health Medical Scheme, Dr Nozipho Sangweni. Picture: DISCOVERY

Discovery Health Medical Scheme (DHMS) asked the Competition Commission on Thursday to dismiss Afrocentric Health’s complaint that it is undercutting competitors, contending it lacked merit.

Afrocentric, Medscheme’s holding company, claimed that since 2014, DHMS and its administrator, Discovery Health, had been unfairly negotiating low rates with hospital groups, disadvantaging all other medical aid schemes and contravening the Competition Act.

Discovery Health has a 54% market share, with nearly 3-million clients. It administers 15 medical schemes, with DHMS being its biggest client.

Discovery Health denied the allegation, saying it did not disclose a cause of action, lacking any substance to show that section 4.1 of the act had been contravened. The firm argued the act only prohibited practices between competitive firms in a horizontal relationship with each other. Discovery Health claimed their relationship with member schemes was vertical.

A 2004 commission ruling stipulates schemes are to negotiate individually and independently with each hospital group.

Medical aid administrators are also to negotiate for each scheme separately.

Arnie Subel SC, for Afrocentric, pleaded that the complaint be heard as its merits were evident. He argued the conduct by Discovery Health and DHMS was anticompetitive as the former used its market power in DHMS as a bargaining tool to secure the lowest possible rates for all medical schemes under its administration.

"Discovery Health is the kingpin in the collective bargaining process," acting as a representative for the scheme, said Subel. He maintained that through the negotiated tariffs with hospital groups, DHMS members were able to enjoy better rates, while smaller schemes under Discovery Health also benefited by securing rates that were 20% lower than average.

Subel argued that the alleged anticompetitive behaviour distorted the medical schemes market and had resulted in financial losses for Discovery Health competitors that may see competitors exiting the market, thereby reducing competition.

Afrocentric’s heads of argument read that hospital groups who were unable to recover costs with Discovery Health were compelled to negotiate with remaining medical schemes at higher tariffs.

Discovery Health’s advocate, Wim Trengove SC, and Discovery Health Medical Scheme’s advocate, Robin Pearse, argued that Afrocentric’s complaint was fatally defective.

The tribunal asked for time to review the matters brought before the court and would make its decision soon after analysis.

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