Discovery takes aim at market inquiry over Remgro interests
SA’s biggest medical scheme administrator wants an assertion about possible anti-competitive behaviour to be withdrawn
SA’s biggest medical scheme administrator, Discovery Health, has asked the health market inquiry to withdraw its assertion that Remgro’s extensive interests in the private health-care industry, which include several of those it does business with, might lead to anti-competitive behaviour.
Remgro is an investment company with health-care assets that include indirect stakes in Discovery Health, Metropolitan Health, a 42% direct interest in private hospital Mediclinic, and indirect stakes in managed health-care services, a primary provider network, pharmaceutical manufacturing, medical insurance organisations and a provider of mobile health services, according to the inquiry.
Discovery Health is a subsidiary of JSE-listed insurer Discovery, and is the administrator of the Discovery Health Medical Scheme.
“Concerns regarding Remgro’s indirect ownership in Discovery Limited are speculative and without foundation, and Discovery Health categorically denies that the indirect ownership by Remgro has ever influenced its decisions or actions in any way that harms competition or consumers,” Discovery Health said in its written submission to the inquiry’s provisional report.
“The inquiry has provided no evidence of any collusion or anti-competitive behaviour between these firms, nor of any harm to consumers,” it said.
The inquiry was established by the Competition Commission in 2013 to investigate the barriers to effective competition in the private health-care market and determine why medical inflation has historically risen faster than consumer price inflation.
In 2017 it published a research note warning that the size and breadth of Remgro and Afrocentric’s financial interests in the sector could hinder competition. It reiterated its concerns in its provisional report, published on July 5, saying common share-holding and cross-directorships might prevent competition. It called for submissions in response to its provisional report, which it published on its website earlier this week.
Afrocentric has interests in medical scheme administrator Medscheme, as well as pharmaceutical manufacturing, wholesaling and dispensing, and HIV/Aids management.
The small number of institutional investors in SA meant cross-shareholdings were found in most industries, said Discovery Health.
It said the inquiry had failed to provide any evidence of collusion between it and Mediclinic, or of agreements that harmed medical schemes or their members.
“In fact, one of the key findings of the inquiry is that Discovery Health is the only administrator able to match the negotiation power of the hospital groups, and able to exert pressure on hospital prices, including that of Mediclinic,” it said.
The inquiry’s conclusion that there was a “significant commercial relationship between the owners of Discovery, MMI [Metropolitan Health’s holding company] and Mediclinic” was baseless and should be withdrawn, it said.
The inquiry received 67 submissions in response to its provisional report.
Many of the submissions — including those from private hospital groups, doctor groups and Discovery Health — took issue with technical aspects of the inquiry’s methodology and analysis.
Private hospital group Netcare raised concerns about the inquiry’s procedural fairness and questioned whether it might have been influenced by Discovery Health.
Netcare said the inquiry should have disclosed that the report’s chapter on supplier-induced demand had been drafted by Neil Soderlund, who heads a joint venture between Discovery Health and Quantium, called Quantium Health Outcomes, as his involvement created a potential conflict of interest.
Discovery Health CEO Jonathan Broomberg said Soderlund was consulting to the inquiry before his business was acquired by Quantium Health Outcomes, and the transaction was declared immediately to the inquiry.
Both the SA Medical Association and the Private Practitioners Forum, which represent the interests of doctors, said they supported the inquiry’s recommendation to set up a supply-side regulator to oversee tariff negotiations, but questioned the government’s capacity to run it effectively.