Clipped wings: Provincial health departments will lose their powers to set their own hospital licensing criteria if proposals by the Competition Commission’s healthcare market inquiry for the institution of a national set of rules are enacted. Picture: SOWETAN/SUNDAY WORLD
Clipped wings: Provincial health departments will lose their powers to set their own hospital licensing criteria if proposals by the Competition Commission’s healthcare market inquiry for the institution of a national set of rules are enacted. Picture: SOWETAN/SUNDAY WORLD

Provincial health departments are doing such a poor job of issuing operating licences to private hospitals that they are stifling competition and potentially depriving patients of cheaper and more innovative care, the Competition Commission’s healthcare market inquiry has warned in a document published on Wednesday.

It has suggested a new regulatory regime for licensing healthcare facilities that is likely to stir the pot with both provincial health departments and private hospitals.

Not only is it proposing a national set of rules that eliminate provincial health departments’ powers to set their own licensing criteria but it also suggests that provinces consider the need for the services offered when considering whether to award hospital licences.

Many licences seem to have been awarded in markets with "excess capacity" and many areas remained underserviced, it said.

This may impact on competition and present a distorted picture of the market

The system has created a submarket for the sale of hospital licences, but changes in ownership are not scrutinised by provincial health departments or the competition authorities, it said. "This may impact on competition and present a distorted picture of the market," it warned.

The inquiry was established to investigate the dynamics in the private healthcare market and to determine whether there are barriers to competition and patient access.

Private hospitals are required to obtain operating licences from provincial health departments before they can open new facilities or extend existing ones. Two years ago, private hospitals presented evidence to the inquiry’s hearings, arguing that the current licensing processes were a barrier to entry and expansion because provincial departments take different approaches and use different criteria to evaluate applications.

Seven of the nine provincial health departments use regulation 158 of the Health Act, but the Western Cape and the Free State provincial departments have enacted their own regulations.

The inquiry also heard that the cost-effectiveness of day hospitals and other more effective ways of delivering healthcare services were not considered in the licensing process.

In its discussion document the inquiry agreed that the use of different regulations by the provincial departments created inconsistencies in the interpretation and application of the licence regulations.

It said regulation 158 had been drafted with acute facilities in mind, so it limited the establishment of facilities that could introduce innovative and cost-effective models of healthcare.

During the public hearings the inquiry quizzed provincial health departments on the oversight they exercised over private hospitals, suggesting they could use their licensing powers to influence behaviour and improve the quality of healthcare. It noted in the discussion document no conditions were attached to licensing such as obligations to report on quality, bed occupancy or the management of state employees who did private sector work.

"These are reasonable expectations of features of well-regulated healthcare markets, internationally, which currently do not exist in the South African market," the inquiry said.

Provinces should be required to collect data from healthcare facilities, report at national level, and withdraw licences from facilities that failed to make the grade, it said.

Rational planning for new facilities could only take place if there was accurate data on bed numbers, levels of care and occupancy levels, it said.

It is also proposing that the awarding of practice numbers, which are used for billing purposes, be done with the awarding of licences. Practice numbers are managed by the Board of Healthcare Funders.

kahnt@businesslive.co.za

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