Unnecessary procedures drive up private healthcare costs, competition inquiry finds
Over-servicing and ‘supply-induced demand’ are among the factors that the long-awaited report on the private healthcare market identifies
Over-servicing by doctors, specialists and other medical practitioners is one of the factors that have driven up private healthcare spending, the Competition Commission’s health market inquiry has found.
This over-servicing includes increased admissions to hospitals, increased length of stay, higher levels of care, greater intensity of care, and the use of more expensive forms of care than necessary.
The fee-for-service model of billing also stimulates oversupply, "which results in wasteful expenditure and incentivises practitioners to provide more services than needed. This incentive is intensified by the current unregulated pricing environment," the inquiry found.
The provisional report of the inquiry into the constraints on competition in the private healthcare market was released on Thursday by chairman of the inquiry, former chief justice Sandile Ngcobo, after more than four years of work.
The inquiry panel said it had found evidence of "supply-induced demand".
Absolute age-adjusted hospital admission rates increased significantly from 2010-14 and were higher than all but two of 17 Organisation for Economic Cooperation and Development (OECD) countries examined.
Utilisation rates of specific discretionary surgical procedures were higher than the average for six of the seven procedures studied, and the highest of all countries for four out of seven.
The panel also found that age-standardised admission rates to intensive care units were higher than all the eight countries with comparable published data.
"If the ICU admission rate per person were reduced to half of its current level (that is to between levels found in Belgium and the US); and half of the costs associated with these avoided ICU admissions were reinvested in better ward-based care, approximately R2.7bn would still be saved annually — just over 2% of private healthcare spending overall for the period studied," the executive summary of the report said.
Looking at the factors likely to influence admission to hospital, the panel found that for nine of the 11 specialities examined, "there was a significant positive correlation between risk of admission and number of doctors or hospital beds in that geography. The same relationship was shown for ICU admission and numbers of ICU beds."
The report said there was little need for explicit or formal collusive agreements between hospital groups and practitioners as their interest in higher treatment volumes and treatment intensity was aligned.
"The uninformed patient assumes that these arrangements are always to his/her advantage and is not concerned with the longer-term financial impact on medical scheme cover."
Private hospitals promoted the use of sophisticated technologies on patients and this drove up costs when it did not provide value for money. The hospitals are forced to use these technologies to secure a return on their investment.
"A key problem underlying high and rising costs of care and medical scheme contributions is not primarily prices as such, but overcapacity and overinvestment in technology, higher treatment volumes, and complex, intensive and expensive treatment methods", which patients might not need.
"Certainly the absence of any health outcomes data makes any claims about the benefit of the level of intervention in the private market hollow," the report said.