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Private hospitals grow while public sector contracts

Written by Health-e News

While hospital beds in the public sector are being reduced, the private sector has added almost 7 000 beds between 1998 and 2006.

This is according to the South African Health Review’€™s chapter on private hospitals authored by Thulani Matsebula and Michael Willie.

There was also a 34% increase in the number of private for-profit hospitals during the same period ‘€“ from 161 hospitals in 1998, compared to 216 hospitals in 2006.

Matsebula and Willie said the growth in private hospital beds occurred at a time when the public sector was reducing the number of beds in virtually every province.

The reduction of hospital beds and public perceptions of quality in the public sector impacted positively on private hospitals with the medical scheme population moving away from public hospitals.

Netcare, Medi-Clinic and Life Healthcare are the main private hospital owners, accounting for more than 75% of private hospitals and 80% of private hospital theatres, the greatest source of income.

The authors concede that doctors, described as ‘€œindirect sellers’€ of hospital services, play a central role in ensuring the success of a hospital.

‘€œHowever, doctors are also dependent on the hospital to supply a complete service to patients,’€ said Matsebula and Willie.

It is known that specialists are key drivers of hospital utilisation and costs and it has been estimated that they generate around 70% to 80% of hospital costs incurred, aside from their own costs

Incentives also play a big role. The ethical rules of the Health Professions Council of SA bar private hospitals from appointing doctors and other health professionals (except nurses) leading hospitals to adopt an approach of incentives to attract people to establish their practices within hospital premises.

The reliance of private hospitals on specialists to generate utilisation for their facilities has led to concerns that private hospitals may be implementing incentives that encourage specialists to over-utilise their services. The authors noted that it is however, extremely difficult to prove over-servicing on a case-by-case basis, except in the most obvious cases.

Both Medi-Clinic and Netcare openly declare that they invest in infrastructure to enhance the satisfaction of doctors practising at their facilities.

According to the SAHR these incentives impacted negatively on equity to access to medical specialists and cost-containment in the health system.

An estimated 7 000 medical specialists work in the private sector compared to 4 000 employed in the public sector, of which some also practice in the private sector under a limited private practice scheme allowed by the State.

The shortage of nurses is considered by the private hospital industry to be a serious constraint and risk factor limiting the industry’€™s potential for growth. In an effort to mitigate nurse shortages Netcare established a training academy to train nurses and paramedics.

The output of the academy in 2007 is expected to be 3 410 nurses. These efforts however, are not adequate to sustain the demands of the rapidly growing private hospital sector.

Private hospitals claim that the shortage of nurses is making it difficult for hospitals to contain costs since the biggest component of cost in hospitals is staff costs. Staff costs are estimated to be as high as 77% of total costs in the private hospital sector.

Private hospitals also claim that they are compelled to compete for limited nursing staff by offering more attractive remuneration.

The viability of private hospital operations is also heavily dependent on the medical scheme environment. Hospitals are nonetheless reporting growth in other non-medical scheme business, particularly from the self-pay market. It was reported by Netcare that this trend is increasing in maternity cases.

Foreign patients are also using the private sector. There are three categories of foreign patients that get treated in South Africa’€™s private hospitals: medical tourists; South African citizens who live abroad but often return to South Africa to access health care services; and citizens of other African countries notably from North Africa. It is estimated that these foreign patients contribute R280 million annually.

Surveys reveal that expenditure on private hospitals by medical schemes has increased significantly since 1990. Perceived declines in the quality of public hospitals coupled with the movement of specialists and general practitioners away from the public sector have led to an increase in the utilisation of private hospital beds.

Whereas in 1990, public hospitals made up roughly 20% of hospital benefits paid by medical schemes, this had fallen to about 3% in 2004.

The authors called for a comprehensive approach to directly regulate private hospitals. ‘€œIn relation to regulation of quality, it is of particular concern that regulatory oversight of private hospitals on infection control is practically nonexistent,’€ said Matsebula and Willie.

In relation to private hospital costs, the SAHR said there is definitely a need for regulatory intervention to ensure greater transparency in fee setting and for clear statutory prohibitions to be put in place to prevent perverse ‘€œincentivisation’€ of doctors by hospitals. ‘€“ Health-e News Service.



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