Healthcare block exemption to make private healthcare more affordable

The minister of trade, industry and competition has published the draft Interim Block Exemption for Tariffs Determination in the Healthcare Sector that is aimed at making private healthcare more affordable.

The Competition Commission’s Health Market Inquiry released its final report in September 2019 and made key recommendations to bring down the cost of private healthcare in the country. None of the recommendations have been implemented so far, and the Board of Healthcare Funders (BHF) pointed out in October last year that government’s failure to implement the recommendations is driving up private healthcare costs.

The BHF wrote to the commissioner of the Competition Commission, calling for a formal response to the BHF’s application for an exemption from provisions of the Competition Act in 2021. The exemption would allow medical schemes to collectively negotiate tariffs with healthcare providers and make this information public.

Katlego Mothudi, managing director of the BHF, said the exemption was one of the recommendations and if it is implemented, it would ensure greater transparency around the cost of private healthcare, which will contribute to making healthcare more affordable over time and potentially lead to lower medical scheme contributions for members.

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What is a block exemption?

Minister Parks Tau has now published the draft for the block exemption for public comment. A block exemption is a legislative tool aimed at facilitating and enabling coordination or cooperation in an industry or sector that would otherwise constitute a contravention of the Competition Act for public interest purposes, according to the Competition Commission.

The commission says the purpose of the draft block exemption is to contribute to the affordability of quality healthcare services, the reduction of costs and the prevention of overuse of healthcare services.

The draft block exemption exempts three categories of agreements or practices for prescribed as well as non-prescribed minimum benefits in the healthcare sector:

• the collective determination of healthcare services tariffs;
• the collective determination of standardised diagnosis, procedure, medical device and treatment codes, and
• the collective determination of quality measurements/metrics, medicines formularies and treatment protocols/guidelines.

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How healthcare tariffs are currently negotiated

Currently, healthcare providers and healthcare funders negotiate healthcare tariffs on a bilateral basis and there is no framework for collective determination of healthcare tariffs in South Africa, leading to inefficiencies, the high cost of healthcare services, pricing differences and a lack of pricing transparency.

The Competition Commission says the draft block exemption is aimed at enabling a structured and streamlined process for tariff determination on an interim basis, effectively creating a multi-stakeholder framework for the determination of healthcare tariffs.

“Establishing an equitable and transparent framework for tariff determination contributes to the long-term goal of reducing costs and promoting universal access to healthcare. The draft block exemption is consistent with the recommendations made by the 2019 Health Market Inquiry chaired by former Chief Justice Sandile Ngcobo.”

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Two structures for block exemption

The draft block exemption creates two structures for tariff determination:

• The Tariffs Governing Body consists mainly of experts responsible for providing oversight in the tariff determination process and
• the Multilateral Negotiating Forum, consisting of multiple stakeholders which shall serve as the primary forum for collectively determining the maximum tariffs for prescribed and non-prescribed minimum benefits for healthcare services.

The Competition Commission says the block exemption will be in place for three years, but the minister can extend it in consultation with the minister of health and the commission.

Stakeholders and interested people can submit written comments to the department of trade, industry and competition by 14 March.

According to the Competition Commission it declined three individual exemption applications received from the BHF, the Independent Practitioners Association Foundation and the South African Orthopaedic Association, saying that the applicants only sought exemptions for their members.

In its assessment, the commission found that the individual exemption applications did not meet the requirements for granting the exemptions as contained in the Competition Act and the commission says industry stakeholders generally expressed a need for collective tariff determination in the private healthcare sector and objected to the granting of individual exemptions to associations in the healthcare sector.

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Block exemption will create industry-level collective tariff determination

The commission’s view is that an industry-level collective tariff determination will offer a more effective way to reduce costs across the industry, thereby fostering greater efficiency and transparency.

“This approach will also enhance the participation of small, medium and micro enterprises and historically disadvantaged individuals. In addition, the approach reflected in the draft block exemption provides regulatory oversight over the collective tariffs determination process ensuring market power dynamics are not tilted in favour of a single association in the healthcare sector.” 

The draft block exemption is available on the Competition Commission’s website here.