A handful of private hospitals and medical scheme administrators are earning handsome profits thanks to their ongoing market dominance and the lack of regulatory intervention, according to a new report from the advocacy group Open Secrets.
Six years after the Competition Commission raised concerns about the lack of competition between a select number of players in the private healthcare sector, little has changed, said Open Secrets.
The Competition Commission conducted an extensive health market inquiry that concluded in its final report that the concentrated ownership structure and cross-shareholdings between private hospital providers and medical scheme administrators could dampen competition and foster collusion.
“If anything, the grip of entrenched players has tightened. Ownership patterns remain stubbornly unchanged, with market power concentrated in the hands of a few corporations that continue to post eye-watering profits,” said the non-profit Open Secrets, which has previously published research on economic crime and corruption in SA.
The private hospital sector continues to be largely controlled by three players – Mediclinic, which is jointly held by Remgro and MSC, Netcare and Life Healthcare.
If anything, the grip of entrenched players has tightened. Ownership patterns remain stubbornly unchanged, with market power concentrated in the hands of a few corporations that continue to post eye-watering profits.
— Open Secrets
The open medical scheme market is dominated by Discovery Health Medical Scheme, Bonitas and Momentum, which are administered by Discovery Health, Medscheme and Momentum Health, respectively. Membership of open medical schemes is available to anyone who can afford their premiums.
Open Secrets drew attention to the continued cross-ownerships in the sector, despite the HMI’s concerns.
Remgro, for example, owns 50% of Mediclinic and is the second-largest shareholder in life and health insurer Discovery, which in turn owns Discovery Health, the administrator of Discovery Health Medical Schemes. Remgro holds 7.44% of Discovery’s shares, according to the report. It also holds an 8.8% stake in the Momentum Group, which owns Momentum Health.
“Cross-ownership legalises vertical and horizontal coordination in the market (and) undermines free competition,” said Wits chair of social security systems administration and management studies Alex van den Heever.
“Where holding companies establish relationships across hospitals and the administration of medical schemes, given the high levels of market concentration, it can result in collusion on strategic issues — for instance, the retention of fee-for-service contracts…” he said.
Van den Heever said the report referred to well-established ownership issues but was analytically weak.
“It (the report) relies on simplistic narratives of 'financialisation' rather than the systematic, evidence-based approach of the HMI, which identified the real structural drivers of cost escalation and proposed important systemic reforms,” he said.
Hidden cost of financialisation
Financialisation is a process in which financial markets, institutions and elites gain greater influence over economic policy and outcomes. Open Secrets argues that financialisation is driving inequality and high unemployment, as shareholder returns are prioritised over social benefits such as fair wages.
"The HMI made important findings about the structure and provision of private healthcare. We have relied quite heavily on it and tried to (show) how the failure to implement its (recommended) reforms is a key part of the problem,” said Open Secrets head of investigations Michael Marchant.
“Financialisation is an important part of why all (the) sectors of our economy are relentlessly focused on margins and why markets become more concentrated,” he said.
The report draws attention to the political weight attained by some private healthcare players, suggesting this may help them lobby against National Health Insurance (NHI) or position themselves for future contracts with the scheme.
For example, it argues that the B-BBEE deal struck in 2021 between Momentum Metropolitan Health Group and the investment arms of two unions — the National Education Health and Allied Workers Union and the Police and Prisons Civil Rights Union — potentially set Momentum up to bid for administration contracts when the government implements NHI, said Open Secrets.
“It has been argued that the SA government could contract medical schemes to provide services. Alongside the largest trade unions in SA, this potentially sets Momentum up with influential political muscle to lobby for those contracts,” said Open Secrets.
The report also highlights the influence of Discovery CEO Adrian Gore, who is vice-president of SA’s key umbrella group for organised business, Business Unity SA (Busa), and was in President Cyril Ramaphosa’s delegation when he visited US President Donald Trump in May.
Gore is also co-convenor of Operation Vulindlela, a joint government-business initiative that seeks to foster economic growth and job creation.
“Gore’s growing influence in interactions between the government and business reveals not only how he has positioned himself as a ‘go-to’ guy for South African business in working with government but also how influential corporate power has become in SA,” said Open Secrets.
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