The Minister of Trade, Industry, and Competition has published draft regulations that will establish a framework for healthcare providers and medical schemes to collectively determine tariffs for healthcare services.
The aim of the exemptions is to make healthcare more affordable, reduce costs, and prevent overutilisation of services, says the minister, Parks Tau, who published the “Interim Block Exemption for Tariffs Determination in the Healthcare Sector” in the Government Gazette on 14 February.
The publication of the draft regulations comes less than a month after the Competition Commission rejected the latest application by the Board of Healthcare Funders (BHF) for an exemption from the Competition Act that would allow medical schemes collectively to negotiate tariffs with healthcare providers.
Read: BHF to appeal decision to deny tariff negotiation exemption for medical schemes
The BHF described the refusal to allow its members to negotiate tariffs collectively as “perplexing” because this was one of the key recommendations in the Commission’s Health Market Inquiry (HMI) report, published in September 2019, in order to lower the cost of private healthcare.
This week, the BHF expressed its reservations about the proposed regulations, while the Council for Medical Schemes (CMS) welcomed them.
The draft regulations propose to temporarily exempt certain healthcare-related agreements and practices from the restrictions contained in sections 4(1)(a), 4(1)(b)(i), and 5(1) of the Competition Act. The exemptions will apply for three years, although the Minister has the authority to extend them.
The exemptions apply to both the Prescribed Minimum Benefits (PMBs) and non-PMBs and cover three main areas:
- Collective determination of healthcare service tariffs.
- Standardised coding for diagnoses, procedures, medical devices, and treatments
- Collective agreements on quality metrics, medicine formularies, and treatment guidelines.
The exemptions exclude collusive tendering, market allocation, and the tariffs and codes for medicines.
The regulations apply to health funders (medical schemes, administrators and managed care companies), and health professionals registered in terms of the Health Professions Act, the Nursing Act, Allied Health Professions Act, or the Dental Technicians Act.
The regulations do not apply to drug and alcohol rehabilitation facilities, sub-acute facilities, mental health institutions, provincial and private hospitals, day clinics, and Hospices.
‘Smoother transition to NHI’
In his explanation of the background to the proposed regulations, Tau says the HMI identified the need for a structured process for determining healthcare tariffs. It recommended a multi-stakeholder negotiation approach to enhance transparency and competition. The proposed interim block exemption supports this goal by allowing collective tariff-setting while ensuring compliance with section 27 of the Constitution, which guarantees the right to access healthcare.
The healthcare sector has struggled with tariff determination, leading to concerns over affordability and accessibility. Currently, tariff negotiations happen individually (bilaterally) between healthcare providers and funders, resulting in price inconsistencies and inefficiencies. The absence of a formal tariff framework has made standard pricing difficult to achieve.
The National Health Insurance (NHI) Act aims to restructure the healthcare system for universal health coverage, but it is not yet fully operational. Until the NHI framework is in place, there is an urgent need for an interim solution. The proposed block exemption serves as a temporary regulatory framework to facilitate sector-wide multilateral tariff determination, ensuring a smoother transition into the NHI system while addressing current pricing challenges, Tau says.
New body will manage the process
The regulations propose establishing a Tariffs Governing Body (TGB) to manage how healthcare prices are decided. The National Department of Health (NDoH) will create and oversee the TGB, which will be led by a senior official appointed by the Director-General of Health.
The TGB will include experts in pricing and healthcare to help create fair rules and guidelines for determining healthcare tariffs. If there are disagreements about prices, the TGB will set rules for how to handle these disputes.
Additionally, the TGB will work with other health bodies to ensure healthcare prices are reasonable and transparent.
The TGB will have several responsibilities, including:
- Setting terms, guidelines, and rules for the determination of tariffs.
- Issuing terms of reference, guidelines, and rules for tariff determination and agreements.
- Creating rules for tariff determination where members of the Multilateral Negotiating Forum (MLNF) cannot agree on tariffs, cannot agree on the process to determine the tariffs, or deviate from the determined tariffs.
- Collaborating with the CMS to review the PMBs.
- Conducting price-cost assessments to validate tariffs.
Multilateral forum will set the tariffs
The tariffs will be set by the MNLF, whose members will also be appointed by the Director-General of Health. The MNLF will include representatives from the government, associations representing healthcare practitioners, healthcare funders, civil society, patient and consumer rights organisations, and any other regulatory body within the healthcare sector.
The responsibilities of the MLNF will include:
- Setting the highest allowable prices for healthcare services.
- In the absence of codes from the NDoH Coding Committee, collectively recommend standardised diagnosis, procedure, medical device, and treatment codes.
- Collectively recommend quality measurements/metrics to the Office of Health Standards Compliance (OHSC) and propose medicines formularies and treatment protocols/guidelines to the NDoH.
- If the NDoH Health Technology Assessment (HTA) Committee has not developed HTAs, collectively source relevant evidence from other contexts for presentation to the committee.
BHF’s reservations about health department’s involvement
In a statement on Monday, the BHF said it was disappointed that the Department of Trade, Industry, and Competition (DTIC) has decided to move forward with a block exemption managed by the NDoH.
“We have serious reservations over the DTIC putting the power in the Department of Health’s hands to manage the block exemption negotiation process. This is because to date they have actively kept private healthcare expensive and inaccessible to justify the implementation of the National Health Insurance Act.”
It said the NDoH was assigned the same tasks as part of the HMI’s recommendations, yet the department has failed to implement these recommendations for the past five years.
Furthermore, the DTIC granted similar exemptions to be managed by the NDoH during the Covid-19 pandemic. However, the NDoH failed to implement the negotiation framework, and the Competition Commission had to intervene to reduce the cost of Covid-19 tests.
“If their track record is anything to go by, we will see similar delays with the block exemption process, and, consequently, rising healthcare costs.”
The BHF said it maintains that the fastest way to make private healthcare more affordable is for the Competition Commission to grant exemptions allowing medical schemes to collectively negotiate tariffs with healthcare providers. This can happen without the involvement of the NDoH.
CMS supports the proposed framework
The chairperson of the CMS, Dr Thandi Mabeba, said on Tuesday that the Council supports the proposed framework for the collective determination of prices and tariffs, and the appointment of the TGB and MLNF.
“In our assessment, the introduction of interim block exemption regulations by the Minister of Trade, Industry, and Competition seeks to establish a structured, multilateral tariff determination process. There has been rising concerns about the affordability and accessibility of quality healthcare,” she said.
Since the release of the HMI report in 2019, the CMS had been inundated with calls from stakeholders to begin the processes of tackling some of the Competition Commission’s recommendations, Mabeba said.
Deadline to comment
Stakeholders and interested persons have until 16 March to comment on the proposed regulations. Comments must be marked for the attention of Dr Ivan Galodikwe and emailed to IGalodikwe@thedtic.gov.za or hand-delivered to the Third Floor, Block E, 77 Meintjies Street, Sunnyside, 0132.
