Company news: Access to healthcare and scarcity of resources – a public and private challenge

There are approximately 103 000 beds in public hospitals and approximately 28 000 in private hospitals. The public sector hospitals, as per its reports, are running at close to full capacity.

The lack of access to healthcare for a large portion of South Africans is a major challenge that needs to be urgently addressed by all industry players, including the private hospital sector.

“Recent reports have indicated that the private hospital sector should do more to assist the sector in general. But, can the private hospital sector accommodate more patients?” asks Melanie Da Costa, Health Policy Director of Netcare.

A recent analysis by JP Morgan of South Africa's private hospital occupancies has sobering news in store. It has concluded that the existing infrastructure will at best cater for a further 15% increase in occupancy. Da Costa says the capacity to increase to this level of occupancy is currently constrained by the dire skills shortage that accounts for a vacancy rate of 24% in registered nurses and 30% in qualified pharmacists.

She explains: “To put these skills shortages into context: According to the South African Nursing Council (SANC) there were a total of 106 914 nurses in the South African healthcare sector at the end of 2006. Of these 101 295 were registered nurses, 39 305 enrolled nurses and 56 314 enrolled nursing auxiliaries. It is important to note that not all nurses registered with SANC are practicing in South Africa, and those who remain in South Africa may not all still be nursing. With a population of 47.505 million the current ratio of patients per nurse is 241:1.”

When it comes to registered doctors and specialists, research published by Wilbury & Claymore earlier this year indicates that there are at present 5 735 registered specialists and 5 092 general practitioners in South Africa.

The South African Pharmacy Council on the other hand reports that there are at present approximately 11 000 registered pharmacists in the country.

Says Da Costa: “Notwithstanding the above constraints, a 15% increase in occupancy indicates that the private sector can cater for no more than an additional one million lives; a small number in the context of the approximately 38 million lives currently being cared for by the public sector.”

In order to increase capacity, it is believed that it is necessary for the private sector to escalate the current rate of investment in hospital infrastructure and nurse training throughout South Africa as a matter of urgency. “However, the current pressures on the private hospital sector by industry bodies and regulatory authorities makes decisions regarding further investment difficult,” she says.

Just how difficult is reflected in an analysis by JP Morgan published in January 2008. This analysis indicates that, based on current tariffs and construction costs, the return on invested capital on a new hospital commissioned by the largest hospital group in South Africa is in the region of 9.2% after tax, marginally above what it costs to build the hospital.

“Throughout the world the hospital sector offers the lowest returns on invested capital in the healthcare value chain. The return on investment is on average lower than that of companies selling surgical consumables, pathology services, pharmaceuticals and even lower than the returns posted by medical scheme administrators,” says Da Costa.

She continues: “Netcare this past year experienced a 13,0% growth in self-pay hospital revenue, especially in terms of maternity and casualty admissions. The self-pay market of individuals choosing to access private healthcare for childbirth on a cash-paying basis has especially grown significantly.” The cost of a natural birth without complications is on average R14 000 for a three day stay while the cost of an uncomplicated caesarean section is R20 000.

“There are ways in which access to quality hospital services can be enhanced so that this scarce and invaluable resource can be nurtured and grown to the benefit of many more South Africans,” says Da Costa. “The private hospital sector has previously indicated certain measures that if taken could have a meaningful and lasting impact within the healthcare environment.”

Proposals for reform aimed at enhancing affordability

Da Costa says that the following nine proposals have been made from the private hospital industry and may significantly influence reform and eventually enhance affordability:

1. The private hospital sector has committed to publishing its regional occupancy level figures should the Department of Health consider partnering with the private sector for the provision of clinical services. “This would involve the use of private sector beds for public patients at specially negotiated DOH rates. In so doing, the private sector invites Provincial Departments of Health to use spare capacity in the private sector.
2. Should the private hospital sector be able to introduce clinical pathways that have been proven to reduce variability in outcomes and hence the overall cost of care in line with international best practice, it would also ensure the staffing of public sector elective surgery waiting list programmes within more affordable parameters.

3. When it comes to the training of nursing staff, reform within the Health and Welfare Seta as well as the South African Nursing Council would greatly alleviate bottlenecks. The training and provision of healthcare personnel is heavily influenced by legislative and financial constraints and the private sector is at present actively engaged in finding suitable solutions.

4. The purchasing of pharmaceuticals at internationally benchmarked prices would reduce healthcare delivery costs substantially.

5. Providing a concession on charging value added tax to State patients or low-income medical scheme patients who are treated within the private sector would render private hospital costs more affordable.

6. A change to regulations R158 and R187 governing the building of private hospitals would allow for the building of less expensive facilities and therefore more cost effective models of care.

7. There has been a moratorium on new hospital licenses for several years with licenses only being issued upon significant and lengthy motivation processes. This is a barrier to competition. By reviewing existing license obstacles it would allow for more hospitals to be built. This will ensure a broadening of competition and encourage further investment in hospitals so that there will be no shortage of hospitals in the future.

8. A review of Prescribed Minimum Benefits to become more inclusive of primary healthcare is needed.

9. Empowering the general practitioner as a true “Gatekeeper” would again ensure that patients receive care sooner and that undue pressure is not placed on private and public hospitals.

Da Costa concludes: “As an industry we welcome change and encourage initiatives that will ensure better, more affordable access to healthcare services for all South Africans.”