(Adds share prices and reaction from Life Healthcare)
By Samantha Lee
CAPE TOWN May 7 South Africa's competition
authorities are to investigate the private healthcare industry,
where early evidence points to high charges and market
distortions, a government minister said on Tuesday.
The ruling African National Congress (ANC) is working on a
$28 billion long-term nationwide health insurance plan that it
hopes will give the poor greater access to quality healthcare.
But the overhaul, one of the biggest economic projects to be
undertaken by the ruling party since assuming power in 1994,
will not be in place until 2025 and until then the ANC wants to
cut healthcare costs for millions of South Africans who cannot
afford to go private.
"Various stakeholders have raised concerns about pricing,
costs and the state of competition and innovation in private
healthcare," Economic Development Minister Ebrahim Patel told
Shares in the major private hospital groups extended losses
on news of the probe, with Life Healthcare dropping the
most, trading down over 3 percent to 37.12 rand, its biggest
decline in nearly five months.
Demand for private healthcare is increasing in Africa's
biggest economy as the fast-growing black middle class take up
But about 80 percent of the population still relies on
state-run hospitals which offer free services but are
under-staffed, with poor resources.
Life Healthcare, along with rivals Netcare and
Mediclinic International, have the lion's share of the
market of about 10 million people able to afford private
healthcare in a country of about 50 million.
Life Healthcare's chief executive Michael Flemming said fees
levied reflected the quality of service private hospitals
provided and that the industry needed to come up with a lower
cost private hospital model for budget-conscious consumers.
"If the minister says 40 million people can't afford private
hospitals, he's right. But 40 million people aren't driving
brand new cars, eating at fancy restaurants or staying at
five-star hotels," Fleming said.
Patel said the competition authorities had previously ruled
that the practice of setting common tariffs for medical
procedures was uncompetitive.
But preliminary evidence showed that in some cases
competition was "prevented, distorted or restricted."
Mediclinic said it welcomed the investigation while Netcare
said it would comment after receiving more information. Shares
in Netcare closed down 1.7 percent at 20.25 rand while
Mediclinic was down 0.1 percent at 65.50.
The Competition Commission, which can impose administrative
fines, is expected to launch the inquiry before Sept. 2013.
($1 = 9.0222 South African rand)
(Additional reporting by Tiisetso Motsoeneng; Writing by
Wendell Roelf; Editing by Ed Cropley and Greg Mahlich)