Company news: Medi-Clinic Southern Africa's position on 2008 private hospital tariff increases

MCSA confirms that its average annual tariff increase is close to CPIX. The group is of the opinion that its tariff increase is reasonable, considering that private hospital cost inflation is higher than CPIX. One of the major drivers of private hospital cost inflation is nursing costs. Approximately fifty percent of the MCSA tariff is directly related to nursing salaries that were increased by approximately 13%. This salary increase has been effective since 1 July 2007. All other components affecting tariff increases including administration costs, electricity, food and maintenance, etc was increased considerably below CPIX.

“We wish to reiterate that an annual tariff increase is a standard business practice, and increases are negotiated and agreed upon with the individual medical schemes during November/December every year, after medical aid schemes publish their premium increases to members” says Koert Pretorius, CEO of Medi-Clinic Southern Africa. This highlights the limited impact hospital tariff increases have on medical aid members' premiums.

MCSA confirms that, in its opinion and supported by independent legal advice, it complies with the provisions of the Single Exit Price regulations in respect of the billing of anaesthetic gases.

Rebates and discounts on surgicals and consumables were not included in the tariff increases for wards and theatres, as MCSA adopted a NAP (net acquisition price) model in 2004. This NAP model stipulates that MCSA charges for surgical consumables at the same cost as the acquired price. MCSA is the only private hospital group that had already abolished the rebates and discounts business practice, which was acknowledged in the recent media reports. This model has resulted in substantial savings to medical aid schemes since inception.

Total hospital expenditure experienced by medical aid schemes is driven by price and utilisation (often referred to as volume); it is utilisation - and not price - that is the key driver of private hospital expenditure. Utilisation is driven by factors such as increased admissions and intensity of care. These factors are in turn influenced by an ageing population, the burden of disease and the availability of new technology.

According to a media statement by the Council for Medical Schemes, dated 28 December 2007, the Registrar of Medical Schemes, Mr Patrick Masobe, "would approach the competition authorities to investigate the possibility of abuse of market power or other anti-competitive conduct" should the private hospital groups fail to fully motivate the increases in their respective annual general tariffs.

“Subsequently Medi-Clinic Southern Africa, along with the other private hospital groups, has engaged individually with the Minister of Health to discuss her concerns over the issues of tariff increases and the manner in which the use of anaesthetic gases are being charged ,” Pretorius says.

The process of engagement with the Minister of Health is ongoing. Clarity has not been reached on the threat of legal action by the Council for Medical Schemes, therefore MCSA is currently not in a position to provide information about the issue.

Medi-Clinic Southern Africa remains committed to a speedy and equitable resolution in the interest of the consumers of South African private healthcare.

Issued on behalf of:
Medi-Clinic Southern Africa
Contact: Biren Valodia
Chief Marketing Officer
Cell: 083 287 8888