I OVERVIEW

The Constitution of the Republic of South Africa (the Constitution) provides that everyone has the right to access to healthcare and requires that the state take reasonable legislative and other measures, within its available resources, to achieve the progressive realisation of this socioeconomic right.2 The National Health Act 61 of 2003 (the National Health Act) was promulgated to achieve this objective and to, inter alia, regulate national health and the establishment of a national health system.3

The National Health Act provides a framework for a structured uniform health system within South Africa, by taking into account the obligations imposed by the Constitution and other laws on the national, provincial and local governments with regard to health services and making provision for related matters.

The regulation of health services is a concurrent legislative competence, and both the national legislature and the nine provincial legislatures have jurisdiction to regulate healthcare-related matters.4 The regulation of the different facets of the South African healthcare ecosystem is entrusted to the national and provincial departments of health, statutory bodies, professional bodies and other voluntary associations.

II THE HEALTHCARE ECONOMY

i General

In light of the above-mentioned entrenched constitutional right, everyone in South Africa, irrespective of nationality, has the right to access healthcare. In addition, no healthcare provider, health worker, or health establishment may refuse a person emergency medical treatment.5

A prominent characteristic of the South African healthcare system is its two-tiered nature, comprising a public health sector and a private health sector.6 The National Health Act explicitly makes provision for the regulation of public and private providers of health services.7

The South African government has stated that certain inequities between the public and private health sectors can be attributed to this two-tier healthcare system, which essentially allows the wealthy to pool their healthcare funds separately from the poor.8

ii The role of health insurance

Medical schemes

In South Africa a medical scheme is a not-for-profit organisation that belong to its members, the objective of which is to pool member contributions to pay for member healthcare expenses from a common risk pool.9 The contributions of a medical scheme's members are only dependant on the level of cover purchased (i.e., the benefit option) and not risk factors such as age or health status.

The Medical Schemes Act 131 of 1998 (the Medical Schemes Act) was enacted to consolidate the laws relating to registered medical schemes, to provide for the establishment of the Council for Medical Schemes (CMS) and the appointment of a Registrar of Medical Schemes, among other provisions.

As at 31 March 2018, it was reported by the CMS that there are about 80 medical schemes in South Africa.10 It is estimated that around 9.4 million individuals have medical aid cover in South Africa.11 The South African medical scheme market is highly concentrated, with two medical schemes holding approximately 50 per cent of both the open medical scheme market and the restricted medical scheme market.12

Pursuant to the Medical Schemes Act, all medical schemes must be registered and are subject to regulatory oversight by the CMS.

Health insurance

For-profit insurance companies are generally allowed to sell short-term and long-term insurance policies in respect of health-related risks. Insurance companies are subject to the regulatory oversight of the Financial Services Board.

It has been recognised that appropriately designed and marketed health insurance policies can assist in protecting against unanticipated health events,13 but it is important that such insurance policies do not undermine the objectives of medical schemes.14

The Minister of Finance, in consultation with the Minster of Health, in 2017 gazetted regulations to the Long-Term Insurance Act 58 of 1998 and the Short-Term Insurance Act 53 of 1998 (the Demarcation Regulations) to enhance the legislative framework relating to the demarcation between insurance business, providing products such as 'health policies' and 'accident and health policies' (collectively, health insurance policies) and the business of a medical scheme.15

The effect of the Demarcation Regulations is that insurance companies are restricted from selling insurance policies that constitute the business of medical schemes and that are not specifically permitted under the Demarcation Regulations.

iii Funding and payment for specific services

Public health sector

The National Health Act provides for the establishment, by the Minister of Health, of conditions subject to which certain categories of persons are eligible for free health services at a public health establishment.16

In addition, the National Health Act obliges the state and state-funded clinics and community health centres to provide:17

  1. pregnant and lactating women and children below the age of six years who are not members or beneficiaries of medical aid schemes with free health services;
  2. all persons, except members of medical aid schemes and their dependants and persons receiving compensation for compensable occupational diseases, with free primary healthcare services; and
  3. women with free termination of pregnancy services.

The National Department of Health publishes annually a Uniform Patient Fee Schedule of Paying Patients Attending Public Hospitals (UPFS). The UPFS must be considered in conjunction with the relevant provincial department of health fees manual.

The UPFS was developed and introduced to provide for a simpler charge mechanism for public health sector hospitals.18 UPFS patients are categorised as follows:

  1. full-paying patients – who are liable for the full UPFS fee as listed in the relevant tariff schedules;
  2. fully subsidised patients – who receive all services free of charge, subject to certain exceptions; and
  3. partially subsidised patients – who receive subsided services, with the level of subsidisation based on an income assessment (i.e., a means test).

Private health sector

Pursuant to the regulations to the Medical Schemes Act (the Medical Schemes Regulations), medical schemes are generally required to pay in full, without co-payment or the use of deductibles, for the diagnosis, treatment and care costs of prescribed minimum benefit conditions (PMBs).19 This obligation in respect of PMBs is not affected by the medical scheme member's benefit option, or the amount of that member's medical scheme contributions.

Approximately 270 PMBs are listed in Annexure A to the Medical Schemes Regulations and are set out in the form of Diagnosis and Treatment Pairs. The PMBs include conditions such as cancers, heart attacks and strokes.

PMBs were introduced to, inter alia, avoid incidents where individuals lose their medical scheme cover in the event of serious illness, with a consequent risk of unfunded utilisation of public hospitals, and to encourage improved efficiency in the allocation of private and public healthcare resources.

For all other conditions that are not PMB conditions, the medical scheme member's benefit option will dictate the rate at which the cost of health services are covered or reimbursed by the relevant medical scheme.

In addition to the medical schemes, various insurance companies offer insurances products to cover health-related risks, including the following:

  1. medical expense shortfall policies – which cover the shortfall between medical scheme benefits and the rates charged by private medical service providers;
  2. non-medical expense cover as a result of hospitalisation policies – which pays out benefits upon hospitalisation; and
  3. primary healthcare insurance policies – which provide for certain, limited, medical service benefits (e.g., general practitioner visits, dentistry).20

Medical expenses that are not covered, or are only partially covered, by medical schemes or health insurance products must be funded out of pocket.

III PRIMARY / FAMILY MEDICINE, HOSPITALS AND SOCIAL CARE

South Africa suffers from a high burden of disease, including non-communicable diseases. As part of the National Department of Health's strategic objectives and vision for 2030, the government has set out to, inter alia, significantly reduce the burden of disease and to raise the life expectancy of South Africans to at least 70 years of age.

Access to public healthcare is a challenge, as the public health sector faces various difficulties, including a lack of resources and general capacity constraints.

One of the primary challenges facing the public health sector is the inadequate supply of well-trained nurses and specialist practitioners. Nationally, and in the public sector, there are numerous vacant posts for nursing positions and also for doctors and specialists.

The South African government has placed an emphasis on developing a reliable primary care-centred and community-based healthcare system; however, in the absence of an optimally functioning public health sector, patients in the private health sector are often able to access a better quality and standard of healthcare.

Because of the high costs of private healthcare, individuals in the middle and high-income earning brackets in South Africa often opt to secure medical scheme coverage; however, the high costs mean that most South Africans are unable to afford medical scheme membership.

Limited coverage is provided through public social insurance schemes such as the Compensation Fund and the Road Accident Fund (RAF).

The Compensation Fund pays for medical care for workers who sustain injuries during the course of their work, or who suffer occupation-related illnesses. The RAF provides partial compensation for medical costs (and related compensation) in respect of persons who suffer injuries in motor vehicle accidents.

These funds offer partial coverage in respect of occupational injuries and partial coverage for road accidents.

Only basic primary healthcare services are provided in the public health sector. A primary healthcare clinic is the first step in the provision of public healthcare and includes services such as immunisation, family planning, antenatal care and treatment of common diseases.

If a patient cannot be assisted at a primary healthcare clinic, he or she will be referred to a community healthcare centre, which provides substantially the same services as a primary healthcare clinic, with the addition of a maternity service, emergency care and casualty ward.

Patients may also be referred to district or regional hospitals for treatment. The third level of healthcare in South Africa is provincial tertiary hospitals, which receive referrals from regional hospitals, as these establishments are generally staffed by specialists and generalists.

The fourth and highest level of healthcare comprises central centres or specialised hospitals; however, these establishments cater specifically for patients suffering from certain illnesses, including chronic psychiatric disorders, tuberculosis, spinal injuries and acute infectious diseases.

IV THE LICENSING OF HEALTHCARE PROVIDERS AND PROFESSIONALS

i Regulators

Healthcare institutions include hospitals, clinics and other treatment facilities that provide a combination of acute, sub-acute, general and specialised services. Healthcare practitioners include general practitioners, specialists, nurses and pharmacists.

The relevant regulatory authorities include the Department of Health, the Health Professions Council of South Africa (HPCSA), the South African Nursing Council, the Allied Health Professions Council, the South African Pharmacy Council and the South African Dental Technicians Council.

ii Institutional healthcare providers

The National Health Act defines a 'health establishment' as including the whole or part of a public or private institution, facility, building or place that is operated or designed, whether for profit or not, to provide inpatient or outpatient treatment, diagnostic or therapeutic interventions, nursing, or rehabilitative, palliative, convalescent, preventative or other health services.

Although the National Health Act provides that a certificate of need (the Certificate of Need) must be obtained prior to the establishment, construction, modification or acquisition of a private health establishment, the provisions relating to Certificates of Need are not yet in effect and consequently the practice is not being enforced by the Department of Health.

The licensing of private health establishments takes place at a provincial level, through the applicable provincial department of health, and pursuant to provincial legislation or the General Licensing Regulations, which govern private hospitals and unattached operating theatre units under the National Health Act.

Subject to certain exclusions, a 'private hospital' is broadly defined in the General Licensing Regulations and includes an institution, building, or place that provides treatment and care in cases requiring medical treatment.

Under the General Licensing Regulations, no person may erect, alter, equip or in any other way prepare any premises for use as a private hospital without first having obtained the written approval of the relevant provincial department of health.

It is anticipated that, going forward, the requirement to obtain a Certificate of Need will be enforced in respect of all health establishments and that the licensing framework in respect of private healthcare facilities will be implemented at the level of the National Department of Health.

Under the Medical Schemes Regulations, all healthcare providers who issue accounts to members of medical schemes must include their practice code numbers (Practice Codes) on their accounts.

Practice Code Numbers (PCNs) are issued to private health establishments by the Board of Healthcare Funders of Southern Africa (BHF). The BHF can only issue PCNs to private health establishments that are duly licensed with a relevant provincial department of health.

iii Healthcare professionals

The Health Professions Act 56 of 1974 (HPA), and the regulations defining the scope of the profession of medicine published pursuant to the HPA (the HPA Regulations), set out the requirements for a medical practitioner to provide medical care in South Africa.

The HPA provides that no person shall be entitled to practise any registrable health profession within South Africa unless he or she is registered in accordance with the HPA.21

The HPA Regulations set out the particular acts deemed to pertain to the medical profession in South Africa, including the physical medical or clinical examination of any person, managing the health of a patient (prevention, treatment and rehabilitation) and prescribing, administering or providing any medicine, substance or medical device.

The HPA Regulations specifically require any person who wishes to perform any of the above-mentioned acts to apply in the prescribed manner to the Medical and Dental Professions Board as a medical practitioner and submit proof of having complied with the registration requirements.22

The application must include the qualification entitling the applicant to registration, together with such proof of identity and good character, and of authenticity and validity of the qualifications submitted, as may be required by the professional board concerned.

The HPA deals with, inter alia, the recognition by the Minister of Health, after consultation with the HPCSA, of foreign qualifications for purposes of registration as a South African medical practitioner.23

V NEGLIGENCE LIABILITY

i Overview

In South Africa, liability for medical malpractice depends on whether there was intentional or negligent wrongful conduct by the parties concerned, or whether they were vicariously liable for the wrongful acts or omissions of others.

These legal principles apply equally to the public and private healthcare sectors. The National Department of Health, provincial departments of health and private sector hospital bodies will be liable for the wrongful conduct of their administrators where, through maladministration, they have harmed patients by intentionally or negligently deviating from the standard of care that is required of them.

Malpractice

Medical malpractice embraces professional medical misconduct committed either intentionally or negligently. It includes the concept of 'professional medical negligence', but goes further to include intentional conduct. The principles of delict govern medical malpractice claims.

To bring a successful delictual action, the plaintiff must prove that:

  1. there was a voluntary act or omission by the defendant;
  2. the conduct was unlawful or wrongful (i.e., the infringement of a lawful right, such as the right to life or bodily integrity);
  3. the defendant had legal capacity;
  4. the defendant was at fault in the form of intention or negligence;
  5. the act or omission caused the loss to the plaintiff; and
  6. the plaintiff suffered loss or damage.

Negligence in general

Negligence in general means that a reasonable person would have foreseen the likelihood of harm and taken steps to guard against it. As a consequence, the conduct of the person in question falls short of the standard that the law expects of a reasonable person in the particular circumstances of the case.

Professional negligence

Professional negligence occurs when medical practitioners or other healthcare professionals, acting negligently, fail to exercise the degree of skill and care of a reasonably skilled practitioner in their field of practice.

Greater skill and care is expected of specialists and particularly in more complicated medical procedures. Therefore, general practitioners would be negligent if they undertook work for which they did not have the required specialist skills, unless it was an emergency, when the standard of care may be relaxed. In emergencies, the test would be whether the practitioner reacted as a reasonable practitioner in that branch of the profession would have reacted in a similar situation; this only applies if the emergency was not created by the practitioner concerned.

ii Notable cases

Afrox Healthcare Bpk v. Strydom 2002 (6) SA 21 (SCA)

This case has produced South Africa's most controversial decision relating to healthcare exemption clauses, sparking debate in many quarters. The relevant exemption clause indemnified the hospital, its employees and agents against all liability for damage or loss of any nature whatsoever, including consequential damages or special damages arising from any direct or indirect injury caused to the patient by act or omission. This exclusionary clause was upheld by the South African Supreme Court of Appeal and, in short, the Court held that such clauses were the norm, not the exception, and, as such, were sound business practice and not contrary to public policy.

MEC for Health and Social Development, Gauteng v. DZ obo WZ 2018 (1) SA 335 (CC)

The South African Constitutional Court was recently called upon to consider the application of the 'once-and-for-all' rule in the context of damages for medical negligence. The crisp legal question was whether this rule allows for payment of future expenses as and when the need arises, or by means of future provision of actual medical services. The Constitutional Court was also required to consider whether, alternatively, the rule should be developed or abolished. In response to these questions, the Court in its majority judgment confirmed that:

  1. damages due by law are to be awarded in money;
  2. the once-and-for-all rule requires that past and prospective damages be claimed and quantified in one action and that future damages may therefore not be paid in instalments; and
  3. a plaintiff may not be compensated by means of the actual rendering of medical services.

VI OWNERSHIP OF HEALTHCARE BUSINESSES

A healthcare professional may acquire a financial interest in a healthcare establishment, provided that all commercial terms related to the interest are negotiated on an arm's-length basis. The commercial agreement must be submitted to and approved by the HPCSA.

No conditions may be imposed in such agreements that would put healthcare professionals purchasing the interests into conflict with the Ethical Rules of Conduct issued by the HPCSA.

Financial or other rewards cannot be based upon admissions or specific targets for servicing patients. The healthcare professional may not participate in advertising or promotion of the healthcare establishment and may not advocate its preferential use.

Healthcare practitioners may only refer patients to any health establishment in which he or she, or a close family member or business associate has a financial interest if the interest has been declared to and approved by the HPCSA. In addition, the healthcare practitioner must disclose and discuss the interest with the patient before the referral. The referral will then be subject to the patient consenting.

VII COMMISSIONING AND PROCUREMENT

i Public health sector

Procurement in the public health sector is, inter alia, governed by the provisions of the following pieces of legislation:

  1. the Constitution;
  2. the Public Finance Management Act 1 of 1999 – at national and provincial government level;
  3. the Municipal Finance Management Act 56 of 2003 – at local government level; and
  4. the Preferential Procurement Policy Framework 5 of 2000.

The overarching requirement is that all public procurement must be in accordance with a system that is fair, equitable, transparent, competitive and cost-effective.24

The procurement of pharmaceutical products, medical devices and other services at national, provisional and local government level generally requires that either:

  1. a written quotation be obtained from as many suppliers as possible; or
  2. a competitive bid process be undertaken.25

An additional consideration in the public health sector is the Broad-Based Black Economic Empowerment status of services providers, which may have an impact on their ability to contract with the state.

ii Private health sector

It must be noted that in the private health sector, and especially where health services are funded by medical schemes, many medical schemes have entered into agreements with hospital groups and other service providers (also referred to as Designated Service Providers or DSPs), in an attempt to better manage and contain the costs of health services. Medical scheme members that choose to use healthcare service providers other than one of their medical scheme DSPs may be required to make co-payments.

VIII MARKETING AND PROMOTION OF SERVICES

Under the HPCSA Ethical Rules of Conduct, a practitioner may advertise his or her services, provided that the advertisement is not unprofessional, untruthful, deceptive or misleading, or causes consumers unwarranted anxiety that they may be suffering from any health condition.26

A practitioner shall not be permitted to canvass or tout or allow canvassing or touting to be done for patients on his or her behalf.

The Guidelines on Over-Servicing, Perverse Incentives and Related Matters, published by the HPCSA, state that healthcare professionals shall not advertise or endorse or encourage the use of any health establishment or orthodox medicine, complementary medicine, veterinary medicine, medical device or scheduled substance or health-related product or health-related service in a manner that unfairly promotes the practice of a particular healthcare practitioner or a healthcare facility for the purpose of financial gain or other valuable consideration.

A healthcare practitioner may not refer his or her patients to any health establishment or to any other healthcare professionals if that referral would constitute over-servicing.

IX FUTURE OUTLOOK AND NEW OPPORTUNITIES

Over the coming months and years it is expected that significant healthcare reforms will be formulated and adopted in South Africa. A key consideration is the current national government's efforts to move South Africa towards universal health coverage by formulating and implementing a National Health Insurance (NHI) scheme. The aim of the NHI scheme is to establish a single-payer and single-purchaser fund for all patients in South Africa.

Following its publication as a draft in 2018 and subsequent comments received from stakeholders, the National Health Insurance Bill (the NHI Bill) is in the process of being revised by the government.

It is understood that the NHI Bill will apply to public and private health establishments, including institutions, facilities, buildings or places, whether for profit or not, that are operated or designed to provide in-patient or outpatient treatment, diagnostic or therapeutic interventions, nursing, or rehabilitative, palliative, convalescent, preventative or other health services.

The Medical Schemes Amendment Bill was published for comment in 2018. This Bill proposes doing away with PMBs (see Section II.iii) and replacing them with 'basic benefits', but little guidance has been provided as to what these benefits would comprise.

In addition to the above, the south african competition commission is due to finalise its market inquiry into the public health sector and publish its final report and recommendations later this year. It is expected that various, and potentially far-reaching, recommendations for regulatory reforms in respect of public health sector funders, facilities and practitioners may be made.

X CONCLUSIONS

South Africa is one of the most industrialised countries in Africa. As illustrated above, the structure of the South African health sector provides unique challenges and opportunities. Many South African corporates in the private healthcare sector have developed innovative business models and products, which have allowed these companies to expand into developed jurisdictions in Europe and the Middle East.

Given the expected changes in the South African healthcare regulatory landscape, there is a unique opportunity for all stakeholders, including business, to have an impact on the reforms and developments that will shape the South African healthcare system.


Footnotes

1 Mandi Krebs is a senior associate and Abrianne Marais was formerly an associate at Hogan Lovells.

2 Section 27 of the Constitution of South Africa.

3 Section 2 of the National Health Act.

4 Schedule 4 of the Constitution of South Africa.

5 Section 5 of the National Health Act.

6 Paragraph 71 of the National Health Insurance Policy, National Department of Health.

7 Section 2(a)(i) of the National Health Act.

8 Paragraph 58 of the National Health Insurance Policy, National Department of Health.

9 Paragraph 77 of Chapter 5 of the Health Market Inquiry: Provisional Findings and Recommendation Report (July 2018), Competition Commission.

10 Page 16 of the Council for Medical Schemes (CMS) Annual Report 2017/2018.

11 Paragraph 5.2 of the General Household Survey 2018, Statistics South Africa.

12 Annual Report 2017/2018 of the CMS.

13 Paragraph 1 of the Explanatory Memorandum to the Second Draft Demarcation Regulations made under Section 70(2b) of the Short-Term Insurance Act, No. 53 of 1998, National Treasury.

14 Page 1 of the Media Statement: Health Insurance Policies to Complement Medical Schemes through an Enabling Regulatory Framework: Release of Final Demarcation Regulations, National Treasury.

15 Paragraph 1 of the Explanatory Memorandum to the Second Draft Demarcation Regulations made under Section 70(2b) of the Short-Term Insurance Act, No. 53 of 1998, National Treasury.

16 Section 4 of the National Health Act.

17 Section 4 of the National Health Act.

18 Paragraph 1.1 of the 2015 User Guide – UPFS 2015, National Department of Health.

19 Regulation 8 of the Medical Schemes Regulations.

20 Page 2 of the Media Statement: Health Insurance Policies to Complement Medical Schemes through an Enabling Regulatory Framework: Release of Final Demarcation Regulations, National Treasury.

21 Section 17 of the Health Professions Act 56 of 1974 (HPA).

22 Regulation 4 of the regulations published pursuant to the HPA.

23 Section 25 of the HPA.

24 Section 217(1) of the Constitution of South Africa.

25 National Treasury Practice Note No. 8 of 2007/2008 and Regulation 12(1) of the regulations published pursuant to the Municipal Finance Management Act 56 of 2003.

26 Item 3 of the Ethical Rules of Conduct issued by the Health Professions Council of South Africa.