Let Doctors own Hospitals

The proposed 26% cap on doctors’ joint shareholding in hospitals is proving contentious. Some listed private hospital groups are objecting to it, as is the representative body of independent private hospitals.
The Health Professions Council of SA (HPCSA) has made a submission to the Competition Commission to limit shareholding of doctors in hospitals to 26%. One of its arguments is that if doctors own hospitals they might try to generate excessive returns through self-referral and over-servicing. It seems the HPCSA is more concerned about individual hospitals where doctors might have or might build up a private equity stake. Medi Clinic says some of the hospitals it now owns were originally established and financed by doctors. Without that, Medi-Clinic says, those hospitals might not have been built at all. Otto Wypkema, NHN CEO, says that medical schemes “have designed very sophisticated pre- and ongoing authorization processes” that would rule out over-servicing by doctors. “The HPCSA must have a jaundiced view of its members,” he says.

The counter argument is that doctors with an ownership stake in a hospital would be motivated to ensure the facility was well run, provided good services and kept costs down. Wypkema says the 26% cap discriminates against independently owned hospitals. Individual doctors can buy shares of listed hospitals on the JSE.

He also asks who would be willing to buy the 74% excess equity in a clinic or hospital. Independent hospitals are already vulnerable to takeovers from larger groups. While the listed hospital groups have been considered sound, defensive investments Wypkema questions whether that’s still the case in the current environment. “It’s possible potential investors may well choose to invest elsewhere. The central issue is the view that doctors and medical professional can be trusted with people’s lives but not with their money. It’s infuriating for doctors that they stand accused of over-servicing or profiting from hospital ownership. In fact, in our experience the opposite is true: doctors who own hospitals tend to go the extra mile to ensure their establishments have reputations for good clinical outcomes. How is it that those formulating health policy can identify a need for independent hospitals and alternative facilities on the one hand and seek to destroy their viability on the other? In our view the regulatory bodies should work together on this issue.” Private hospital groups hope new Health Minister Barbara Hogan will pull the disparate parts of Government health policy together. Submissions and proposed amendments to Acts have been contradictory in the past.