Abstract
The Competition Commission (CC) commenced with an enquiry into South Africa’s private healthcare sector at the beginning of 2014, the outcome of which could have far-reaching consequences for the medical industry in South Africa. The panel appointed to consider competition in the private healthcare sector has indicated that they are interested in understanding increased consolidation in the private hospital market and the effect this may have on competitive dynamics. This article considers historical concentration trends in the private hospital market from 2000 to 2012. In addition it also deals with changes in market structure in the medical scheme and administrator markets. These trends provide a complete picture of market structure changes and the implications for relative bargaining power of the various parties. It finds that whereas the market concentration of private hospitals has remained relatively stable since 2004, the market concentration of medical schemes and administrators has increased over this period.
Highlights
The 2014/15 market enquiry by the South African Competition Commission (CC) into the private healthcare sector sparked renewed interest in the level of concentration in this sector
This article aims to provide a factual review of historic market concentration trends for private hospitals, medical schemes and medical scheme administrators in South Africa, in order to gain a deeper understanding of relative bargaining positions
We find that concentration in the private hospital market has remained stable since 2004, following the Tribunal ruling in 2004, prohibiting collective bargaining by Hospital Association of South Africa (HASA), Board of Healthcare Funders (BHF) and South African Medical Association (SAMA)
Summary
The 2014/15 market enquiry by the South African Competition Commission (CC) into the private healthcare sector sparked renewed interest in the level of concentration in this sector This is important as there is an assumed link in the competition literature between market structure and market power (the ability to increase prices). We first discuss the background and context to better understand the market concentration debate in South Africa’s private health sector, after which we discuss the methods commonly used to measure market concentration, with specific focus on the Herfindahl-Hirschman Index (HHI) This is followed by an exploration of the international literature regarding the measurement of market concentration for hospitals and health insurers (medical schemes in the South African context). We present the results from our South African analysis and elaborate upon the contribution of our findings to the literature
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