Declaration Of Undesirable Business Practices - Government Gazette No 44469 - Dr D L Pearmain 12 August 2021 - Randwater ...

Declaration Of
  Undesirable Business
Practices – Government
       Gazette No 44469
              Dr D L Pearmain
               12 August 2021

The selection by a medical scheme of a healthcare provider
                 or group of providers as the preferred provider or providers
Declaration 23   to provide to its members the diagnosis, treatment and care
                 in respect of one of more prescribed minimum benefit
April 2021       conditions, namely as designated service providers, without
                 engaging in a fair procurement process which is fair,
                 equitable, transparent, competitive and cost effective.

                 The Council shall publish guidelines on selecting Designated
                 Service Providers for medical schemes within 180 days of
                 publication of this notice

When an organ of state in the national, provincial or local
sphere of government, or any other institution identified in
national legislation, contracts for goods or services, it must
do so in accordance with a system which is fair, equitable,
transparent, competitive and cost-effective.
The PFMA lists public institutions that are bound by it.
Medical Schemes are not included.

Constitution : Section 217

An accounting authority must ensure that the public
                 entity has and maintains -
Public Finance
Management       an appropriate procurement and provisioning system
                 which is fair, equitable, transparent, competitive and
Act s51(1)       cost-effective;

(a)(iii)         Every public entity must have an authority which must
                 be accountable for the purposes of this Act (PFMA
                 section 49(1))

                 “Public entity” means a national or provincial public
                 entity (PFMA s1)

PFMA Section 1 – National Public Entity
(a) a national government business enterprise; or
(b) a board, commission, company, corporation, fund or other entity
    (other than a national government business enterprise) which is -
   (i) established in terms of national legislation;
  (ii) fully or substantially funded either from the National Revenue Fund,
       or by way of a tax, levy or other money imposed in terms of national
       legislation; and
 (iii) accountable to Parliament;

PFMA Section 1 – Provincial Public Entity
(a) a provincial government business enterprise; or

(b) a board, commission, company, corporation, fund or other entity (other than a provincial
    government business enterprise) which is -

   (i) established in terms of legislation or a provincial constitution;

   (ii) fully or substantially funded either from a Provincial Revenue Fund or by way of a tax, levy or
        other money imposed in terms of legislation; and

   (iii) accountable to a provincial legislature;

Imposing a copayment in terms of Regulation 8(2)(b) that
                 exceeds the quantum of the difference between that
                charged by the medical scheme’s designated service
                 provider and that charged by a provider that is not a
              designated service provider of such scheme. This includes
               any other co-payments, which are unfair to members or
              beneficiaries or cannot otherwise be numerically justified.

Declaration
23 April
2021          The Council will publish guidelines on co-payments within
                  180 days after the publication of this declaration

Constitutional Court – Genesis Medical Scheme v
 Registrar of Medical Schemes 2017 (6) SA 1 (CC)
But the statute (MSA) nonetheless sees it as a 'business’. Why?
Because, by elementary entrepreneurial principle, a scheme must survive
on what it gets in.
And the statute requires that it balances its books while doing so. It
demands that schemes keep afloat in a fraught, competitive insurance,
reinsurance and healthcare market.
To keep afloat means keeping solvent — and this inevitably demands a
sensible, practical, realistic, business-based approach to managing and
accounting for both assets and liabilities.
The definition (of business of a medical scheme) is steeped in the
language of a business-based, contractual relationship

Legal Implications
The Registrar, CMS and the Minister have tried to make legislation
concerning medical schemes through the s 61 Declaration of an
undesirable business practice, contrary to the Constitution
The PFMA applies only to government entities, but now its procurement
principles will be applied to medical schemes via UBP Declaration.
Government is not in business.
Government is publicly accountable for procurement decisions because
the money it has must be used in the most efficient and effective ways to
carry out its constitutional mandates
Medical schemes are private entities, not organs of state. They are
private businesses that will not be bailed out by government funds if they
fail. No other private businesses are bound by s217 of the Constitution.

The UBP Declaration gives the CMS the power to
Legal          interfere with every single contract a medical
               scheme signs, or refuses to sign, with a supplier.
Implications
               It gives the CMS the power to order a medical
               scheme to contract with a particular supplier
               contrary to business principles and business-
               based decisions by the BOT

               It gives the CMS the power to demand disclosure
               to CMS, and therefore the public, of sensitive
               business relationships and contracts and
               competitive information of medical schemes

It brings contracts entered into by medical schemes within the
               scope of the criminal law
Legal
Implications   Section 61(4) of the MSA: No medical scheme or other person
               shall on or after the date of the Notice carry on the business
of UBP         practice referred to in the directive

Declaration    Section 66(1) of the MSA: Any person who contravenes any
               provision of this Act or fails to comply therewith shall…be
               guilty of an offence and liable on conviction to a fine or to
               imprisonment not exceeding five years or to both

               It is now potentially a crime to refuse to contract with a supplier
               who offers the same service at the same price as other
               contracted suppliers

It is now a crime to select a DSP if the
               procurement process is judged by the CMS to
Legal          be unfair, inequitable, anti-competitive, not
               transparent or cost-effective.
Implications
               The CMS has arrogated to itself the power to
               decide on this by including in the Declaration
               the fact that it will issue guidelines on both
               UBPs within 180 days.

               The Declaration, however, is effective as from
               the date of publication in the Gazette. (section
               61(4)

Terms of current contracts may have to be revised insofar as they do not comply with

The Effect On   or are inconsistent with the Declaration.

Current And     Medical schemes may no longer be able to guarantee patient volumes to DSPs

Future          DSPs may be able to claim breach of certain contractual terms if medical schemes are

Contracts       unable to comply with them.

                DSPs may want to re-negotiate current contracts and push the price up

                Medical schemes may not be able to avoid contracting with providers that are guilty of
                fraud, waste or abuse in the past or that have poor success rates or health outcomes
                for their members or that have been found guilty of unethical practice by the HPCSA

Medical schemes are less likely to be
                able to negotiate lower prices with
                providers meaning that contributions
                may increase

                     Medical schemes may have to reconsider
                     formularies, treatment protocols and other
                     methods contemplated in regulation 8(4)
                     for keeping costs down – may have to

Effect On
                     become stricter, narrower

Benefits And
Contributions              Medical schemes may not be able to
                           control contribution increases and keep
                           them below certain levels

Implications For Scheme ‘s BUSINESS

May have to immediately revise scheme rules on DSPs and co-payments
May have to immediately revise lists of designated service providers
May have to immediately revise provisions on co-payments
May have to immediately revise clinical protocols and guideline
Need to revise membership contributions
May need to revise hospital pre-authorisation systems
May need to revise managed care contracts insofar as DSPs and PMBs
are concerned

Industry wide not scheme specific – does not favor one scheme over another

The Value Of
Legal Opinions   Sets out legal principles and legal arguments applicable to all schemes

Procured By      Helps BOTS to focus on relevant legal issues, properly instruct scheme legal advisors and

BHF And How To
                 attorneys and get sound legal advice from them.

Use Them         Saves schemes money in getting their own legal opinions because it narrows down the legal
                 research necessary by advocates and attorneys

                 Written by a court recognized expert in health law and medical schemes law Cotty v Registrar
                 2021; CMS v Genesis Medical Scheme (SCA) 2016; Goliath v MEC for Health 2016 (SCA);
                 Stransham-Ford v Minister of Justice 2015; Oppelt v Department of Health 2016 (CC);
                 Sechaba Medical Solutions v Sekete 2015 SCA

BOTs have a legal duty to obtain expert advice on legal,
             accounting and business matters as required, or on any other
             matter of which the members of the board of trustees may lack
Way Foward   sufficient expertise (s57(4))

             Period for appeal ito S50 of the MSA is closed. May not have
             been the appropriate path anyway

             Litigation is recommended. The Notice puts schemes and BOTs
             in an untenable position. As many schemes as possible need to
             to litigate to avoid victimization by CMS, give BHF locus standi,
             lower the costs for each scheme individually

             Timescale: urgent