Notices > Notice in terms of Section 10(7) of the Competition Act, 1998 (As Amended): Day Hospital Association - Conditional Exemption Granted

Notice No. 1977

01 April 2022

GG 46164

Competition Commission South Africa

On 10 February 2021, the Day Hospital Association (“DHA”) and its members, hereinafter jointly referred to as (“the Applicants”) filed an application for an exemption (“the Application”) in terms of Section 10(3)(b)(ii) of the Competition Act No 89 of 1998, as amended (“the Competition Act”). The exemption was requested for a period of five (5) years.

The DHA is a representative body of independent, registered, and private day hospitals across South Africa. Its’ members currently form part of the National Hospitals Network exemption (“NHN exemption”). The DHA independently submitted the current exemption application to the Commission for the same conduct exempted under the NHN exemption i.e.: (1) Collective Bargaining, (2) Centralised Procurement and (3) Alternative Reimbursement Models. According to the DHA, the reason for this separate application, is that the NHN exemption which permits the NHN to bargain collectively with medical schemes on behalf of its members in relation to tariffs and other matters, is not sufficient for members of the DHA since the business model of a day hospital requires a unique approach.

In their Application, the Applicants have relied on the objectives set out in Section 10(3)(b)(ii) of the Competition Act which allows an exemption of agreements and/or practices that promote the effective entry into, participation in or expansion within a market by small and medium businesses, or firms controlled or owned by historically disadvantaged persons.

4.	The scope of the application for exemption is in terms of a commercial agreement and/or practices in the industry as they relate to:

Collective Bargaining

4.1.	According to the DHA, should the exemption be granted, it will be able to negotiate prices with medical schemes enabling its members to collectively implement such prices.

Centralised Procurement

4.2.	The DHA has submitted that should the exemption be granted, it will be able to engage in centralised procurement through a ‘request for proposal’ to suppliers for the surgical cost basket in exchange for participation in the preferred provider list.

4.3.	According to the DHA, suppliers adding value will be instrumental to the success of the DHA. This will ensure the highest standards of goods, at the lowest possible prices and will essentially support its’ objective to deliver the highest quality of care, at the most cost-efficient price.

Alternative Reimbursement Models

4.4.

The DHA is of the view that alternative reimbursement model (“ARM”), which is a form of payment restructuring that incorporates quality and total cost of care into reimbursement rather than a traditional fee-for-service structure, could pertain to a specific clinical condition, a care episode, or a population group. If allowed, the DHA will also be able to engage in global fee negotiations with medical schemes and the state.

The exemption application was brought in terms of section 10(1) in conjunction with sub-sections 10(2) and 10(3) of the Competition Act. Section 10(1) of the Competition Act allows a firm to apply to the Commission to exempt an agreement, a practice and a category of agreements from the provisions of Chapter 2 of the Competition Act. The DHA relied on the objective set out in Section 10(3)(b)(ii) of the Competition Act, which allows an exemption of agreements and/or practices that promote the effective entry into, participation in or expansion within a market by small and medium businesses or firms controlled or owned by historically disadvantaged persons.

6.	The Commission’s investigation revealed that:

6.1.	the conduct of DHA’s members would result in a contravention of Section 4 of the Competition Act, as the application relates to information exchange agreements and/or practices between parties in a horizontal relationship;

6.2.	the sought conduct will contribute to “the promotion of the effective entry into, participation in or expansion within a market by small and medium businesses or firms controlled or owned by historically disadvantaged persons” within the private healthcare sector.

After consideration of the exemption application, the Commission has decided to grant DHA a conditional exemption for a period of 5 years (five) years, commencing from 1 June 2022. The DHA will use the period between the approval date and 31 May 2022 to set up infrastructure, operations, and strategy required to implement the conduct exempted by the Commission. The exemption will be subject to monitoring mechanisms which the Commission has put in place to ensure that the objectives set out in the application are met by the exemption. The Conditions and Monitoring Mechanisms are attached below as Error! Reference source not found.

Notice is hereby given in terms of Section 10(7) of the Competition Act regarding the Commission’s decision to grant this exemption. The Applicants and any other person with a substantial material interest affected by this decision may lodge an appeal to the Competition Tribunal in the prescribed manner in terms of Section 10(8) of the Competition Act. Further queries should be directed to:

Mr Tlabo Mabye/ Mr Derrick Bowles / Ms Priya Reddy

Competition Commission South Africa

Market Conduct Division

Private Bag X23

Lynnwood Ridge

0040

Email: [email protected] / [email protected] / [email protected]

In correspondence kindly refer to the following case number: 2021Feb0013

Competition Act, 1998 (Act No. 89 of 1998)

Notices

Notice in terms of Section 10(7) of the Competition Act, 1998 (As Amended): Day Hospital Association - Conditional Exemption Granted

Notice No. 1977 of 2022