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Industry News

Public hospital inflation outstrips that of private hospitals

12 June 2008

In Categories: Industry News

Using statistics from sources outside the private hospital industry, T-Sec economist Mike Schüssler told delegates at the Hospital Association of South Africa’s (Hasa’s) annual conference that inflation in the private hospital sector was lower than in the state hospital sector.

Schüssler said that medical inflation generally increased faster than normal inflation in most countries around the world. According to Statistics SA he said, medical schemes had increased their prices the most, with medical scheme consumer price inflation over the period 2000 to 2007 standing at 158%. Private hospitals had increased their consumer prices by 74%.

Over the same period, public hospitals increased their total consumer prices by only 12,8%.
Schüssler said public hospitals only received around 2% of their income from consumers while private hospitals earned 100% of their revenue from consumers or medical schemes. Therefore, he said, public hospitals were funded by the tax payer and latest Inter Government Fiscal Review (IGFR) from National Treasury points out that funding grew by 10,2% annually from 2003/4 to 2006/7. Real after-inflation growth, according to the IGFR, will average 4% from 2003/4 to 2009/10.

Looking at the cost per admission at public hospitals since 2000, the funding cost per admission had increased by 111,7% Schüssler said, adding that in four out of the last eight years the cost increase per admission has been over 10%.

According to the IGFR, public hospitals have seen an increase of just half a percent in admissions since 2000. During this same period, the total SA population grew by 8,5% and the mortality rate increased by 42% between 2000 and 2005.

Using Council of Medical Schemes annual reports from 2001 to 2006, Schüssler showed that the total cost per admission to private hospitals increased by 22,1%. The reports from 2001 to 2006 demonstrated that the total cost per admission to public hospitals increased by 57.7%. Public hospital cost inflation is likely to increase over 10% again as salaries will increase by over 10% in the coming year (as per the Public Service Commission).

According to Statistics SA, the inflation rate for medical schemes was 11,8% in 2007 while private hospitals’ inflation was 4,9%. National Treasury data puts the increase in funding per admission in public hospitals at 16,7%.

Private hospitals therefore had the lowest inflation rate among all these services in South Africa, Schüssler concluded.

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