Essay: Role of managers in medical aids and what legislation expects

Management falls under the micro or intra-organisational section of business ethics (Kretzschmar, Prinsloo, Prozesky, Rossouw, Sander, Siebrits, Woermann, 2012: 21). This section deals with the relationships between the managers and the employees (Kretzschmar, 2012). Referring back to the definition of ethics; if a manager (self) treats their employees (others) with respect and kindness (good) , they will receive respect and efficiency in return (Kretzschmar ,2012). This statement is also the truth to a business ethics myth; nice guys come second, where you can either be nice or successful (Kretzschmar, 2012). In order to understand whether or not top management salaries of medical aids are ethical or not, the understanding of the role of a manager would be essential.

A manager in any institution has four main tasks; planning, organising, leading and controlling (Drotskie, Nieuwenhuizen&Oosthuizen, 2014). Planning is what the organisation plans to achieve in the future and how they will go about doing so (Drotskie, Nieuwenhuizen&Oosthuizen, 2014) . Organising is the delegation and distribution of certain tasks and activities (Drotskie, Nieuwenhuizen&Oosthuizen, 2014). Leading is the guiding of employees in such a way that their work almost becomes voluntary (Drotskie, Nieuwenhuizen&Oosthuizen, 2014). Finally, controlling is monitoring the performance of the company and fixing the actions that are incorrect (Drotskie, Nieuwenhuizen&Oosthuizen , 2014).

The question then is; are the managers of South African medical aids doing their jobs effectively? If not, why are they still getting salary increases more than that of inflation, if the service in private hospitals keep on deteriorating? What have they done for their salaries to increase?
Essentially, the character of any manager is to reflect values such as; integrity, honesty, diligence and commitment, both to the organisation as well as to the employees that support the organisation (McCloud, 2002). According to John Ele-OjoAtaguba (2012), medical aid management receive high salaries because, to put it simply, they can. The link between income levels and health has been recognised by various studies, as outlined in the study done by John Ele-OjoAtaguba (2012). A healthy population is vital for a growing economy, however, one of the key dimensions for assessing the performance of health systems is to look at the ‘fairness’ of its financing system (Ataguba, 2012). If there is unevenness in the distribution of salaries between management and the general working staff, it spells disaster for the overall health system which includes health care facilities, such as hospitals. If there is an ‘unfairness’ in salary distribution then the ripple effect will definitely impact health providing institutions, like hospitals (McCloud, 2012).

In 2010 the trustees remuneration for Discovery Health was R 1 552 000, in 2013 remuneration for trustees had increased by R1 623 000 (more than half of the remuneration expense in 2010) making the trustees remuneration in 2013 R3 175 000 (Discovery; 2013). A key concern raised here, is the question of accountability; if there is no system in place checking up on the distribution of salaries then accountability becomes a core concern. Without proper accountability, medical aids cannot serve the health care system in a ‘fair’ way. Instead of the top managers salaries increasing, this should be subsidized to the users monthly premiums or to additional premiums.

The opinions expressed above draw attention to the fact that managers are not doing their jobs correctly. The inverse relationship between rising salaries and deteriorating health care indicate what many studies have already revealed, South Africa is in for a crisis where the statement; ‘the rich get richer and the poor get poorer’, holds true. Health care markets are extremely complex as they are riddled with imperfect information. Medical administrators negotiate tariffs directly with the rest of the healthcare system and as a result play a vital role in finding ways to reduce costs. However, their salary increases are more than inflation. The rate administrators charge is not monitored, hence the salary increases being above inflation (Helse, Moeketse, Mtombeni, Robb, Vilakazi& Wen, 2012).

‘ Legislation

The basis of the South African health system lies within the National Health Act, 61 of 2003(). Although legislation is passed to better a country, not all legislation is ethical. For example, abortion is seen as being unethical, however legislation allows it. So being legislation doesn’t make it ethical.
In chapter two of the National Health Act, 61 of 2003 it states that a hospital cannot refuse to treat a patient when there is an emergency. It also states that a person has the right to make decisions regarding their own health (, 2012).

The following table represents the recent improvements in South Africans legislation regarding health, this will help give a better understanding as to where medical aids, hospitals and individuals fit into the health system and the rights that they have.
Where Legislation can be Found Content
National Health Amendments Bill, 2010 This ensures that all healthcare providers maintain the minimum standards through an independent entity. (, 2012).
Medicine and Related Substances Act, 59 of 2002 This ensures that the average individual can afford to purchase medicine. Not making medicine ridiculously expensive. (, 2012).
Medical Schemes Act,1998 This stops medical aids from providing schemes to individuals that are too old or critically ill. (, 2012).
Choice on termination of pregnancy Act, 91 of 1996 This legalizes abortion and allows protection to the individual because it may seem unethical. This applies to both public and private hospitals. (, 2012).
Tobacco Products control Amendments Act,23 of 2007 This stops individuals from smoking in public areas and ensures that warnings are provided to the individual when purchasing cigarettes or anything that relates to smoking. (, 2012).
Nursing Act, 2005 Nurses have to do community service. (, 2012).
Mental Healthcare Act, 2002 This entails an introduction of a new type of mental care. (, 2012).
Pharmacy Amendment Act, 2000 This allows individuals who are not pharmacists to own pharmacies, as long as it is in their interest to increase access to medicine. (, 2012).

Legislation is one way for the government to intervene with the ethical question being asked. Although the government has recently passed legislation to improve South Africas health system, it is simply not enough! The government should also subsidize medial aid, allowing medical services to become more affordable for individuals.

‘ Comparison
‘ The comparison of the three chosen medical Aids

The following table shows the comparison of the three (3) medical aids; Discovery, Momentum and Medi-clinic, between their highest, medium and lowest and benefits of their packages.
Medical Aid Highest Package Medium Package Lowest Package
Discovery The Executive Plan:
‘ Unlimited cover in any private hospital (including private ward cover).
‘ Guaranteed full cover of in hospital specialists, up to 300% of the Discovery health rate.
‘ Unlimited benefit for your day to day healthcare needs.
‘ Access to specialised and advanced medical care in South Africa and abroad.
‘ Travel emergency cover.
‘ Additional cover when medical savings run out The Delta Plan:
‘ Unlimited private hospital cover.
‘ Guaranteed full cover of in hospital specialists, up to 200% of the Discovery health rate.
‘ Unlimited benefit for your day to day healthcare needs.
‘ Access to specialized and advanced medical care in South Africa and abroad.
‘ Travel emergency cover.
‘ Additional cover when medical savings run out.

The Essential Package:
‘ Unlimited private hospital cover.
‘ Guaranteed full cover of in hospital specialists, up to 100%-200% of the Discovery health rate.
‘ Unlimited benefit for your day to day healthcare needs.
‘ Access to specialized and advanced medical care in South Africa and abroad.
‘ Travel emergency cover.
‘ Additional cover when medical savings run out.

Momentum The summit option:
‘ Associated specialists are covered in full. Other specialists are covered up to 300% of the momentum health rate.
‘ Hospital expenses covered in full at a negotiated rate.
‘ Unlimited fees to the family for the year(medical expenses)
‘ Limited treatment of chronic benefits of 7800 per family per year (for 36 conditions) and unlimited (for 26 conditions).
‘ Day to day benefits: savings are allocated at 25% of total contributions, and additional extended cover.
‘ Additional cover for medical expenses can be negotiated to your budget of expenditure. The Incentive option:
‘ Associated specialists are covered in full. Other specialists are covered up to 200% of the momentum health rate.
‘ Hospital expenses covered in full at a negotiated rate.
‘ Limited fees to the family for the year.
‘ Limited treatment of chronic benefits of 7800 per family per year.
‘ Day to day benefits: savings are allocated at 10% of total contributions.
‘ Additional cover for medical expenses can be negotiated to your budget of expenditure. The Ingwe option:
‘ Specialists covered up to 100% of the momentum health rate.
‘ Hospital expenses covered in full at a negotiated rate.
‘ Limited fees to R1060 000 per family per year.
‘ Day to day benefits such as primary care (doctor visits and medication) and secondary care (specialist visits).
‘ Additional cover for medical expenses can be negotiated to your budget of expenditure.
‘ Unlimited treatment of chronic benefits.

Notes to the table above:
‘ Each package has been precisely and comprehensively selected to highlight the differences and similarities contained within each package that ultimately affect the price of the chosen package.
‘ Each package (Highest, Medium, Lowest) have great similarities to each other, but due to the slight differences contained, the price of each package and benefits related are affected.
‘ Health rates: This is the rate set by the medical scheme at which claims and services for healthcare providers (hospitals, pharmacies and healthcare professionals) will be paid.

‘ National versus International (Health care and Medical Aids)

‘ Ranking of healthcare sector against international competitors
According to the world economic forum South Africa has a lot of aspects it is well ranked in but in comparison to its international counterparts there are some issues worth looking at. In order to further enhance its competitiveness the country will need to address some of its weaknesses, The World Economic Forum ranks South Africa 95th in the labour efficiency therefore out of 144 countries South Africa does not perform well. When this is looked at in terms of the healthcare industry it is an indication that the healthcare industry lacks efficiency which could be attributed to factors such as the lack of high standards of education and training for healthcare professionals. If affirmative action (the preferential treatment of those previously disadvantaged in order to correct the wrongs of the past) is used to select candidates in this sector, the effect can be seen in this low ranking of labour efficiency (World Economic Forum, 2012, pg.15).

We have looked at the best ranking countries in healthcare (When trying to place the countries in an index the cost and quality of the healthcare service is considered) to try and see what the contributing factors are to a better healthcare system that can be implemented in South Africa (‘SA hereafter’). In this way the lack of adequate healthcare both in the private and public sector could improve. According to the World Health Organisation the country with the best healthcare system is France. Interestingly enough the French healthcare system relies on both the private and public sector for its healthcare, the healthcare service is paid for mainly by the government funds and another portion is paid for by the private medical aids which the majority have, this is similar to the system South Africa implemented however the contribution by the SA government is significantly lower than the contribution made by the French. The majority of the ailing population do not pay any of their bills. All their medical expenses are taken care of by the state (the coverage includes surgeries, therapy and drugs). The funding from all of this is received mainly from the taxes which the French government collects from its people and enterprises. In France many of their medical cost are taken care of by the state and medical aids (most of which is paid for by the employer), this then means that there is very little to none of the cost sharing that happens in our country. In our country many can even be turned away from hospitals due to the lack of funds either in the form of not having a medical aid or not having actual cash as a deposit for the services that will be rendered, often times being turned away for a small or minor illness which could lead to even greater medical ailments that could have been prevented if treated immediately.

South Africa needs to have an efficient method of funding its healthcare as to help prevent and reduce the ever rising mortality rate in the country. Perhaps the best possible solution to ensuring that the most important issues (Quality, patient satisfaction and mortality) are resolved quicker, is by creating laws that will force all government personnel, providers of healthcare services, as well as managers and directors of medical aids to all by law be required to have treatments from state hospitals. This will create the categorical imperative of universalisation (‘Deontological Theory ‘ Immanuel Kant’). In this way they will have a better understanding of what it is like to be on the receiving end of this treatment and as a result work on improving it to a higher standard.

‘ Increase of premiums beyond Inflation
In an article by Laura du Preez, it was found that members of discovery health medical aid scheme would pay more on their premiums could be expected to increase by 9.9 percent in average within the 2015 year. The Council for Medical Schemes has instructed schemes to justify contribution increases that exceed the inflation rate. Currently the inflation rate is 6.6 percent and this increase of 9.9 percent is three points greater than that. Discovery health went on further to state that the increase would be for all benefits excluding claims on oncology as it had a 99 % claim in this field and therefore chose to exclude it. This makes one question the scheme as this is a clear diversion from paying out claims to make more of a profit but the patients in need of the service have to fund their own medical expenses although their premiums increase. This is clearly an unethical decision as this only ensures the interests (good) of discovery(self) and not that of their clients (others) (Du Preez, 2014)

‘ What is required of medical aids?

The Council for Medical Schemes (CMS) is the government agency which is responsible for regulating the private medical aid industry. The rate at which medical aid premiums increase if far greater than that of inflation and salary increases, this makes it less and less affordable to have medical aid and should this sort of trend continue the medical aid expense will become too expensive for consumers to consider. ‘The top three categories of payments by medical schemes were to hospitals (35.3%), specialists (24.5%) and medicines (16%) ‘ Council for Medical Schemes’. why is it then that although the highest category of payments made was to hospitals that the services at the private hospitals decrease and often times patients are refused admittance unless a deposit is made? Every medical scheme is required by law to provide certain prescribed minimum benefits (PMB’s), regardless of the benefit option. So why is it that this is still an issue when the schemes are required to cover some of the most pressing and expensive medical conditions by law? This then means that the medical aid scheme should cover for these PMB’s from their own funds and not use the savings from their clients. If a scheme is found to not be adhering to this there could be serious legal and financial implications that would lead to the demise of the fund.

‘ Prescribed Minimum benefits:
In 1998 the new medical schemes legislation responded to various challenges that they were faced with. They introduced the Prescribed Minimum Benefits (PMB) which was compulsory for all medical aid schemes. These prohibited age, medical history and status of one’s health discrimination. The contributions that are to be made by the various parties were to be determined upon review of their income and their number of dependents.
The PMB implemented the following criteria:
‘ Psychiatric care for a period of 3 weeks per inpatient.
‘ Substance abuse and drug rehabilitation.
‘ STI’s and STD’s.
‘ Comfort care and pain relief of imminent death.
‘ Infertility.
Many of these now are seen as Exclusions in the medical aid schemes. **
‘ Medical Aid Contributions (‘MAC’ hereafter)
The new act was responsible for the heavy increases of the contributions of the Medical aid schemes. There were various changes to the act that affected the costing of the medical aid schemes such as:

‘ Number of dependents primary and secondary. Primary being the immediate dependents such as connected first persons (children) and secondary being the second degree of connected persons (parents).
‘ The schemes must pay for treatments of a wider range of ailments, including HIV and AIDS, organ transplants and TB.
‘ Payments of in hospital treatments of any infections and illnesses that are AIDS related.

Tim Mathis, director of TMS30X30 claims that due to the latest trends in medical aids schemes many of the clients are unaware of what they are actually paying for and this makes it difficult for them to be positive about their schemes. According to a local survey by PWC they attribute the increase to the lack of medical practitioners and specialists. Another reason for the unsustainable increases is that the medical aid schemes have a prescribed minimum benefits regulation they must adhere to which makes it difficult for them to try and offer a more affordable medical aid package to their clients. This also means that the medical aids cannot reach the ever growing low- income population group to try and make packages for this market and therefore have to try capitalising on the markets they do have and they do so by increasing the monthly premiums each year. The burden of regulation on medical aids is detrimental to members’ interests.’ When Discovery Holdings records healthy profits, members of the Discovery fund could wonder why their money is fuelling the profit of a company instead of being paid out in benefits’ (Mathis).

Many are unaware that the medical aid contribution is split up into two parts which is the contribution itself and the fee which goes to the administrator where discovery is concerned the fund and administrator have the same name and leads to confusion towards their clients. (Jeanette Clark)

‘ State of National Hospitals in South Africa
‘Inspectors found that maternity wards were a disaster.’ (Mapumulo, 2014)
The above statement was found in an article written and published by city press. The article also stated that 93% of hospitals did not have sufficient functional and essential equipment that are needed to keep mothers and their babies safe.

Maternity wards should be on a hospitals priority list as they are the first home or first environment a new born baby is exposed to. New born babies as well as their birth mothers are vulnerable after birth takes place. New born babies are especially susceptible to disease and require the correct facilities and sanitation to ensure their health remains where it should be as they continue to adjust to their environment. If this environment is unhealthy the mortality rate would increase rapidly which is a negative image on a countries economy.

There is an-automatic perception that private hospitals are ‘better than’ public hospitals. However due to further exploration, more nuanced perceptions and acknowledgements of positive and negative components of each sector emerged.

Health Minister Aaron Motsoaledi indicated how appalled he was by the results produced by the National Health Care Facilities Baseline Audit carried out at the beginning of 2014. The audit not only indicated the state of hospitals but also included the terrible state of various clinic as well.

Cleanliness, infection control, drug stocks, staff attitude, patient safety and waiting times are extremely important factors which are considered before a particular hospital may be considered efficient and up to standard. A recent survey conducted in 2014 produced shocking results in terms of the standards of hospitals across South Africa. According to ZinhleMapumulo (2014) only one out of the 394 hospitals which were audited met the required standards in terms of the above mentioned factors.

The hospitals infrastructure, condition of medical equipment, opening hours, work load, staff numbers and standards were also investigated in five priority areas, namely maternity wards, infection control, safety, staff attitudes and availability of equipment and facilities, which gave a further indication of the state of hospitals

‘ Poor maternity wards
‘Inspectors found that maternity wards were a disaster.’ (Mapumulo, 2014)
The above statement was found in an article written and published by city press. The article also stated that 93% of hospitals did not have sufficient functional and essential equipment that are needed to keep mothers and their babies safe.

Maternity wards should be on a hospitals priority list as they are the first home or first environment a new born baby is exposed to. New born babies as well as their birth mothers are vulnerable after birth takes place. New born babies are especially susceptible to disease and require the correct facilities and sanitation to ensure their health remains where it should be as they continue to adjust to their environment. If this environment is unhealthy the mortality rate would increase rapidly which is a negative image on a countries economy.

‘ Infection control
‘Approximately 32 of 3’880 hospitals and clinics comply with infection control guidelines set out by the health requirements act. This is an appalling score of approximately 18%. These findings are alarming, as the sanitation and infection control within hospitals are meant to be immaculate. There are people constantly entering and departing from hospitals throughout the day, on a daily basis, providing various opportunities for the spread of harmful viruses and infections. Patients have open wounds and are weak as a result of diseases or viral attacks on their immune systems. Various surgeries are performed throughout the day, therefore there is ”a serious health risk and the risk of cross-infection was very high’.’ (Mapumulo, 2014)

‘ Safety
Only about 2 in 3 880 facilities could guarantee the safety of their patients which is only a mere fraction to where it should be. This is an extremely important factor to take note of especially in a country where the crime rate is quite high.

‘ Staff attitudes
A number of policies aimed at improving the relations between health care workers and patients have been instituted because of the amount of rudeness, random acts of unkindness, physical assault, and neglect by nurses that have been reported (McIntyre et al., 2007a, Coovadia et al., 2009). These policies include the Batho Pele Strategy, the Patients’ Rights Charter and other interventions such as client satisfaction surveys and complaints boxes. Evidence, however, demonstrates that very little has changed since the time of implementation.(Schneider et al., 2007; McIntyre et al., 2007a; Coovadia et al., 2009)

Staff attitudes towards patients are alarming. ‘An average of 30% was awarded to the attitudes’ (Mapumulo, 2014) of staff members which indicate how poorly patients are being treated in hospitals. Only a quarter of staff have caring attitudes. The poor attitudes of nurses towards patients could be as a result of being under paid, making nurses feel that they should only put in as much effort as the remuneration they receive. This ties into the morals and ethical values of the nurses. Going into the health care occupation an individual’s main motivation should be to help others, thus their actions must be for greater good of those in need of their service.

The actions of nurses should be for the greater good (being hospitable, friendly and helpful) for themselves (the hospital) and others (the patients).

Mill’s Utilitarian Theory is one of the three theories which provide guidance on when an action or decision can be regarded as moral or not. Utilitarian ethics supports the ‘greatest happiness principle’ meaning that an individual’s actions should be of such a nature that it results in ‘happiness to the majority of those affected by the specific action’ (Kretzschmar, Prinsloo, Prozesky, Rossouw, Sander, Siebrits, Woermann, 2012:81). Staff must therefore make decisions and act in such a manner that it makes the greatest amount of patients happy.

Kant’s Deontological Theory deals with deontological ethics which states that morality depends on the moral quality of one’s actions. The theory indicates that an individual has a duty to perform specific actions, thus the staff of hospitals and clinics have a duty to care and treat patients in an appropriate manner.

‘ Availability of equipment.

Private hospitals have the most modern and up to date equipment and the equipment also lasts munch longer in comparison to public hospitals. Public hospitals have good equipment, but due to the excessive usage of the equipment and facilities they get damaged more often than those in a private hospitals.

Although private hospitals have all the resources available at their disposal an individual may not always have access to these services even though he/she has medical aid. It has been proven on countless occasions that if an individual fails to pay a single months premiums, they are disqualified from these services. Certain hospitals refuse to provide medical assistance claiming that the medical aid does not cover the expense or that the medical aid does not cover that particular hospital. Therefore belong to a medical aid is not always beneficial to an individual especially in cases of distress and emergency.

The above mentioned factors pertaining to hospitals relates to an ethical dimension, more specifically the micro- economic or intra-organisational dimension of business ethics. The micro-economic dimension relates to the relationship between individuals and economic activity within the organisation. In the micro-economic dimension, concentration is placed ‘on the moral dimension of business practices, policies, behavior and decisions that occurs within a business. The abovementioned concerns associated with the attitudes of staff are an example of intra-organisational ethics as the attitudes of staff depend on how they are treated. The image of the hospital is also affected by how patients are treated, which ‘relates back to the three concepts that are inherent in the definition of ethics namely good, self and other.’ (Kretzschmar, Prinsloo, Prozesky, Rossouw, Sander, Siebrits, Woermann, 2012:81)

‘ Service in Public versus Private Hospitals

A general belief exists amongst majority of people; that private hospitals provide better services than most public hospitals in South Africa. There are, however, various factors that can prove this belief to be incorrect.
‘ The formation of private and public hospitals in South Africa

The apartheid regime saw a large divide in the health sector, with a total of fourteen different health departments, and with particular hospitals being allocated to individuals based on their racial group (, 2012). Majority of the hospitals available were only allowed to be used by the white minority population. It was only after the first democratic election that this departmental division was erased and the unification of the health sector as we know it today was introduced in the two sectors, namely public and private (Naidoo, 2012).

‘ Similarities between public and private hospitals

As the state of private hospitals has begun deteriorating there are many similarities between public and private sector hospitals. Such similarities include: funding received, costs of procedures, quality of workforce and shortages of doctors. As at 2012, it was calculated that 8,8% of South Africa’s GDP was spent on healthcare, with just more than half being allocated to the public sector and the remainder to the private sector (, 2012). A study conducted by actuarial scientist ShivaniRamjee found that the average difference in cost per admission is a mere 5,7% higher in private hospitals than it is at public hospitals (Kahn, 2013). Costs of medical supplies in both sectors have seen a drastic increase in the prices charged by hospitals due to inflation. Medical aid companies have had no choice over recent years but to increase the price of their premiums and reduce the benefits that members can receive from their plans (Andrew, 2012). The shortage of doctors is a problem that is being faced by hospitals in both sectors where there it is estimated that there is one doctor in South Africa for every 1000 people (, 2012). It is this shortage that has seen south Africa allocate R1,2 billion in their current 2015 budget to fund contracts for general practitioners (National Treasury, 2015).

7.3 Implementation of National Health Insurance

The state and service of hospitals has been a growing concern in South Africa for many years and has thus seen extensive efforts made by South African government to address such issues (Malan, 2013). One such effort is The National Health Insurance policy (NHI); which is still to be implemented. This health system aims to create equity between the public and private health sector, not only in terms of providing affordable services, but to also ensure that hospitals in both sectors are managed in a similar way (, 2012).

7.4 Service issues within private hospitals

The current health minister, had stated in an interview that he prefers to use public hospitals as a result of several incidents where the service in private hospitals was unsatisfactory (Malan, 2013). He had given an example of a time he had brought his son to a private hospital and during his four day admission, had not been given a diagnosis. Upon his transfer to a public hospital; it had only taken a mere four hours for the professors to generate a diagnosis and conduct a successful operation. Many newly qualified doctors spend a year in public hospitals which are understaffed, this is an indication that public hospitals are continuously being kept up to date with new medical breakthroughs that are being taught in universities.

7.5 Price of services rendered in private and public sector hospitals

Patients who seek medical attention at private hospitals are inclined to pay much higher rates for services rendered by the hospital than they would at a public facility. The reason for these higher rates is due to taxation that private hospitals are inclined to pay and the increased cost of medication that they use (Kahn, 2013). Public hospitals, however, categorise their clients into three separate groups. These groups including: those who are required to pay full amounts for medical bills (this is based on an individual’s monthly salary, the rate being R6000 per month as at 2012), those receiving less than the benchmark salary per month and qualify for a subsidy for their medical costs incurred and finally those individuals who are unemployed and therefore qualify for free healthcare (Kahn, 2012). It was stated by the minister of health that all doctors that work within the private sector have been trained by government doctors that are employed within public hospitals (Malan, 2013). Many specialists work part- time in public hospitals even whilst being employed by private hospitals. This is an indication that patients have to pay extremely inflated prices at private institutions even whilst the exact same service is being offered at affordable prices within state hospitals.

7.6 Medical aid as a form of payment in private hospitals

The higher rates of payments have caused individuals to become members of a medical aid scheme in order to reduce the amount of money that would need to be paid directly to the hospital. Due to many individuals, however, not being able to afford being on a medical aid scheme, currently only an approximate 17% of the population is part of a medical aid scheme (Kahn, 2013). It has been estimated that double the amount of individuals would be able to afford medical aid if they are operated in a more efficient manner and if government would instate regulations that would put an end to fraud within the medical aid industry (Kahn, 2013). The focus of the government, however, has shifted away from medical aid schemes and their efficiency. They are no longer trying to make medical aid affordable for more members of the middle class income group but are concerned with the National Health Insurance (NHI) policy that will provide equitable services for the entire population at an affordable price.

7.7 Medical aids no longer being able to provide value for money

The University of Cape Town conducted a report based on the South African health sector, which found that the average cost spent to treat a patient in a private hospital had doubled between the years 1996 and 2003 (World, Health Organisation, 2010). It is these increased costs that have forced medical aid companies to increase the premiums that they offer to the South African population. Due to medical aid schemes having to reduce the benefits that they offer individuals with each plan has created a situation where those who are on a ‘low-cost scheme’ within the private sector will have to pay extremely high amounts of additional charges as barely any of the medical expenses incurred by the individual will be covered by their benefit plan. It would be more beneficial for such individuals to seek service from public hospitals as low cost medical schemes are restricting their range of services (World Health Organisation, 2010).

7.8 Definition of business ethics

Business ethics is a crucial part of any organisation. It entails transactions that are beneficial for both the customer and provider of the service. There are, however, issues facing such transactions within the healthcare sector; some of which include: service of inferior quality, unreasonable prices and inability of customers to pay for services received. Business ethics is based on a three level platform being a macro-economic level, meso-economic level and a micro-economic level(Kretzschmar, Prinsloo, Prozesky, Rossouw, Sander, Siebrits, Woermann, 2012: 20).

7.9 The meso-economic level of business ethics

The meso-economic level refers to businesses and their interaction with society. The healthcare service is concerned mostly with this level of business ethics as hospitals have a social responsibility to the patients that they treat. Medical aid schemes also operate on a meso-economic level. The medical aid companies have a duty to their clients and to hospitals to pay for the bills that individuals incur when seeking medical assistance. The hospitals themselves have a responsibility to society to ensure that they use such funding received by medical aid schemes in order to improve services provided as well as to improve the physical state of the hospitals.

7.10 The Utilitarian Theory

The Utilitarian theory as according to John Stuart Mill focuses on actions rather than character of individuals (Kretzschmar, 2012:79). This theory is centralised around the idea that actions are considered to be god if they result in happiness for the majority of the population; thus it is commonly called the ‘The greatest happiness principle’. Only 17 % of the South African population are members of a medical aid scheme. This low figure is an indication that majority people are unhappy with the services provided by medical aids. It is also an indication that medical aids are charging fees at an unrealistic price that middle class earners are unable to afford. Medical aid schemes are not providing value for money; as members have to pay high additional fees to the hospitals even beyond their monthly premium payments to the medical aid themselves. The services and unfairly charges prices at private hospitals have seen majority of people seek medical attention at public hospitals. The government’s initiative to implementthe NHI policy will, however, result in the happiness of majority of South Africans as it provides equitable health services at fair prices.

7.11 The ethicality of medical aid companies and Private hospitals

The medical aids charging high prices at a low value for money is unethical. The high premium costs are merely good for the medical aid company (self) as they generate profits off such payments. It is, however, not good for the private hospitals (others) that it pays out a portion of clients money to as they are not paying them amounts high to better the infrastructure of such hospitals and finally medical aids are also not in the benefit of the population (greater good) as their unaffordable premiums and low benefits has only 17% of the population to be part of a medical aid scheme.
The deteriorating service in private hospitals is unethical. It is not good for the hospitals themselves (self) as they are losing credibility and thus seeing a decrease in patient number. The bad service is also not good for public hospitals (other) as they are having to treat additional patients, who refuse to receive private healthcare services, and have lack of facilities and funding to do so and finally it is not good for the patients of private hospitals (greater good) as they are paying extremely inflated prices to receive medical assistance in private hospitals; yet are becoming subject to bad service.

‘ Scenarios on Public and Private.

‘ Clinic Governance and Ethics
Mediclinic Southern Africa which is part of Mediclinic International hopes that patients, doctors and sponsors of healthcare will regard them as the most sought for and trusted medical aid that provides excellent specialised hospital services. In order to uphold the quality of Mediclinic services the group focuses on the skills of their doctors to the quality of the care given to the patients, the understanding that the nursing staff has to maintain the high standards of Mediclinic facilities and finally the maintenance of their advanced technology to uphold the standard set, these factors contribute to the image and standards Mediclinic strives to uphold, internationally as well as locally. Mediclinic implemented the Net Acquisition Pricing model which was the first transparent pricing model to be used by a private hospital group. In order to improve quality and secure the protection of healthcare, Mediclinic uses a patient-focused approach in their business. Their approach to contributing to clinical quality is by centring their attention on construction, systems and the results of care. Advanced clinical results can only be attained by using infrastructure of a high standard and systems that are sophisticated, efficient and that have been tested internationally. Mediclinic is part of the Vermont Oxford Network which betters the levels of care in their neonatal units. The annual clinical governance report provides a summary of clinical activities the Mediclinic group experienced internationally. The commitment to quality care is emphasised and implemented in all aspects of the group. Quality and safety are encouraged through an all inclusive programme that contains five focus areas that the group focuses on: clinical governance, clinical information management, integrated clinical information systems, cost management and communication. A clinical information department with specific information management and numerical abilities supports clinical governance in the group’s operations in South Africa and Namibia. The department develops tactical, clinical and management information to support the group in decision making, in order to improve the management of quality care at Mediclinic. Data management and arithmetical abilities are being improved by the clinical information centre in South Africa. This initiative improves the quality of the group and helps to reach the groups vision and values both locally and internationally. South Africa’s clinical information department has progressed and has managed to provide services to Mediclinic Middle East. Mediclinics goal is to be an international provider of hospital services which is ranked the most reliable and valued provider. Mediclinic is dedicated to being a responsible corporate citizen with every client or country with which it does business with. When operating globally, the governance practiced by the group is of the utmost importance as it sets an example of the businesses ethical values, the group is set on building a sustainable business. Mediclinic makes sure the group maintains firm principles to implement high standards of integrity and ethics to maintain good corporate governance.

Currently the board of mediclinic is satisfied that they met the requirements of the Companies Act, the majority of the principles in the King Report on Governance for South Africa. Group corporate governance manual dealing with group practices and policies assists the company secretary and the company’s three operating platforms in Southern Africa, Switzerland and the United Arab Emirates to make sure the same standard of corporate governance is practised throughout the group. The group complying with all the laws, regulations and accepted standards is essential to the Groups risk management process and is observed and monitored.

Risk management is an important factor in the Mediclinic group. The main aim of the risk management in the Group is to ensure that an effective risk management framework is established where the most important risk elements in the Group are identified and procedures are put in place in order to deal with those risks. Sustainable development is of vital importance within the Group as it creates positive impacts on its stakeholders and the community and supports the Groups vision and values. By focusing on sustainable development one is increasing the confidence and trust in Mediclinic as it represents a positive image of the Group.

Doing business in a fair, legal and honest manner is the guidelines Mediclinic follows. These guidelines are implemented and monitored by management and the board so that the highest ethical standards are present when dealing with stakeholders. The Group provides an anonymous toll-free Ethics line that stakeholders and staff can call if one has experienced any problems in connection with the Mediclinic Group. Regular feedback is given in order to solve the problems faced. Corporate governance is important as it should make the company’s response time quicker to the different needs of the stakeholders. Efficient governance in a company can raise capital as higher premiums will be given to a well governed company that functions in a lower risk country. This also benefits companies which need to the help of financial loans and pulls in private equity investments as the company is more attractive due to its well governed state.

‘ Black Economic Empowerment
According to the Mediclinic BEE certificate issued on the 17 December 2014 the following information was shown:
Ownership actual score was 15.87 and the target score was 20.00. Management actual score was 2.97 and the target score was 10.00. Employment Equity score was 3.15 and the target score was 15.00. Skills development score was 12.04 and the target score was 15.00. Preferential procurement was 14.90 and the target score was 20.00. Enterprise Development score was 15.00 and the target score was 15.00. Socio-Economic Development score was 5.00 and the target score was 5.00. Total score for the scorecard information for Mediclinic Southern Africa was 68.93 and the target score was 100.00.

Based on the information show above one can conclude that Mediclinic performs poorly with the management section in terms of B-BBEE as the actual score of 2.97 is much lower than the target score of 10.00. This suggests that Mediclinic should focus on increasing the actual score by implementing more diversity and complying B-BBEE standards into the management sector. Employment Equity had a poor score too with a score of 3.15 out of a target score of 15.00. Mediclinic should focus on the employment equity within the organisations and improve the equity within employees in order to create a fair and diverse employee group. Enterprise Development and Socio-Economic Development scored extremely well as Mediclinic reached the target score for each. This suggests that Mediclinic as an organisation is growing sustainably and that the social standards are being adhered to such as the growth of the organisation, the levels of employment and the conditions in the workplace.

Based on the analysis in the B-BBEE Mediclinic Southern Africa certificate the procurement recognition level result was a 100%, black ownership results were 19.67% and black women ownership were 6.23%. The Quota for the percentage of black women ownership should be increased. We can conclude based on these percentages that the percentage of black ownership in the Mediclinic organisation is low and more black management should be employed. This could result in negative feelings of envy, dislike between employees and members of the organisation could feel like African employees are being unfairly treated. An African employee in a management position due to the BEE protocol could result in he/she not being respected by the other employees in the company.

‘ Press and Media
Katherine Child (2015) Times Live published ‘medical aids and private hospitals are being accused of scheming to dictate to healthcare workers what treatment to use and restricting certain medicines ‘(Katherine, 2015)

According to the article due to the high costs of medical aid and private hospitals, doctors are enraged that medical aid schemes administrators are dictating how high the prices doctors should charge to patients and restricting medicines that doctors could prescribe as a result affecting treatment of patients. SA medical association accused the three biggest hospital groups (Mediclinic, Discovery Health and Life and Netcare) of plotting which treatments to prescribe to patients in hospitals and which medicines would be available for treatments. Medical practitioners are forced to use the certain treatments made available by private hospitals and medical aid administrators regardless of what is best for the patient thus resulting in patients receiving incomplete treatments even though prices are set high. These accusations against Mediclinic goes against the values of the Mediclinic group as patients are not receiving the most effective clinical service and the best interest of the patient is not the main focus.

Roly Buys, the executive of Mediclinic, rejected the accusations made by the medical association of SA. Roly Buys stated that the choice of medicine and treatment for the patient is the doctor’s responsibility and if the medical aid does not cover the costs of the patient’s treatment they would have to pay for their own medicine.

CMS (2011) reports that ‘misrepresentation in private hospital expenditure facts’ published on the 7 September 2011. The release of the report emphasised a rise in medical schemes member dissatisfaction, regarding issues faced in private hospitals. Dr MonwabisiGantsho, the registrar of the CMS identified the rising hospital tariffs as the primary reason for the increase in hospital payments. It is based on the assumption that unfair billing systems are being exposed to medical aid scheme members. Regardless of the research and statistics that prove that private hospitals charge higher fees and the fact that they are the main cause for healthcare costs increasing are not true these criticisms are still made in the media. Mediclinic has stated that their prices have remained constant regardless of the equipment costs and nursing salaries (few of the input costs) that have contributed to the increase in hospital tariffs. CMS reports show a decline within hospital groups, however, a growth has been reflected in the hospital groups’ reports which highlight one question, how reliable the hospital groups really are. In 2009, Medical scheme industry earned nearly R2.8billion and other income. These statistics goes against the claims that the medical aid industry is under stress as they are making a profit. The industry reserve has experienced an increase for seven consecutive years and has banked a sum of R17 609.2 billion over the seven year period.

The focus in the private healthcare industry should be on improving the equal distribution of the risk in the industry, and making medical scheme cover obligatory for those who can afford it thus these improvements will result in the lowering of costs of medical aid scheme cover due to the improvements of the part of the population covered by the medical aid schemes health. As a result financial aid can be provided to lower income workers in order to improve their access into private hospitals.

Many people spend an immense part of their salaries on medical aid and are still left with the responsibility to cover medical aid fees. Thalia Holmes (2013) states that, ‘Hospitals- they’re making a killing!’ Mail and Guardian. [Online] 14 June 2013. Martin Fish a 72 year old retired fisherman was extremely ill and after his stay in the hospital realised that his medical aid only covered certain costs. Martin had to pay for pathologists’ expenses which came up to R4 300, ambulance fees, a part of the doctors bill and the radiology bill for one x-ray he underwent. Mr Fisher required a MRI scan to determine a reliable diagnosis, however, he could not afford the costs for the MRI scan for R12 000 which his medical aid did not cover and therefore the hospital did not perform the MRI. This experience is unfortunately one of many that indicate how the public puts their trust and money into a medical aid scheme hoping that they will be taken cared in the high standard promised yet most are paying high medical bills as schemes do not cover all the costs. This is one of the social ethical dilemmas faced between the private hospitals and medical aid members. One cannot say that private hospitals who deny patients from receiving the correct treatment due to insufficient funds is ethical because ethical actions are based on three pillars namely, the action must be good for the self and for others. The hospital denying Mr. Fisher an MRI scan is an action which is good for the institution as the hospital group will not lose money, but not for patient, Martin Fisher, as he will not be given a reliable diagnosis for the cause of his pancreatitis and therefore could face future health problems if the medication given is not effective.

Mediclinic has experienced extremely higher profits than similar global firms even with the input costs getting higher. Over the past ten years the prices of private hospitals has increased by nearly double the consumer inflation rate. Mediclinic experienced a 15% profit increase and Mediclinic International experienced an increase in their value of their shares by 275%. Council for the medical aid schemes stated that hospital groups can dictate prices of medical aid schemes due to the large percentage of control therefore the inflated amounts do not want to be covered by the medical aid. A report conducted by lawyers from Edward Nathan Sonnenberg indicated that the result would be that members of the medical aid schemes would eventually accept to co-pay or pay the medical bills themselves as there would be a plain difference between the tariffs charged and the rates medical schemes are prepared to offer for cover. There was an attempt by the Competition Commission to spread out joined negotiating by hospitals to try and increase competition between hospital groups. These desired results were not achieved. Competition in the industry will increase efficiency and productivity, and it creates a downward pricing pressure which benefits the consumer. In order to remain competitive the competitors have to improve their product or service. In the case of private hospitals this would result in patients receiving the best possible healthcare services. Economic Development Minister Ebrahim Patel has expressed his concern that ordinary South Africans will not be able to afford private medical care in the future. This concern was supported by the Health Minister Aaron Motsoaledi who raised interest to regulate prices to Parliament.

The opposite of free competition is a monopoly. The result of a monopoly are higher prices, and a likely decrease in production yield, this is all at the expense of consumers and the society. Monopoly characteristics have been seen within the trilogy due to the significant increase in profits after the groups united according to the Genesis Analytics report. Mediclinic’s average return on capital was 14% (1988 ‘ 2001) and increased to 23% (2002-2011), however an increase in profitability can be due to the increase in disease in the country which would result in an increase in demand for private healthcare services. Econex (Economics Consultant) report indicated that spending on private hospitals was more than double the rate of inflation experienced during 2000-2010. The consumer price index was 6% and hospital price inflation was 8.5% over a period of ten years, however, spending on private hospitals rose to 12.2% and more than 40% higher than hospital inflation rates.

A dilemma exists between private healthcare institutions and the members of these medical aids as prices of these private medical aids increase substantially whilst members’ pockets are decreasing at the same rate. This is a social ethical dilemma as there are conflicting ethical judgements between two parties. In order to resolve dilemmas, parties should reach a compromise where people can receive affordable healthcare, however, this is not the case in reality and society is losing hope in the healthcare sector as they can no longer benefit from good private medical care due to lack of finances. Many members pay large amounts of money towards medical care and end up with only some of the benefits medical aids promise as a result the outstanding fees are paid by the member. One could ask the question if this type of action is an ethical one and whether the institution is complying with the good corporate governance principles. An ethical action is one that isn’t solely in the interests of the institution but it also has the best interests for others affected by their actions. A company’s ethical behaviour should not only concentrate on the individual level but also on the organisational and universal level. Meso-Institutional economic level of the Mediclinic institution pertains to the relationship Mediclinic has with society. Business ethics evaluates the impact of institutions on the broader society and explores the social responsibility of business towards society. As a result, Mediclinics relationship with its members (society) has experienced negative feelings towards the high prices and the medical aid cover or lack thereof.

According to an article in Timeslive it is stated that millions in South Africa are paying much more than is required to medical aids, doctors and hospitals due to red taping. This directs the issue of high health costs towards the Department of Health who implemented these costs. Government regulation was to blame for these high costs due to increase in competition and increasing prices. This represents characteristics of a communistic market system as government regulation is more evident and the market is controlled which affects prices and institutions. The opposite of this would be capitalism which is a market system where distribution and production are privatised and there is minimum government interference, low prices and high quality of products. Many economists believe a free market system would be beneficial for society as a whole. Due to the governments poor working conditions, their healthcare facilities and the quality of the institutions as a whole has provided more business for the private sector as more people are forced to pay the funds needed in order to be treated accordingly. Society as a whole is hoping that the healthcare prices decrease. (Katherine, 2014)

Reasons for the high costs of medical care are due to 25% contributions that must be kept in reserve ‘ this is stated by law, it takes five years in order to register a generic medicine through the Medicine Controls Council which results in a build up of cheaper medicines not available to customers, importing medicine and medical equipment is costly due to the weak rand. There is a severe shortage of specialist which prevents specialist from charging very high prices as they are in demand. Some doctors over charge patients as they know medical aid will cover the costs and abuse the system resulting in high medical costs. The myth, ‘All that matters is the bottom line’ can describe the situation above as private hospitals and medical aids will act in an unethical manner in order to gain profit by charging excessive prices and extra charges on medical care. The truth is that unethical behaviour can damage institutions reputations and can deteriorate the trust between the organisation and its members. One cannot divide the problems of healthcare into different regional divisions or sectors. South Africa as a country faces a healthcare problem as the quality of the public sector is very poor whereas the private sector provides quality services but the prices are very high so only a small part of society can afford it.

Mia Malan quotes what the Health Minister Aaron Motsoaledi said about why he uses government hospitals (Mia Malan, 6 September 2013, Mail and Guardian). In 2009 Aaron Motsoaledi was accused of triggering a scandal due to the transfer of his son to the Steve Biko Academic Public Hospital in Pretoria. His son was first taken to a private hospital, after a few days there was no diagnosis given to the boy and no signs of recovery. Thereafter Aaron Motsoaledi transferred his son to the Steve BikoHospital where he was diagnosed shortly after arrival and treated appropriately. The health Minister explained that this was because of the fact that professors are based in public hospitals and not private hospitals. The minister of health uses the services of public hospital for himself and his family. He believes that the government does not provide public hospitals with the sufficient amount of tools and support to the doctors and facilities in order to do their jobs effectively and of a high quality. Public hospitals have become a service made available for the poor or middle class society that can’t afford the high prices in the private sector. Public facilities should be used by all people in society regardless of their wealth status on the basis of private healthcare being too expensive when one can receive the same equality of treatment in a public hospital if more capital was provided to the hospital top make use of. Dr Ridwan Mia is a plastic surgeon who is recognised internationally for proving Pippy Kruger with a lifesaving skin transplant. Dr Ridwan Mia is a private specialist however he is a full time employee at Helen Joseph Hospital and at Wits University (public university). This case therefore proves that one can find the same quality of services in public hospitals as one could get in a private hospital as specialists and doctors contain the same qualifications and level of experience.

According to Times Live. (Katherine, 2014) ‘Hospital horrors costing SA plenty.’ Medical carelessness in hospitals has resulted in high expenses in negligence claims for the regional health departments. Examples of these negligent acts are; a Childs genitals being cut off by accident, cerebral palsy is becoming more common in babies due to the mother not being properly cared for and supervised during birth, and an infant went blind because doctors failed to identify a problem with the baby and diagnose the infant respectively. Lawsuits and claims up to R1.28 billion for the year 2012/2013 was experienced this included claims in both public and private hospitals. Babies that resulted in brain damage was due to nurses not paying attention to the mother and this lack in skills and bad attitude can cost lives. One can wonder why fees for medical aid fees are expensive when the service does not match up to the costs paid yearly towards healthcare.Medical negligence attorney, Adele van der Walt indicates that private hospitals have employed unqualified nurses that work in intensive units and one nurse will supervise four babies instead of just one baby. This is not ethical as members pay medical fees to ensure their children and families are treated with the service promised in the hospitals visions and values. A shocking story that Van der Walt reported in the article is a women that approached her indicating that she went into labour at a private hospital where she proceeded to inform a nurse, however the nurse was not interested and hours later after much pleading to help and contractions, the lady stood up and the baby fell onto the floor. It is too early to determine the damages the baby will be faced with. The Gauteng health department spokesman argues that the amount of negligence’s are small compared to the amount of babies born every year. This statement supports the Greatest happiness theory due to the fact that most of society does not get affected by negligence’s that the problem does not have to be looked in further as the majority is satisfied but this does not make the actions ethical.

Mediclinic strives to achieve the values and visions set out by the institutions report and the Groups actions reflect whether these visions and values of the best patient healthcare, fair treatment in the workplace and growth to become internationally recognised as the best are being achieved. In order to reach these goals ethical behaviour and good governance forms a big part as ethical actions requires that actions do not only benefit one but others as well. The public argues whether private hospitals such as Mediclinic treat their members ethically and whether they can be relied on as increasing medical costs continue to rise whilst the cover of medical aids fall and more members have to cover extra costs that they cannot afford. Many of the private hospitals are accused of using monopoly power to increase the costs of medical care and leaving the rich being able to access private healthcare only and poorer society are left with public healthcare. His monopoly power is frowned upon in business ethics as society has to suffer at the expense of medical aid profits. Deontological ethics can be applied to this situation as the focus is on what the right thing to do is and that what private hospitals do to members they would accept the same treatment towards themselves and their families. Mediclinic BEE certificate indicates that the institution is a level four contributor and that more time should be put in in order to increase affirmative action by using tie-breaker, quota, outreach or strong preference to ensure more disadvantaged groups are given an opportunity for management positions and more female employees are present in management. Mediclinic should place measures that will reduce the criticisms in the institution towards affirmative action to reduce conflict by implementing confidential reporting systems and educating employees on why actions are taken.

Mediclinic has been negatively and positively reported in media. Negative aspects such as incompetency, increasing medical costs and medical aids not covering costs and leaving members to pay for bills they cannot afford. Salaries paid to private hospital management are extremely large while there is still a demand for medical facilities and tools that are needed. These high salaries are given to medical aid management who has not been covering most of its member’s medical costs as promised which leaves members doubting and questioning where all their money is going to. Contributions paid to these private medical aids amounted to a substantial amount of capital and most of it was used towards board members and non-hospital factors. This goes against the values of providing the best quality of patient healthcare that Mediclinic promises as money is not being directed where it is most needed. This type of unethical behaviour only benefits medical aid management and leaves society having less trust in South Africa’s healthcare system.

The healthcare system has many flaws; however, it can be solved. These solutions will not work any time soon but solutions need to be implemented in order to improve the healthcare system in the future and promise fair access to healthcare for society. There is no equal distribution of healthcare as some people in society may need healthcare more often than others as a result the healthcare system should aim to provide fair access to the poor and rich and no favouritism for the rich. This aims to close the gap between the rich and the poor. The development of the National health insurance aims to reach the desired outcomes of acting as a positive force to increase access to quality healthcare and create a like-minded community that strives to work towards a better healthcare system for all. Hospitals need to ensure that nurses are qualifies and trained properly as the negligence experienced in hospitals, public and private are costing government health departments millions. These problems can be prevented.

‘ Conclusion


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