• Only four state Western Cape patients were treated in the private sector despite months of negotiations to set up agreements. 
  • Public and private sector players say the consultations nonetheless may have started to rebuild trust broken down over years.
  • Information made available to support South Africa’s Covid-19 response helped the health department streamline some of its data systems. 

Only four state Covid-19 patients in the Western Cape were treated in the private healthcare sector, but experts say the partnerships set up to prepare for the province’s coronavirus peak have nonetheless helped to lay a foundation for the implementation of South Africa’s National Health Insurance (NHI) scheme.

Why? The negotiation process, they argue, facilitated the rebuilding of trust between the public and private sectors. Under the NHI, a centralised fund will procure a package of health services from both the public and private sectors in an effort to provide all South Africans – regardless of their ability to pay for services – with free access to healthcare.

Only 16% of the country can afford medical aid premiums, while the rest of the nation relies on a dilapidated, inefficient public health system, or pays for private services out of pocket when necessary.

The Western Cape government negotiated with the private healthcare sector for beds at set daily rates for Covid-19 state patients, in case the government ran out of beds.

Although the national health department set the prices at which private providers would be contracted by provinces, each province had to sign its own service level agreement (SLA) with private providers.

The national department adopted the Western Cape’s deal and distributed it to other provinces to use as a basis for their negotiations with the private sector.

“The trust relationship [between the public and private healthcare sectors] was broken down over decades and will take more than just one good year to patch up,” says Nicholas Crisp, the head of the NHI office and one of the national health department’s negotiators for Covid-19 service level agreements between the state and the private healthcare sector.

“But the discussions that went into setting up the Western Cape’s Covid-19 agreement helped to demystify some of the mistrust because we understand each other’s constraints better.”

The Western Cape’s SLA with private hospitals and health practitioners lapsed at the end of September, but negotiations between the provincial government and the private healthcare sector had already started in February, a month before the national government announced the first three-week lockdown to curb the spread of SARS-CoV-2 – the virus that causes Covid-19 – in the country.

The deal was, however, only finalised four months later by 20 June and signed in early July, when the province was still in the peak of its Covid outbreak.


Mathematical modelling initially predicted that the Western Cape’s peak would be in August, but the health department’s data shows the worst was over towards the end of July.

As a result, there was little opportunity to put the service level agreements to the test or to streamline the processes, explains Bhavna Patel, who was part of the provincial team tasked with coordinating the deal. Patel is also the chief executive officer of Groote Schuur Hospital in Cape Town.

“By the time we had everything ready we didn’t have many patients to admit to the private sector — that’s why only four government patients were treated in the private sector in the end,” Patel says.

“But although the agreement took a long time [to put together], just getting to that point was a good thing. Now we have so many fantastic relationships [between the provincial government and private providers] that we didn’t have before.”

Only the Western Cape ended up signing an agreement with providers – none of the other provinces made enough progress with negotiations to reach the stage where they signed a deal, according to SLA negotiators, including Crisp.

The country’s NHI Bill, which was published in 2018 and approved by Cabinet in July 2019, is set to be debated in Parliament in October during which submissions from key stakeholders, including the private healthcare sector, will be heard.

We look at five lessons consultants learned during Covid negotiations and how they can be applied to the NHI.

1. Don’t underestimate the complexity of the public and private health systems

The private health sector is set up in a complicated way, Patel says.

Administration intermediaries, hospitals groups, clinicians, radiology and pathology services and other health workers, such as occupational therapists, had to be contracted individually for the Western Cape SLA.

In turn, each service needed its own daily per diem rate which was proclaimed by the national health department. The department decided on tariffs using prices submitted by various private providers, Crisp explains.

Only then could the private providers accept the price.

Fortunately, Patel says: “Most providers did [accept the tariffs], and some doctors even offered their services for free.” Negotiations among private providers themselves would usually fall foul of South Africa’s competition laws, but in March the Department of Trade and Industry gazetted a block exemption by the Competition Commission which allowed the private health sector to communicate about tariffs under specific conditions.

For example, to enable the co-ordination of available resources to treat Covid-19 patients, and to reduce the costs of agreements with the public sector. The exemption, however, excluded price negotiations except when specifically authorised by the minister of health. Crisp says the department did not use the exemption to facilitate the SLAs.

As part of the process of setting up the SLAs, the Western Cape government also had to get permission from the province’s MEC of Finance to buy insurance for private healthcare providers in case claims are made against them while treating state patients, explains Michael Manning, the business development director for the Western Cape health department.

Manning drew up the contracts for the different SLA participants. What’s more, separate tariffs, operating guidelines and per diems had to be set up for the additional procedures that some Covid-19 patients might need, such as emergency surgery, dialysis or blood transfusions, Manning says.

Before the Covid-19 SLAs were set up, the private sector didn’t understand what problems the public sector’s procurement processes could cause. Says Crisp: “The public sector – me included – did not understand how complicated and segmented the private sector is.”

2. Better collaboration means better data – and better healthcare

After the initial shock of Covid-19 had passed, information sharing improved dramatically both inside the public sector and between the public and private sectors, Crisp says.

At the start of the outbreak, the data sent from the public laboratories of the National Health Laboratory Service to the data centre at the National Institute for Communicable Diseases (NICD) was “seriously flawed”, according to Crisp.

Often identification numbers, contact details and addresses of patients who had been tested were left off the swab samples sent to labs. At one point, Crisp says, less than half of the swabs sent to the NICD included this type of biographical data, which is crucial for contact tracing.

But Crisp says data sharing and reporting between the public and private sector laboratories and the health department is now streamlined. As a result, the national health department has implemented an automated system that integrates and checks the data streaming in from public and private laboratories.

The dashboards on the National Institute for Communicable Diseases’ website showing the number of available beds and oxygen in the private and public sectors were also “a massive breakthrough”, Crisp says.

In four provinces – the Eastern Cape, Free State, Limpopo and Mpumalanga – 100% of both private and public hospitals are now reporting this information to the health department – this information was not available before. Some hospitals, however, still struggle to report this information because of connectivity issues, he says.

With more data available as a result of the Covid-19 pandemic, the health department was able to finalise the National Health Normative Standards Framework for Interoperability in eHealth, which will form the basis of a system that “allows the IT systems of the public and private sectors to talk to one another”, according to Crisp.

These standards were commissioned by the health department in 2013 and form part of the country’s digital health strategy. Under this system, information about procedures done in all hospitals in South Africa will be automated and made shareable. Crisp says this type of information will form an important part of the billing systems that will eventually be set up for the National Health Insurance scheme.

“We’re very close to publishing those standards for public comment – they will then become the new regulations for public and private providers to set up their IT systems so we can all exchange information.”

3. The way payments are set up matters 

Under the SLA agreement, private providers were paid a set daily rate for treating public sector patients — the rates didn’t include a profit and was loss-making for some.

Specialists or teams of specialists were paid R2 493 per day for an in-hospital patient, for example, and that figure covered all the care a Covid-19 patient might need while in hospital – barring any additional treatments such as dialysis. Mostly, medical schemes reimburse health workers on a “fee-for-service” basis in which each individual procedure, and consumable (such as masks and syringes) is billed for separately.

One of the main disadvantages of a fee-for-service payment system is that it gives health workers a reason to do procedures even when they’re not necessary because they get paid for each action separately, the authors of a 2010 report by economic consultant group Econex argue.

The Competition Commission’s 2019 Health Market Inquiry into the private health sector confirmed this: it found that “supplier-induced-demand” – when health workers order treatments that patients don’t need – played a significant role in driving up the cost of private healthcare in South Africa.

The daily payments set up for the SLA’s are different from what is envisioned for the NHI and do not set any precedents for contracting under the scheme, but Crisp argues the health department learned valuable lessons about the kind of payment system that is needed for the country’s move to universal health coverage.

Crisp explains: “However the NHI system is structured in the end, we’ve learned that it is possible to pull off a collective tariff structure – we’ve also learnt the difficulties of setting them up.”

He says “a collective payment to a hospital group is one thing”. “But once the tariff has five parts, one for the hospital, one for the clinicians, one for the labs etcetera, things get complicated again and it’s not necessarily the best way to do it. We didn’t have a lot of time to really interrogate all the details. But this payment structure was probably less optimal than it could have been.”

The trouble with setting up a capped payment, he says, is that it takes a lot of data to get the price right. During the SLA consultations the health department didn’t have enough time to do a proper costing of the price of treatment in the private sector. And, it was difficult to compare the private sector costs to what a day in intensive care would cost in a government hospital because there is little available information.

“Our data is poor,” Crisp admits.

Sharon Fonn, a professor at the school of public health at the University of the Witwatersrand, argues there may have been better ways to set up the payments, but since the treatments for Covid-19 and knowledge about how the disease works was changing so fast, this type of payment was a good start.

Fonn, who was also a panelist on the Competition Commission’s Health Market Inquiry, concludes: “This is exactly the payment mechanism that we think is correct – one that you negotiate.”

4. Public and private sector doctors need common treatment guidelines

Getting specialists on board added another layer of complexity to the SLA negotiations since they are independent providers, Patel says.

The next step was making sure that state patients who are treated by private specialists get the same level of care as those being treated in government facilities. But it’s not the hospitals that decide what treatment patients get – it’s doctors.

The catch here, Patel says, is that the specialists in the private sector aren’t regulated or mandated to follow the national health department’s treatment guidelines.

“In the state sector we use guidelines based on what we can afford and on best practice. We can’t use very expensive drugs or do the number of investigations the private sector does.”

Private sector physicians use guidelines that are drawn up and reviewed by the various specialist societies to which they belong, says Adri Kok, who helped to negotiate agreements with the Western, Eastern Cape and Gauteng health departments on behalf of the South African Private Practitioners Forum as a representative of the Faculty of Consulting Physicians of South Africa.

Private sector guidelines are not legally binding, but are used to evaluate doctors’ conduct should complaints arise. The same process was followed during the Covid-19 pandemic, Kok says.

But this situation makes it difficult to hold private practitioners accountable for their standard of care. The Health Market Inquiry found that because there is no standardised method of reporting on the quality of care in the private sector there is “no way to assess if current treatment is beneficial to patients”.

In the end, the Western Cape health department worked with private sector specialists to draw up treatment guidelines for intensive care, acute care, as well as emergency and palliative care.

Any provider who signed onto the Western Cape’s SLA had to adhere to these guidelines. But although most hospitals were happy to oblige, some doctors working in the hospitals were hesitant, essentially rendering those facilities unable to participate, Crisp says.

Adri Kok explains: “As a private physician, I need to be able to do the best I can for the patient. I don’t care about the money. If it’s my clinical assessment that the patient needs dialysis, then they should get it. But that’s not always possible in the public sector. It took a while for the government to understand where we were coming from.”

In the private sector, doctors can, however, be limited to the treatments that medical schemes will cover. Patel says one way to develop common treatment guidelines for the public and private sectors in the future could be to consult with the societies to which clinicians belong since their members span both the public and private sectors.

This collaboration is already envisioned for the committee that will determine what services the NHI Fund will cover, since those benefits will be based on treatments that are considered best practice. A similar system was recommended by the Health Market Inquiry.

5. Transparency can make or break the NHI negotiations 

A huge lesson for the public sector was in the importance of transparency, Crisp says.

“You need to sit around the table and talk. It’s okay to differ – and we [the public and private sectors] are quite capable of doing that.”

Mistrust between the public and private healthcare sectors is a longstanding problem globally, but Patel says in the Western Cape some of that melted away as soon as the private sector got a commitment from the provincial department that the agreement would not be used as a springboard for NHI deals.

In Gauteng, Kok says specialist intensivists, pulmonologists and doctors from the public and private sectors started a Whatsapp group and set up virtual meetings to help each other make decisions because information about the treatment of COVID-19 was so limited.

“The collaboration is there on an academic front, but when it comes to referring patients between the sectors there are a few barriers,” Kok says.

“Institutional roadblocks, cumbersome processes as well as the slow uptake of the suggested SLA prevented this from happening.”

According to Crisp, South Africans should feel personally affronted about the looting of funds earmarked for the country’s Covid-19 response.

In September, the Auditor-General of South Africa Kimi Makwetu released a report that revealed the government bought sub-par personal protective equipment at five times what it really costs using the R500-billion fund set up to respond to the Covid-19 pandemic.

The investigation also found evidence of “potential fraud, and unfair processes”, a statement by Makwetu reads.

“The lack of validation, integration and sharing of data across government platforms resulted in people – including government officials – receiving benefits and grants they were not entitled to.”

Presidential spokesperson Khusela Diko, Gauteng Health MEC Bandile Masuku and both of their spouses are among those being probed by the state investigations agency the Special Investigating Unit (SIU). There are implications for the NHI Fund, Crisp says.

“We will have to redouble our efforts to convince the public that we know how to minimise the risk of fraud to the Fund.”

He plans to do this by making sure every transaction of the Fund is in the public domain. Built into the skeleton of the Fund should be an automated system that flags anything that is irregular and that protects it from hacking, he says.

Fonn says that the fresh allegations of looting have dire implications for the public’s trust in government, and so too citizens’ confidence that a centralised fund for the NHI can be managed well. But, she argues the Health Market Inquiry revealed the public doesn’t trust private medical scheme administrators either.

“Some of this is legitimate. Some of it is because patients always think more treatment is better, and that’s not always the case.”

This story was produced by the Bhekisisa Centre for Health Journalism.