High court vindicates watchdog’s inquiry into private health sector

ON AUGUST 22, Judge Elias Motajane handed down judgment in the Netcare vs KPMG and Competition Commission case. Netcare brought the case because it believed that KPMG, having previously done work for Netcare, should be prevented from assisting the commission in its inquiry into the private healthcare sector, claiming a conflict of interest. The impartial market inquiry into the private health sector will investigate participants in the sector, including Netcare, other private hospitals, specialists and medical schemes.

The judge decisively found in favor of KPMG and the commission and ordered Netcare to pay their legal costs.

In May this year, three days of legal arguments took place in the South Gauteng High Court. Netcare spent a day and a quarter sketching out minute details of the interaction between Netcare and the KPMG team that had provided services to Netcare, what documents were exchanged by whom and when and which specific individuals had to be excluded from the assisting the commission. It spent little time on the law on conflict of interest, the crux of the case. It brought to mind the old lawyer’s adage: “If the facts are against you, hammer the law, if the law is against you, hammer the facts and if the facts and law are against you, hammer the table.”

Netcare’s lawyers questioned the integrity of the commission in court, arguing it had improperly allowed KPMG to take over the inquiry, and that therefore the commission had failed to meet the “high standard of professional ethics” expected of it in terms of section 195 of the constitution.

In response, KPMG argued that Netcare’s case had no merit in law and that the only plausible reason for it to bring this case was to “disrupt and delay” the inquiry into the private healthcare sector.

The commission carefully outlined the importance of the inquiry to its mandate and KPMG’s role in it. The commission also pointed out its own powers to subpoena information relevant to the inquiry, including Netcare’s confidential information. The only prejudice that Netcare would suffer was the “leakage of the truth” to the commission, which the latter was in any event entitled to.

Judge Motajane agreed with KPMG and the commission: “The only irreparable harm that Netcare, it seems, might suffer is that the truth might leak out irregularly as opposed to regularly through a subpoena. The court is loathe to come to Netcare’s assistance in this regard as Netcare is obliged by law to disclose any information that is relevant to the market inquiry voluntarily and in a candid manner. This information can in any event be obtained by subpoena.”

The judge dealt with Netcare’s attitude towards the inquiry, both in the legal papers and in the public discourse. For example, the judge found that Netcare “sees itself as defending itself against price regulation” and “it seeks to impugn the integrity of the commission and the inquiry”. Netcare’s attorneys also publicly characterized the inquiry as “absurd” and an “inordinate waste of money”. Netcare’s CEO was quoted in Business Day as saying: “If you are not happy with the private sector, please use the public sector, if you think our costs are extortionate, why don’t you go and use a public sector hospital?”

Section 27 of the constitution guarantees everyone the right to have access to healthcare services. The court confirmed the state’s duty to take reasonable measures to promote and fulfill the right to access healthcare services and stated, “the healthcare inquiry is such a constitutional measure”. Judge Motajane also quoted the inquiry’s terms of reference: “Private healthcare provision takes place within the context of this constitutional commitment to the provision of universal healthcare services to all people in South Africa.”

This judgment is important. It vindicates an important democratic process that is intended to air a range of issues in the sector related to the cost of and access to healthcare services, in order to ensure that rights are protected as envisaged by the constitution. The judgment makes it clear that the market inquiry is a truth-seeking inquiry, carried out by the commission in line with its constitutional mandate.

Not all industry stakeholders agree. For example, Life Healthcare hospital group suggested in comments to the commission that “we do not view the constitutional dynamic as central to the panel’s objectives as mandated by the Competition Act. We fully support an evaluation of prices, expenditure and costs in private healthcare, but we do not believe that it is appropriate to rely directly on the constitution when there is legislation which deals specifically with the market inquiry”. This, ofcourse ignores the supremacy of the constitution, which is a founding value of our constitutional democracy.

The court’s judgment means that stakeholders must recognize not only that the inquiry is taking place in the context of the realization of fundamental human rights, but that they too conduct business in an environment in which rights must be protected and promoted. While government has constitutional duties to deliver services and realize rights, the private sector also has constitutional duties in certain respects, according to section 8 of the constitution. It means stakeholders must co-operate fully with the commission by producing all relevant information, giving evidence truthfully and, importantly, not impeding the commission in its truth-seeking mission.

This inquiry provides an unprecedented opportunity for the public and policymakers to understand a very complex and multifaceted market, one through which 8.7 million people access essential health services. The commission is now free to use all the tools at its disposal to ensure a robust inquiry that achieves its mandate.

The commission has called for submissions by October 31 2014. Public hearings will begin in March 2015. The final report of the inquiry is expected in November 2015. It will most likely contain specific recommendations for amended policy, legislation and regulations.

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