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Private Wards in Public Hospitals in South Africa:

The Policy Context and Models of Operation

August 2009

Ermin Erasmus1, Duane Blaauw1 and Lucy Gilson2

1 Centre for Health Policy, School of Public Health, University of the Witwatersrand

2 Department of Public Health and Family Medicine, University of Cape Town

TABLE OF CONTENTS PAGE

1. INTRODUCTION ............................................................................................................ 1 2. DATA COLLECTION ...................................................................................................... 4 3. POLICY CONTEXT AND PRIORITY ............................................................................. 7 4. OPERATING PRIVATE WARDS IN PUBLIC HOSPITALS: THE WESTERN CAPE

EXPERIENCE ............................................................................................................... 9 4.1 A Brief Summary Of The TAH Model ..................................................................... 9 4.2 Other “Models” In The Western Cape Province ................................................... 13

5. OPERATING PRIVATE WARDS IN PUBLIC HOSPITALS: THE MODELS IN OTHER

PROVINCES ............................................................................................................... 14 5.1 Gauteng Province ................................................................................................. 14 5.2 The Northern Cape Province ................................................................................ 27 5.3 Free State Province .............................................................................................. 30 5.4 North West Province ............................................................................................. 32

6. CONCLUSIONS............................................................................................................ 34 REFERENCES ................................................................................................................. 39 APPENDICES.......................................................................................................................i

Appendix A: Interview Guide For National And Provincial Policy-Makers .....................i Appendix B: Interview Guide For Managers Of Private Wards.....................................ii Appendix C: Questionnaire For Hospitals With Private Wards.................................... iii

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1. INTRODUCTION

In the last decade or so, certain South African public hospitals have created private

wards that function within their physical and organizational boundaries. The dominant

approach has been called differentiated amenities. Differentiated amenities typically

involve the public sector hospital providing better hotel services to patients who are

private in the sense that they pay for care on an out-of-pocket basis or through medical

insurance. The public sector objectives for these wards include revenue generation, as

well as other gains such as health personnel retention, new models of service delivery

and better access for disadvantaged population groups (National Department of Health,

2001).

Historically, a variety of factors influenced the creation of differentiated amenities. Firstly,

public hospitals faced budgetary pressures due to efforts to re-allocate resources

towards primary health care and stagnating overall levels of health spending. At the time

of the country’s transition to democracy in 1994, for example, hospitals represented

approximately 89% of expenditure on the major categories of health services, but in

2005 this figure stood at about 78% (McIntyre et al., 2007). Secondly, National Treasury

has encouraged the greater involvement of private agents in public sector activity. And

thirdly, private sector actors such as health care providers and funders have seen value

in the possibility of tie-ups with the public sector.

International experience suggests that this type of ward has much potential for

promoting inequity within hospitals. The two key problems are the failure to generate

sufficient revenue to sustain hospital-wide quality improvements, and the likelihood of

resource allocations within the hospital becoming biased towards the private wards. With

reference to Nicaragua for example, Birn et al. (2000) describe how private wards within

public hospitals, with the original intention of cross-subsidizing public wards, led to better

quality care being offered to the users of the private wards because all the revenues

from these wards were reinvested back into them (see also Hanson et al., 2002;

Nakamba et al., 2002a; Nakamba et al., 2002b; Suwando et al., 2001). This type of

dynamic would certainly be of concern in South Africa because, as McIntyre et al. (2007)

argue, a key challenge facing the country is the inefficient and inequitable resource

distribution between the public and private sectors. They report, for example, that more

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than R8 000 was spent by medical schemes/medical insurance per beneficiary in 2005

(representing 14% of the South African population), while less than R1 200 was spent on

public sector services per person who is not a beneficiary of a medical scheme (McIntyre

et al., 2007). There is, therefore, a strong pressure to narrow this gap, rather than

offering further advantages to private patients.

However, as these differentiated amenities were created and started delivering services

in South Africa, it became clear that not much was being done to evaluate them and to

understand their governance arrangements and impact on the health system.

Against this backdrop, the Centre for Health Policy, University of the Witwatersrand, in

November 2007 conducted a detailed case study of one hospital that had established

differentiated amenities. This case study itself built on earlier research that investigated

more broadly a range of interactions between the public and private sectors in health

and that had, amongst other things, developed a conceptual framework to monitor and

describe public-private interactions (PPIs), conducted a review of international and

national experience with PPIs and mapped the nature and extent of PPIs in the South

African health sector (Wadee et al., 2003; Wadee and Gilson, 2005).

The detailed case study of a hospital that had established differentiated amenities

focused on Tygerberg Academic Hospital (TAH), a public sector hospital located in the

Western Cape Province of South Africa (Wadee and Gilson, 2007). A primary concern

was the potential for private ward bias and so this research in TAH sought, among other

things, to explore:

whether the private wards raised sufficient revenue to generate a surplus and

subsidy flow to public wards;

whether public ward patients benefited from any use of surplus revenue

generated through private wards;

whether hospital resources were diverted from public to private wards, and

whether this affected the quality of care offered in public wards;

the operation of existing governance mechanisms in terms of their potential to

prevent inequity resulting from the private ward operation.

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This case study report presented material and conclusions that were very specific to

TAH, but that to a large extent left unanswered questions about the broader relevance

and implications of the case study experience. It was therefore thought that it would be

useful to conduct additional work to enrich the contextualisation of the TAH case study

and more clearly nest it in a comparative perspective relative to other hospitals in other

provincial settings with similar private ward arrangements. This contextualisation was

envisioned to include:

An update of the South African policy context in relation to private wards in public

hospitals;

An exploration of the extent to which the structural arrangements in TAH were

shared by other public hospitals with private wards;

Eliciting other hospitals’ views on and experiences with the key factors that

shaped the implementation experience at TAH.

This report presents the findings of this additional work, an extension of the original

work, to better contextualise and place in comparative perspective the case study of

TAH’s private wards. The original TAH case study contributed to the thin literature on the

evaluation of private wards in public hospitals (Wadee and Gilson, 2007). In conducting

the current work, it became clear that not much had been done to explicitly document

and disseminate information about the ways in which private wards are being operated

in different settings in South Africa. It is hoped that this report will go some way towards

filling this gap.

The report briefly outlines the data collection process followed in this work and then

sketches the current (2009) South African policy context in relation to the issue of private

wards or differentiated amenities. A brief reminder of the key features of the model

according to which the private wards in TAH were found to function follows this. The

TAH model, then, serves as a point of reference against which to compare other models

and experiences in the provinces of the Western Cape, Gauteng, Northern Cape, North

West and Free State.

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2. DATA COLLECTION

In order to collect the additional information required for the contextualisation of the TAH

case study, three key data collection strategies were proposed. These strategies, and

the reasons for pursuing them, are outlined in the table below.

Data collection strategies Rationale

In-depth interviews with selected national and provincial policy-makers. Where possible, these interviews will be conducted face-to-face.

This would help to contextualise the case study work and to place it in more of a comparative perspective by answering questions about issues such as: (a) the current impetus behind the policy on private wards, (b) the rules and processes governing the establishment of private wards in different provinces, (c) current trends in the establishment and management of private wards, and (d) the implementation experiences of other hospitals the policy-makers are familiar with.

Survey among hospitals around the country that have implemented private wards. The idea is to construct a questionnaire around the key themes/issues that emerged from the TAH case study work, e.g. raising sufficient revenue, the diversion of resources from public to private wards, the reimbursement mechanisms for staff who work in private wards, guidelines on revenue use and allocation etc.

Constructing a questionnaire around the organising themes of the case study work will yield information along the same lines as that presented in the case study report and will therefore help to contextualise the experience of TAH and to provide reference points for comparing it with the experience of other facilities.

In-depth interviews with selected hospital managers responsible for private wards in public hospitals. Where possible, these interviews will be conducted face-to-face.

These interviews will, firstly, be used to add ‘richness’ to the information obtained from the questionnaires mentioned above, e.g. by further exploring unusual reported experiences. It will therefore aid efforts to contextualise the case study experience and to put it in comparative perspective. It will also be used to explore topics that might be more difficult to do in a questionnaire, e.g. future trends in negotiations with medical schemes and steps to develop hospital information systems to better accommodate the requirements of private wards.

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After obtaining ethical clearance for this work in June 2008, the research team began

contacting potential key informants, eventually interviewing 2 senior government officials

at the level of the National Department of Health (NDOH) and 7 senior government

officials in the provinces of North West (2), Free State (2), Gauteng (1), Western Cape

(1) and Northern Cape (1). The map below shows the location of the provinces in which

the research was done.

(http://www.southafrica.info/about/geography/provinces.htm)

The work focused on these provinces (five of the country’s nine provinces) because our

initial work suggested that these provinces were mostly likely to have arrangements

comparable to those in TAH. With respect to both the national and provincial-level

interviews, attempts were made to interview officials with responsibility for

hospitals/private wards in public hospitals, as well as officials with more clear

responsibility around revenue and finances. This was not always possible because some

of the latter declined to be interviewed and because attempts to secure appointments

with others came to nought. It often proved very difficult and time consuming to arrange

interviews with officials.

At the national and provincial levels, the interviews were focused on gathering

information on where differentiated amenities had been implemented, on the current

prominence of this policy area, the procedures followed in the establishment of these

private wards and on how the authorities were dealing with key issues in the

management of these types of arrangements. The interview guide used in the interviews

with the senior national and provincial-level officials is attached as Appendix A.

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In the actual implementation of the research it was decided to change around the order

of the proposed hospital survey and interviews with hospital managers responsible for

private wards in public hospitals. This was mainly because we felt that we needed a

better understanding of the functioning and practices of private wards in order to design

the questionnaire in a way that made sense to the potential respondents. The required

information was not always forthcoming from the higher-level national and provincial-

level interviews, hence the decision to speak first with the much more operational

managers of these private wards. In this regard, we were able to interview 4 managers

in charge of private wards, all of them in Gauteng. At this level, the interviews sought to

gather information on the more detailed, day-to-day management and organisation of

private wards and included questions about issues such as the flows of money, the

provision of medical care and the arrangements for support services. The interview

guide used in the interviews with the managers of private wards is attached as Appendix

B.

The questionnaire was eventually distributed to only 4 hospitals, all in Gauteng. These

were hospitals that were known to be the only ones in the province with differentiated

amenities. It could have gone to 1 or 2 more hospitals in other provinces that the

researchers were aware of, but attempts to do this were abandoned because it proved

near impossible to engage with the higher bureaucratic levels overseeing these

institutions. Despite reminders, no responses were received, perhaps reflecting the

inherent weakness of the method of e-mailed questionnaires, the difficulties sometimes

encountered in arranging the earlier face-to-face interviews and the generally low priority

of the activity. As is evident from Appendix C, the questionnaire was aimed at getting

more quantitative information about the functioning of these wards. Information, also,

that respondents did not necessarily have at hand during the initial face-to-face

interviews.

All-in-all, the questionnaire was sent to a small number of hospitals, but this reflects the

fact that there are not many hospitals that have private wards or differentiated amenities

comparable to those at TAH. From experience, the researchers are aware of hospitals

that essentially have 1 or 2 rooms set aside for the possible use of private patients, but

these were excluded from this work. They are different in scale and nature from the

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facilities at TAH and the hospitals included here, which all have full-scale wards

available for the use of private patients.

Lastly, a mixture of written and verbal consent was secured for all interviews and, where

possible, face-to-face interviews were recorded. Detailed notes were made of all the

interviews after which the information was thematically coded and wherever possible,

data was triangulated across interviews.

3. POLICY CONTEXT AND PRIORITY

Before saying more about other private ward models and how these compare to the TAH

model, it might be of interest to present more general information about the current

policy context and the priority accorded to the issue of differentiated amenities in public

hospitals.

Private wards or differentiated amenities can, in two ways, be thought of as belonging to

the broader category of public-private interactions (PPIs). Wadee et al. (2003) broadly

define PPIs as engagements between the public and private sectors that support health

service delivery directly or indirectly. On the one hand, it involves utilising private health

finance to support health care delivery in the public sector. This is because the patients’

accounts are often settled through medical insurance. On the other hand, as will be

discussed in greater detail in subsequent sections, these wards often rely heavily on the

outsourcing of non-clinical services such as portering and catering to private, for-profit

enterprises.

Previous work by Wadee et al. (2003) argued that South Africa had quite a range of PPI-

type arrangements in 1990s and that it became a greater part of the policy rhetoric late

in the 1990s. Their report pointed to milestones such as: a) the NDOH developing policy

guidelines on public-private partnerships (PPPs) in 2000, b) the promulgation of National

Treasury PPP guidelines around the same time, and c) the development by the NDOH

of a policy document on PPIs in 2001.

In contrast to this, however, the interviews conducted for this project suggest that much

of this dynamism or impetus had dissipated by 2008, at least with regard to the health

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sector and the issue of private wards in public hospitals. While private wards are often

dear to those who manage them on a day-to-day basis, it was very clear from interviews

at national, provincial and facility-level that, in the bigger scheme of things, the issue of

private wards in public hospitals is not a very visible or important one on the radar of

government at the moment. Perhaps the best characterisation is to say that they have

become routinised, with decision-making effectively taking place at provincial and even

hospital level. From time-to-time these wards were in the spotlight – for example when

prominent politicians were admitted there or when opposition political parties raised

concerns about their functioning – but this is not the same as being a programme that is

high on the list of priorities for a sustained period of time. In addition to direct statements

about relatively low priority and the fact that some respondents mentioned other issues

of higher priority, the relatively low priority of private wards is perhaps also suggested by

factors such as the apparent absence of any national-level monitoring or oversight. One

senior provincial official described a “policy vacuum at national level”.

Drawing on the interviews conducted, the reasons advanced for this state of affairs

include:

The refusal of Provincial Treasuries to allow the private wards to retain the

revenue raised through their operations. This was interpreted as reducing the

incentive to go to all the trouble of establishing and running differentiated

amenities;

The realisation over time that the private wards are not really generating

worthwhile surpluses; and

The fact that key stakeholders such as senior financial officers have, linked to the

lack of profit, lost enthusiasm for the idea.

At present (2009), the health policy agenda has to a large extent been dominated by the

government’s plan to introduce national health insurance (NHI) in the country. This

intention has been clear for some time, as it was incorporated into both the resolutions of

the 52nd national conference of the ruling African National Congress (ANC) held in 2007

(ANC, 2007) and the party’s election manifesto for the 2009 general elections (ANC,

2009). However, the issue gained significantly in public prominence when the contents

of a draft proposal were leaked from the task team working on the design of an NHI

system. It seems as if the introduction of an NHI will have major repercussions for public

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hospitals (for example, in work that will have to be done to strengthen them before NHI

introduction), but it is not clear what the status of differentiated amenities will be in an

NHI system and whether there will in fact be any rationale for their continued existence.

Similarly, in his State of the Nation Address in June 2009, the South African president

spoke about the urgent rehabilitation of public hospitals through PPPs in order to pave

the way for NHI (State of the Nation Address, 2009). Again, it is not clear at present

exactly what the proposed engagement with the private sector will entail, which hospitals

will be affected, and how they will be affected.

There are, therefore, a number of ideas on the policy agenda at the moment that will

have significant impacts on public sector hospitals if they come to fruition. However, it is

not clear what the impact will be on private wards in public hospitals or that anyone is

even thinking about the place of private wards within these larger reforms.

4. OPERATING PRIVATE WARDS IN PUBLIC HOSPITALS: THE WESTERN

CAPE EXPERIENCE

4.1 A Brief Summary Of The TAH Model

Even though there seems to have been a shift in the broader context in which private

wards in public hospitals are being implemented, the fact remains that they continue

functioning, in certain cases on a substantial scale. In terms of the research objective

around contextualisation and comparative perspective outlined above, it therefore

remains worthwhile to try and unpack how these wards are implemented, how the

models compare from setting to setting, and what possible impact the pursuit of private

wards in public hospitals is having in different places.

As set out above, a first step in this direction is to briefly describe the functioning of the

private wards in TAH as this will anchor, will provide a reference point, for much of the

information, discussion and comparison that will follow. This description is drawn entirely

from the case study of TAH referred to above (Wadee and Gilson, 2007).

The private facilities in TAH seem to fit the definition of “differentiated amenities”, which

entail the provision of better hotel services to higher-income patients/private patients

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who, under a fee-for-service arrangement, pay out-of-pocket or through medical

insurance. Patients in TAH are directed to the private facilities if they have

comprehensive-type medical aid/insurance, a more limited hospital insurance plan or if

they are able to pay a two-thirds deposit on a basic fee.

The private facilities in TAH are, in important respects, integrated with the rest of the

hospital. It was developed in unused space in the hospital and this involved upgrading

through painting, tiling, refurbishing bathrooms and installing televisions in each room.

Beyond the physical, this integration is also evident in the functioning of key categories

of staff, especially doctors. Doctors do not spend fixed periods of time on a rotational

basis in private wards. They are expected to work throughout the facility and treat private

patients as part of their overall duties. As will become clear later, this is one of the key

factors that differentiate the TAH model from some of the alternatives.

Key points for comparison:

integration with hospital, hotel services and staffing arrangements

• Physical integration with the rest of the hospital

• Better hotel services than the regular public wards

• Doctors treat patients as part of their overall duties in the hospital

Regular public wards are organised by clinical sub-department, with there being for

instance an orthopaedics ward, a cardio-thoracic ward and the like. In the case of the

private ward model at TAH, private patients admitted for different conditions – and

requiring the services of different specialties – are placed in the same ward. That is,

different specialists visit the same ward, with all specialties catered for except for

paediatrics. In 2005, the hospital opened an outpatients department (OPD) for private

patients as it was felt that it did not make sense to have both public and private patients

together. In addition, there are two designated beds in the Intensive Care Unit (ICU) for

private ward patients. At the time of the original study, plans were underway to develop a

designated operating theatre for private patients.

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“sub-ward” types and organisation

• Patients with different conditions in the same ward, paediatrics not catered for

• Separate OPD for private patients

• Sharing main hospital ICU, plans to develop theatre for private patients

As already explained, doctors are expected to work throughout the facility and treat

private patients as part of their overall hospital duties. Doctors employed by the

Provincial Government of the Western Cape (PGWC) are not allowed to do remunerated

work outside of the public sector (RWOPS) within the public facility (and hence not in the

private wards within TAH). RWOPS is a system whereby people in government employ

can get permission to do private work to earn additional income. This prohibition means,

therefore, that doctors cannot treat the patients in the private wards as private doctors

and therefore cannot charge them additional fees. Consequently, there is for them no

financial incentive attached to service delivery in private wards. However, doctors on

joint PGWC-University posts are allowed to charge a professional fee for their work in

the private wards. In this instance, the professional fee is not charged by the hospital,

but by the doctor in his/her personal capacity.


staff financial incentives

• Many doctors have no financial incentive to work in the private wards

The nursing provided in the private facilities used to be pre-dominantly in-house, with

staff allocated on a rotational basis out of the full staff complement in the hospital. Since

2005, however, the private wards have relied mostly on nurses who are contracted

through nursing agencies. These might be “freelance” or “temp” nurses who have no

permanent jobs or nurses with permanent jobs who use nursing agencies to find work

during their free time.

In private wards, catering is provided in-house. The menu is slightly different to that

available to public ward patients, with private patients have greater choice. The cleaning

function for the private wards is outsourced. Laboratory tests are paid for either directly

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by the patient or the medical aid scheme/hospital insurance plan. The private wards

employ some full-time clerks and administrators and case managers have been

appointed to ensure billing is accurate and to manage relationships with funders such as

medical aid schemes.


staffing arrangements and support services provision

• The significant use of agency nurses

• The mixture of in-house and outsourced services

• Direct link between laboratory and patient/medical insurance company

Lastly, the original case study of TAH described a system in which it was possible, under

a specific set of circumstances, for the hospital to retain some of the revenue it raised

from its private and public wards as a whole. This system worked as follows:

• Revenue generated from the private wards went straight into a central revenue

fund that was returned to the Provincial Treasury. Each year, however,

Treasury determined the revenue budget for TAH on a historical basis;

• This estimation was then included in the total budgetary allocation from the

province to the hospital;

• In the case of over-recovery – that is, should TAH raise more revenue than

stipulated in the estimated revenue target - it would be ‘retained’ by the facility;

• The over-recovery is not directly retained by the hospital, but is advanced in the

following budgetary cycle in addition to the ordinary budgetary allocation. This

comes with clear specifications on how the money is to be spent, with only once-

off expenditure permitted.


revenue retention

• A defined system for dealing with and retaining surplus revenue

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4.2 Other “Models” In The Western Cape Province

Information obtained from the Western Cape for the purposes of this report suggests

that there are, in addition to the TAH private wards, other entry points for private patients

into the public hospital system of that province. However, to some extent some of these

entry points seem to be the product of chance and historical circumstance, not the

deliberate development and implementation of a model as in the case of TAH.

Most hospitals, according to a senior government official interviewed for this project,

would see private patients and charge them as such. This, however, does not represent

a differentiated amenity and simply means that public hospitals follow the normal

procedure for private patients as outlined in the Uniform Patient Fee Schedule (UPFS).

The UPFS is the national policy document that regulates the fees charged to different

categories of patients at public hospitals, including private patients. The UPFS applies to

all hospitals, so there is nothing that prevents any private patient from coming for

treatment to any public hospital, irrespective of whether that hospital has differentiated

amenities.

The interview with this senior official also yielded the example of a large hospital in the

province where doctors can levy professional fees that are higher than the UPFS. This

was cause for dissatisfaction because of the feeling that doctors are already being paid

a salary and because they are charging additional fees for work that they are doing in

the hospital. At the same time, there is also a private hospital within this public hospital,

with the doctors working in both places, on both the public and private sides of the fence

as it were. This was described as a “headache” and “not a planned model”.

A last example was of a separately operated private hospital that closed down and that

ended up moving into a public hospital after that. This is not a differentiated amenity as

both private and public patients are being seen, with the only difference being the bills

received by the different types of patients. It was not clear if the public system was

somehow subsidizing this arrangement as it was not routinely monitored and there was

no real mechanism to check the cross-subsidy.

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In contrast to some of the above examples, the experience at TAH seems to represent

an attempt at developing a coherent and systematic way of incorporating and trying to

benefit from private patients in a public hospital. It therefore remains a useful and valid

reference point for comparing the models of differentiated amenities operating in other

provinces.

5. OPERATING PRIVATE WARDS IN PUBLIC HOSPITALS: THE MODELS IN

OTHER PROVINCES

In the following sections, the private wards model of TAH will be contextualised by

comparing it to the practices, arrangements and incentives that exist in other hospitals in

provinces outside of the Western Cape. It will become clear that there is considerable

variation between provinces, but also between hospitals in the same province. As one of

our national-level key informants explained, this can be traced back to the original policy

decision taken by a committee comprising of the Minister of Health and the nine

provincial Members of the Executive Committee (MECs) for Health (MINMEC).

According to this respondent, MINMEC decided that each province must establish its

own policy on the issue, hence the different ways of doing things and the lack of

national-level governmental involvement.

5.1 Gauteng Province

The scale and ward organisation of the Folateng wards

In terms of the comparison with TAH and the Western Cape Province, Gauteng Province

is implementing differentiated amenities on a larger scale and, at least in certain

respects, represents a different way of doing things.

Four public hospitals in this province – Charlotte Maxeke-Johannesburg Academic,

Pretoria West, Sebokeng and Helen Joseph – have private wards. These are known as

the Folateng wards (Folateng means “place of healing”) and together they represent a

major alternative model on the private wards landscape1. One national-level key

1 The press recently reported on plans in Gauteng to reopen a public hospital that was closed in

1997. The idea seems to be to operate this hospital according to the Folateng principles, which

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informant, in a less than enthusiastic tone, argued that this model is one of “separate

amenities”, as opposed to the “differentiated amenities” of the Western Cape. Implicit in

this characterisation is a concern about the equity implications of the way of doing things

in this province in the sense of separation of services between patient groups based on

ability to pay and how this could be intertwined with historical racial inequities.

According to the information at our disposal, the Folateng wards appear to be operating

the differentiated amenities model on scale that is unequalled in South Africa. At

inception, the two private wards of TAH comprised 29 and 33 beds respectively (Wadee

and Gilson, 2007). In comparison, when the interviews for this study were done, the

private wards of Charlotte Maxeke-Johannesburg Academic, Helen Joseph, Sebokeng

and Pretoria West hospitals had 97, 40, 36 and 52 beds respectively. Although not

systematically explored in each of the Folateng hospitals, there is evidence (at least from

Johannesburg) that the wards are also not necessarily organised in the same way as at

TAH.

A clear difference is in the intensive care unit (ICU), with the Folateng at the Charlotte

Maxeke-Johannesburg Academic Hospital having its own ICU (13 out of 97 beds) that is

run completely by the private ward, as opposed to the TAH model of sharing with the

mother hospital. This Folateng in Johannesburg also has 8 high-care beds, with the

remainder being divided between medical and surgical patients. Where TAH doesn’t

cater for paediatrics, the Folateng at the Charlotte Maxeke-Johannesburg Academic

Hospital doesn’t cater for maternity patients. Like TAH, this Folateng also in effect has its

own outpatients department (OPD) with two self-employed physicians who are

permanently in the ward and often act as gatekeepers to specialists. At the time of the

study, this was not the case in any of the other Folateng wards, although some had

plans to try and appoint such dedicated doctors.

means it will be the first time that an entire hospital will be run on this basis (The Star,

2009/08/17).

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• The larger scale of the Folateng wards

• Some Folateng wards have their own ICUs

• Some Folateng wards have their own OPDs

The Folateng wards as nested within their “mother hospitals”

The Folateng model can be compared to the TAH and other models along a number of

dimensions, e.g. the collection and retention of revenue, the conditions under which key

personnel such as doctors and nurses work there, and the organisation of support

services such as cleaning, catering and portering. It will become clear that there are, in

certain respects, significant differences between Folateng and the other models, but that

all the Folateng wards are also not operating in the same way and under the same

conditions.

The first Folateng wards started operating in May 2002 (Folateng, 2009), around the

same time (financial year 2002/2003) as the creation of the first ward at TAH (Wadee

and Gilson, 2007). As with TAH, the Folateng wards are functioning within the physical

space of the existing hospital buildings and are, in that sense, integrated with their

“mother hospitals”. They also enjoy better hotel services and, in fact, look quite different

to the rest of the facility. This can be seen in things such as tiling and the colours of the

walls – the Folateng wards have clearly been renovated and often appear to be in a

better state than other sections of the facilities in which they are housed.

The Folateng wards don’t only relate to their mother hospitals in terms of physical

infrastructure. They are also nested in wider systems such as the accounting and

financial system. The Folateng wards, for example, are not separate legal entities and

do not have their own bank accounts. This means that funds due to them are deposited

into the accounts of the mother hospitals and that within the accounting systems of each

of the mother hospitals, the Folateng wards represent a cost centre or a unique project

code. Money is deducted from this code when the mother hospital supplies something to

the private wards. Much of the private wards’ medicine, for example, is provided through

the mother hospitals’ pharmacies, with the private wards being charged for whatever

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they consume. This appears to be similar to the TAH model where we found there to be

a cost centre for “differentiated amenities”. However, the systems appear not be working

in exactly the same way because in TAH, for example, the cost of medicine does not

appear under any cost centre. Records on these costs are not differentiated for public

and private patients and the only way to allocate these costs is to examine patient

records. In addition to medicine, a whole range of other costs accrue against the

Folateng codes and are paid by the private wards, including: catering, cleaning,

portering, consumables used in theatre and the nurses who work in theatre.


integration with hospital, hotel services and finance flow

• Physical integration with the rest of the hospital

• Better hotel services

• Generally good and renovated appearance

• The ward is a cost centre against which costs such as those for pharmaceuticals accrue

The admission of patients in the Folateng wards

The overall impression created by the interviews with the officials and managers in the

Folateng wards is that there is a genuine effort to view and run these wards as private

enterprises. One respondent, for example, explained that Folateng is viewed in the same

light as a regular private, for-profit facility, while another spoke specifically about the

ward that she manages as her “business”. This means, we judge, that they have a

particular approach to costs in that their activities are very specifically set up in ways that

limited the risk of financial loss.

This is evident, firstly, in the steps that are followed in admitting patients into these

wards. The Folateng wards operate in a way that essentially allows them, with some

exceptions, to get full, up-front payment of the approximate cost of the patient’s stay

before admitting the patient (if the patient is paying cash) or pre-authorisation of the

patient’s stay by the medical aid scheme (in the case of patients not paying cash). The

general way of doing things seems to be to give prospective patients a comprehensive

quote of the approximate cost of their stay in the ward and their specific procedure. This

then has to be followed by a cash payment or medical aid authorisation before the

patient will be admitted. It was quite clear from the interviews that the wards had, in the

18

past, experienced problems with cash-paying patients settling only part of their bill or

taking a long time to pay the full outstanding amount. This seems part of the reason for

the introduction of the quote system and some of the respondents also mentioned

explicitly that they do not accept part-payment upfront from cash-paying patients, e.g.

where patients come with a couple of hundred or thousand rands and the promise to pay

the rest later.

One interview with a manager of one of the private wards yielded slightly more detailed

information, with it being said that the above system essentially applies only to what

happens during office hours. In this particular respondent’s ward, cash-paying patients

who arrived after-hours were expected to pay a deposit of R10 000 towards the

hospital’s costs and R5000 for the doctors’ fees. If medical aid patients came after-hours

and their scheme did not operate 24 hours a day, they were asked to pay upfront for an

overnight stay and to sign a form admitting their liability for payment should the medical

aid scheme not give authorisation for their stay in the hospital. However, it was indicated

that exceptions were sometimes made, for example if the medical aid patient coming in

after-hours was a regular patient in the ward. If the ward was fairly certain that the

patient still had medical insurance, they would admit him/her, get them to sign the

liability form and arrange things with the medical aid scheme the next day, without

collecting the upfront payment for the overnight stay.

Another respondent from a different ward also said that they do try and get the medical

aid authorisation as quickly as possible, but that it has happened that patients are

admitted, with the medical aid scheme eventually not wanting to pay. In a third ward, the

respondent confirmed the expectation for the upfront payment of quotes, but said that

the medication bill is settled on discharge. This is often not a very expensive part of the

overall account. There are, therefore, clearly still some risks, but this system of quotation

and upfront payment or authorisation arguably represents a concerted effort on the part

of the Folateng wards to limit their financial risk.


finance flow

• Efforts to secure upfront payment of the patient’s costs, no deposits allowed

19

The providers of health care and support services

The admission of the patient is obviously only one part of the process of operating a

private ward. Once they are admitted, patients receive all kinds of services from health

care professionals and support staff. Understanding how these services are organised is

an indispensable part of trying to get to grips with the Folateng model. This section will

describe briefly the ways of working of health care and other staff, including differences

between the Folateng wards. It will be shown, firstly, that these services are also set up

in a way that limits the risk of financial loss to the private ward. Secondly, it will become

clear that the ways of working of especially the health professionals go to the heart of

the question of whether private wards pull critical staff away from the state/public side of

the bigger hospital.

The presence of doctors is obviously key to the functioning of the private wards, but in

the main the private wards do not have doctors who work in the wards full-time. The

implication of this is that these units rely to a large extent on doctors who are employed

in the mother hospitals within which these private wards are located. There is one

exception to this: a Folateng unit where one of the mother hospital’s doctors occasionally

sees patients (without charging any fees for his own personal benefit), but where the rest

of the doctors who work in the private ward are all from outside the hospital. In this

context of heavy reliance on doctors from the mother hospitals, a key question is

obviously to what extent doctors might be neglecting their public work in favour of their

private practices and work in private wards.

Such doctors from the mother hospital, who are paid a salary by government, are

permitted to do private work under the scheme called RWOPS, which was briefly

outlined earlier. When talking to representatives of Folateng, it is clear that doctors are

supposed to be following the regulations of RWOPS when working in the private wards.

However, when probed about this, the respondents’ answers often did not give great

confidence that the stipulations were being adhered to. Responses included statements

such as that it is not the concern of Folateng because Folateng is not the employer and

that the private wards don’t get involved in this controversy because it is up to the

doctors’ superiors to ensure that they are adhering to all the necessary rules and

regulations. In fact, reading between the lines it is clear from some of the interviews that

doctors do attend to patients during what would be considered normal working hours. To

20

paraphrase one respondent, if a doctor sees Folateng patients between 10h00 and

14h00, it is up to the doctor to sort it out with his/her superior. Similarly, another

respondent spoke about being sure that doctors arrange their consulting times for when

they are not on “government time”, but also said that in practice one has to trust that the

doctor is following the rules and is honest enough to, for example, work back

“government time” spent in the private wards. Clearly, none of this proves that health

professionals’ nests are being feathered in the private wards at the expense of their

public patients. However, it also does not give confidence that there is much by way of

preventing such subsidies from the public to the private, especially since this is such a

key and contentious part of the debates around private wards in public hospitals.

In terms of billing, the doctors’ rates are separate and not included in any tariffs that

Folateng may charge patients. The doctors also have the responsibility of billing the

patient or medical aid and collecting the money from them. Some respondents indicated

that Folateng aims to regulate the fees charged by the doctors so that they are lower

than the charges one might encounter in the pure private sector. This is because many

of the patients have quite limited medical insurance and charging very high rates would

mean that they would have to pay a portion of the costs out-of-pocket. One Folateng unit

mentioned implementing a new system to collect doctors’ fees from cash-paying

patients, partly because it allowed them to keep track of what was happening and to

avoid patients being over-charged.


staffing arrangements and staff financial incentives

• Doctors are not supposed to see private patients as part of their normal hospital duties

• Doctors bill patients separately, in addition to fees charged by the private wards

This mode of functioning (of services being provided to patients by a distinct, clearly

delineated provider who then makes separate arrangements with the patient regarding

payment) is key to understanding the provision of medical services in Folateng as it

applies to a range of providers beyond doctors. This was mentioned as applying to

laboratory tests, often to X-Rays, and in one case where it was specifically asked by the

interviewer to physiotherapy. Many of these services, such as X-rays and physiotherapy,

21

would be “owned” by the mother hospital and, although it was not investigated directly

with the respective departments, it seemed as if these “government-owned” departments

sometimes essentially contained private practices within them. Sometimes it seemed

very formalised, as when “X and Partners” were described as operating from within a

radiology unit, collecting cash from patients, calling medical aid schemes to get

authorisation for expensive procedures, and billing medical aid schemes themselves.

With regard to one particular physiotherapy service, it was said that physiotherapists

from the mother hospital would be sent to Folateng and would bill the patient separately

from the Folateng tariffs, but that all the physiotherapists would benefit from it: those not

working in Folateng would double-up for those working in Folateng, with the money

going into a central fund for all to share by some means that was unknown to the

respondent. Again, arrangements such as these are susceptible to suspicions about

time spent away from non-private patients and preferential care provided to private,

paying patients.


support services provision

• A range of health care providers bill patients separately, as distinct from the private ward

tariffs.

With regard to nurses, it is clear that these private wards rely to a large extent

(sometimes exclusively) on nurses who are supplied by nursing agencies. In the one

hospital, where all the nurses were supplied by agencies (this unit had no nursing posts

of its own), it was explained that different types of nurses came through the agencies.

Some, especially more senior staff such as sisters, had full-time, permanent jobs in the

mother hospital, but were using their off-time to moonlight in the private ward of the

same hospital. Other nursing categories such as staff nurses and enrolled nursing

assistants tended not to have full-time jobs and were “pure” agency nurses, who could

theoretically work in a different place each day. Despite this reliance on an agency

workforce in this setting, there were attempts to build up a core, stable group that would

essentially work “full-time” in the private ward. In the private ward of a second hospital

there were six permanent posts, mostly for management who still performed some

nursing tasks. The rest of the staff were all supplied by agencies. In contrast to this

general picture of reliance on agencies, the private ward of a third hospital said it relied

22

mostly on permanently employed nurses, with agency staff mainly being called in when

the ward was unexpectedly busy. Unlike doctors and the other services described in the

paragraph above, nursing care is not billed separately to the patient as it is included in

the daily facility fee that the patient has to pay to the private ward.

In all Folateng wards, services such as catering, cleaning and portering are outsourced

to private companies.


staffing arrangements and support services provision

• Nursing care included in private ward tariffs

• Heavy, sometimes exclusive, reliance on agency nurses

• Outsourcing of catering, cleaning and portering

Revenue retention

It is clear that the Folateng wards do not, in any straightforward sense, retain any

surpluses that they might generate. According to one respondent, the Folateng wards as

a group are showing a surplus, with two of the wards generating surpluses and the rest

not. One of the problems for those wards not showing a surplus has to do with the ward

fees they are allowed to charge in terms of the UPFS. Academic-level hospitals are

allowed to charge about R1000 per day, while this figure is approximately R400 for a

district hospital. All Folateng wards are standardised, with costs to a large extent being

fixed, hence the problem that low ward fees represents for some hospitals.

There were some discrepancies in how the respondents spoke about the flow of money

and consequently we are not able to present a very clear revenue retention picture.

However, it seems clear that the money collected by these wards, in the first instance,

goes into the bank account of/is deposited with the cashier of the mother hospital

because these wards do not have their own bank accounts. It is not clear if these

accounts are then under the control of the provincial health department or provincial

Treasury or whether money is at some point transferred to these provincial authorities,

but the respondents were fairly clear that the money eventually ends up under the

control of either the provincial department of health or provincial Treasury, with the

23

wards having no access to it and these higher authorities then deciding on the allocation

and use of the revenue/surpluses. One respondent thought that the money first flowed to

the national level of government before being passed on to the provincial Treasury, but

this seems unlikely and might just be a misunderstanding on the part of the respondent.

On paper and in principle, therefore, the Folateng wards don’t seem to retain any of the

revenue or surpluses they generate and don’t have control over how this money is

subsequently used in the government system. The interview material suggests,

however, that there might be some strategies available to these wards that might make it

possible for them to “retain” some of the revenue. This has to do not so much with the

wards, but with the functioning of governmental financial systems and the incentives built

into these. One respondent indicated, for example, that if the wards under-spend on their

budgets, the budgets will be reduced in the next budgetary cycle. The system therefore

seems to contain an incentive for the wards to spend their budgets fully and one might

therefore see “revenue retention” in the sense that there is not necessarily an incentive

for the ward to spend as little as possible and to generate the maximum difference

between expenditure and income. The spending of private wards will be discussed

again in the following section on the micro-politics of these wards.

Lastly, a couple of other points might be worth mentioning with regard to revenue

retention. These issues only came up in a very limited set of interviews, so it is hard to

determine how accurate they are, especially because the respondents were often also

not able to describe them in great detail. They serve to highlight other possible dynamics

at work with regard to revenue retention and to underscore that the interviews did not

yield very clear information on this issue:

• One respondent described how the private ward recently got back a very sizable

amount of money, which now had to be spent in a few months or lost completely.

The respondent linked this to the reaching of targets and said government had

an arrangement in terms of which units got money back if they reached their

targets. She couldn’t explain this process exactly and claimed to have heard of

the money via the financial manager of the mother hospital. This suggests that

Gauteng Province has a system similar to that in the Western Cape which

allowed TAH to get some money back, but in Gauteng this was only mentioned in

a single interview.

24

• One respondent expressed the understanding that 80% of the money collected

by the Folateng wards was supposed to be distributed to the mother hospitals

because Folateng was all about generating money to improve these hospitals,

with the other 20% being retained by the provincial Treasury. In practice

however, this respondent said, things were not working like this. When the

respondent last heard of the issue, in the 2006/7 financial year, all the money

was apparently given to the radiology unit of Charlotte Maxeke-Johannesburg

Hospital. The respondent was unsure of the origin of this decision (“it must have

been from the top”), but apparently it caused some tension in the relationships

between the mother hospitals and the Folateng wards.

• Another respondent was of the opinion that the idea was to pay back, over a

period of five years, the money that the Gauteng Provincial Government had

spent on the renovation and establishment of the Folateng wards. After this had

been done, surplus revenue could be used to help the mother hospital with

whatever it needed. This respondent mentioned help that was given to the

oncology department of Charlotte Maxeke-Johannesburg Hospital, apparently

because this repayment had taken place in that hospital. When prompted, the

respondent said that she had not seen this arrangement captured on paper, but

that it represented her understanding of how things were supposed to work.


revenue retention

• In principle, the private wards don’t retain revenue/ surpluses and don’t decide on their

use

• Lack of clarity on other aspects of financial flows

The micro-politics pf private wards

In the final analysis, the private wards remain nested in the systems and relationships of

the mother hospitals. To conclude the discussion of the Folateng wards, the focus will

briefly be placed on the nature of these relationships and their benefits and drawbacks.

A theme that is pretty much present in all the interviews has to do with frustration around

the systems of the mother hospital and wider governmental system. One respondent,

for example, explained how they have, over time, taken certain functions such as

25

medical scheme billing from the mother hospital due to problems such as bills not being

paid or submitted to medical schemes in the first place. Referring to a province-wide

agency, this respondent also complained about long procurement processes, especially

when supplies were needed on short notice. Similarly, a second respondent also

complained about slow procurement processes (this time at hospital-level) and

discussed plans to implement a “sub-cashier” in the ward because of problems being

experienced with the main cashier of the mother hospital. Similar issues, especially

around administrative delays, were also raised by a third respondent. On several

occasions, respondents expressed the wish that Folateng would become a stand-alone

unit.

In the interviews, it appears that complaints such as the above are framed in two

different ways. In one case, for example, a respondent explained that the private ward

had a good and supportive relationship with the mother hospital. Here, the above

complaints about administrative frustrations appear to be just that. In other cases,

however, these issues are framed more as groups within the mother hospital subverting

or resisting the private wards, e.g. complaints about private ward procurement requests

being treated as the last priority. In the interviews, this latter framing co-exists with

examples of some overt opposition to the private wards. In one case, for example, there

was mention of the argument of a very senior doctor in the mother hospital that the

private ward should be closed down because it was costing the hospital money. In

another case, the respondent felt there was some top management support, but a lot of

negativity from the “lower categories” of staff. Their basic attitude seemed to be: “You

people (the private wards) are making money, so sort yourself out”. This respondent also

mentioned resistance from some doctors, who felt the Folateng patients were treated

differently and that they should be treated like all other patients.


micro-political relationships with mother hospital

• Private ward frustrations with mother hospital administrative processes

• Some private wards face resistance from other sections of the hospital

The private wards are, therefore, inextricably bound up in these local processes and

relationships and, if the respondents are to be believed, these impact on the day-to-day

26

functioning of the private wards. This, then, is perhaps a good place to unpack the

potential benefits of the private wards to the mother hospital. This can be framed as an

issue of equity (Do the private wards benefit the mother hospital or is there a subsidy in

the wrong direction?), but also has relevance, at least in some contexts, to the issue of

the relationships of support and opposition discussed above.

As already outlined above, there is some ambiguity around how certain health

professionals divide their time between the state and private sides of the hospital and

whether the public is subsidising the private. As mentioned by one of the respondents,

some staff also feel that the Folateng patients are treated differently and that this is

inappropriate.

On the other hand, on the direction of the subsidy, the Folateng wards can argue that

they pay for a whole host of costs ranging from pharmaceuticals, the work that nurses do

in theatre and the consumables used in theatre to cleaning, catering and portering – that

they therefore are not a burden on the state side of the hospital.

The interviews also contained no shortages of examples of ways in which the private

wards had benefited other parts of the mother hospitals. Examples mentioned included

paying the salaries of teachers who work in the hospital crèche, buying consumables

such as gowns and gloves, buying theatre equipment that the mother hospital will also

be able to use, refurbishing certain units within the mother hospital, and buying for

doctors who are active in Folateng materials that they can use in theatre, but which they

have spent a long time waiting for. In one setting where there is resistance to the private

ward, the respondent specifically mentioned how the sharing of benefits such as these

can help to foster good relationships with the mother hospital. It is, therefore, not only

about medical benefits and the general improvement of the quality of care in the

hospital, but also about the micro-institutional politics of survival and relationship-building

with a “state-side” of the hospital that in many ways operates in a different paradigm.

In terms of the benefits of private wards, the interviews also contained the argument that

this should not only be considered in terms of whether a surplus is generated or not, or

in terms of the types of benefits described in the previous paragraph. Some feel, for

example, that the retention of highly valuable and specialised staff is one of the spin-offs

27

of Folateng. This refers to the fact that doctors can earn additional income within the

hospital in which they work on a day-to-day basis, as opposed to going to a private

hospital in a different location to do this. The sense is that this makes it easier to

manage the movement of doctors than when they are travelling between the mother

hospital and other facilities to run their private practices.

5.2 The Northern Cape Province

In this province, it was only possible to interview one, albeit very senior, provincial

official. The information in this section is therefore somewhat more limited than what

has been presented thus far because it was not possible to visit any of the relevant

hospitals or directly interview any of the managers of the private facilities. Nevertheless,

our information indicates that there are two types of arrangements in this province.

The first operates in the three towns of Upington, De Aar and Kuruman and is referred to

as preferred private beds. This essentially refers to beds within general wards or small

side-wards into which private sector providers, for example local general practitioners,

can admit their patients. In these small towns, the public hospitals have links to local

general practitioners who are contracted to work some hours for the state in the public

hospitals. Within the context of these kinds of links, and the fact that small towns such as

these often don’t have private hospitals of their own, the private practitioners can also

use the public hospitals for their own patients. Under this arrangement, the public

hospital will charge the private patient a facility fee, which is a basic daily rate that

includes the cost of things such as nursing care. All-in-all, though, this is not a serious

alternative model in terms of differentiated amenities in South Africa. The key informant

described it as more of a “sweetener” that doesn’t mean much in terms of revenue

generation. It is really about the convenience of the local private sector doctors, many of

whom do sessions in the public hospitals, and about offering private patients a service

that is more affordable than private hospitals.

28



• Beds/side-wards for private patients

• Little impact in terms of revenue generation

• Exists to a large extent for the convenience of private sector doctors

Secondly, a more structured and fully fleshed-out model appears to be in operation in

the public hospital in Kimberley, the provincial capital of the Northern Cape Province. In

comparison with the preferred private beds discussed above, this seems a more

appropriate comparison with TAH and the Folateng wards. In this hospital there is

almost a whole section or ward dedicated to private beds. The only difference between

the public and private sections of the hospital lies in the “hospitality”/amenities, with the

private section for example having television sets. This private ward operates

completely within the rest of the hospital:

• Medical care is completely provided by medical officers and specialists in the

employ of the state and there is no special group of doctors that cater for the

private patients. The same is true with regard to the nursing care; and

• All services such as catering and laboratory tests are provided internally.


hotel services, integration with hospital and support services provision

• Better hotel services

• Private ward operates completely within the mother hospital

• All services such as catering and laboratory tests done in-house

The state-employed specialists in all fields have been granted permission to engage in

RWOPS, which means that they are entitled to charge patients a professional fee in

addition to the charges that will be levied by the hospital itself. The hospital in Kimberley

also has a private consultation room – and OPD walk-in - with a doctor on duty until late

in the evening.

29



• OPD for private patients

In the Northern Cape, the revenue that is raised through private wards in public hospitals

goes straight into the account of the provincial government. The hospital did, in the past,

apply for permission to retain some of this revenue, but the provincial Treasury has

never approved this request because the Northern Cape Department of Health has had

various audit disclaimers on its financial accounts. The health officials have no role in

deciding how the Treasury allocates the revenue collected from private wards and the

latter is also free to use it outside of the health sector, for example on the upgrading of

roads. The private ward in Kimberly was reportedly finding it difficult to claim from

medical aids and it was explained that no case managers are employed and that nurses

are used to fulfill this function. Some thought has been given to outsourcing this claiming

process, but it was reported that this appears to be a prohibitively expensive option.


revenue retention

• No revenue retention

The respondent argued that the activities of the hospital were not being diverted to the

private wards because this ward is completely integrated with the rest of the hospital and

not seen as a separate entity. It was acknowledged that insufficient revenue was being

raised and that the private ward was not viable as a purely economic investment.

However, it was argued to have other benefits, including using the private ward as a

benchmark for attempts to improve the rest of the hospital, positive community

perceptions about a public facility were it is possible to be very well-treated, and helping

with the attraction and retention of doctors.

30

5.3 Free State Province

In a case that seems somewhat different to much of the information presented thus far,

respondents from the Free Sate Department of Health indicated that the broad policy

position is not to have differentiated amenities here. As one said, the decision in

principle is that private patients must be among public patients and that all wards must

be upgraded to a standard that is acceptable for private patients, but that one cannot

have a standard that is different for public and private patients. One respondent did

mention an apparent recent exception to this position on private wards that did not come

up in other interviews.


policy decision against differentiated amenities

• In general, differentiates amenities not allowed

This exception seems to apply to a hospital in a very rural area, where a whole ward was

upgraded, among other things, by installing showers and toilets in each of the rooms.

This initiative, which affects 20 beds in a 350-bed hospital, was in part paid for by

government and in part by private sponsors. According to the respondent, this was a

very local strategy, with requests coming from private general practitioners in the area

and backed by the hospital and community. This local support seems to have

contributed to the approval of the project together with the argument that it would not

compromise efforts to upgrade other wards and that there are no other private facilities

in the area. The idea seems to be that it will mainly be the private doctors who will have

patients in this ward, not the public doctors, but that the hospital should be able to

generate some funds from the fees the private patients have to pay in terms of the

UPFS. At the time of the interview, there was no contract between the hospital and the

private doctors.


hotel services, financing and organisation

• Better hotel services, e.g. showers and toilets in each room

• In part, paid by private sponsors

• Mainly for the use of private doctors and their patients

31

The interview did not yield detailed information about the arrangements for service

provision in this ward, so it is difficult to say how it compares with some of the other

models described in more detail above. In one sense, it is reminiscent of one of the

Folateng wards in that is essentially used by private doctors. However, the fact that

private sector actors funded part of the upgrade is unusual and seems to distinguish this

case from normal practice in the establishment of differentiated amenities. It indicates

that this arrangement is perhaps a variation on the co-location theme (described below)

for which this province is well-known.

Leaving aside for the moment this possible exceptional case, the opposition to

differentiated amenities in this province is built around a number of arguments. Firstly, it

is argued that it does not make financial sense. The argument here is that the UPFS

rates that differentiated amenities have to charge, even those for full-paying patients,

don’t result in full cost-recovery. This essentially means, then, that one is losing money.

This view holds that any such scheme will inevitably result in a subsidy from the public to

the private. A second argument relates to the revenue that the provincial department of

health gets from the provincial treasury, which is about R10 million more than the

department of health actually collects itself. The fear is that a proposal on differentiated

amenities, and the retention of the associated revenue, will lead to the loss of the R10

million. Lastly, there is an argument around the purpose of public hospitals, which some

see as the provision of service to those who cannot afford private services. From this

perspective, private wards seem like a deviation from the proper purpose of public

institutions.

While not a strong proponent of private wards/differentiated amenities, the Free State

Department of Health is, in the broader field of public-private engagement, well-known

for its so-called co-location project. In a nutshell, this involved the private sector

developing some additional facilities and taking over some unused capacity in two large

hospitals. The private sector group pays a fixed monthly amount as well as just more

than 1% of the annual turnover of these private hospitals that they run “within” the two

government hospitals. In the South African context, this is known as a public-private

partnership (PPP). This goes beyond the two sectors somehow working together or the

public sector providing service to private patients and refers to a very formal contractual

32

relationship between the public and private sectors in which the public sector attempts to

achieve a set of very specific goals, for example to transfer risk to the private sector.

5.4 North West Province

The official policy in the North West Province seems generally supportive of developing

public-private partnerships (PPPs). There is a Director of PPPs and Hospital Services

tasked with managing and developing PPPs in the province with a number of PPP-

related initiatives currently operating. As with most hospitals in South Africa a wide range

of non-clinical functions such as catering, laundry and security services are now

outsourced to private providers. There is also a co-location type project similar to the

Free State example operating at one hospital in the province. At this hospital unused

public sector space is leased to a private hospital group who runs a separate private

sector hospital for private patients.

Of interest to this survey, the North West Province has also officially supported the

establishment of private wards in public hospitals. However, implementation of the policy

has been fairly slow and largely left to individual hospital managers to operationalise

rather than being actively driven from the provincial level. Although 10 hospitals were

originally identified in 2004 as suitable for differentiated amenity projects, only 6 had

established private wards, and only 3 of those were considered to be actually functioning

as private wards and admitting private patients by the time of the study. In addition, a

number of hospitals in the province are being upgraded as part of the National Hospital

Revitalisation Programme and in most of these provision is being made for the

establishment of private wards.


policy decision against differentiated amenities

• Official support for establishment of differentiated amenities

• Provincial plan for implementing private wards

• Limited progress in rolling out private wards

At present the model for the functioning of the active private wards is similar to that of

TAH. Separate private wards have been demarcated within the hospitals. The physical

facilities of the private wards have been upgraded using public funds and improved hotel

33

services are provided in the private wards. However, clinical services are completely

integrated with those of the mother hospital. General nursing staff from the hospital are

allocated to the private wards on a rotational basis and doctors provide medical care as

part of their general hospital duties. Laboratory tests, radiological services, ICU care and

theatre use are all delivered through the same systems as the rest of the hospital.


hotel services, integration with hospital and support services provision

• Better hotel services than the regular public wards

• Private ward operates completely within the mother hospital

• Doctors treat patients as part of their overall duties in the hospital

Private patients admitted to the private wards are billed according to the Uniform Patient

Fee Schedule (UPFS). Billing is done by the general hospital administrative systems so

there is no separate or specialised billing system for the private wards. Revenue

generated by the hospital is sent to the Provincial Treasury. There is an agreement that

50% of any over-collection will be returned by the North West Treasury to the North

West Department of Health but so far this has not generated any extra income for the

Provincial Health Department. So, in effect, there is little incentive for the hospital, or

even the Provincial Department, to maximise revenue from the private wards.


revenue retention

• All hospital revenue including that from private wards goes to Provincial Treasury

• No direct financial benefit to hospital from revenue generated by private ward

Respondents indicated that private wards in public hospitals in the North West province

were likely to continue but questions were being raised about whether or not their

current integrated model is appropriate. A review of all differentiated amenities is

planned for the near future. Provincial officials have been on study visits to Folateng in

Gauteng and they are considering changing the management of private wards to the

more independent Folateng model. Provincial informants did think that the Government

Employees Medical Scheme (GEMS) introduced in 2005 should encourage GEMS

members to utilise private wards in public hospitals rather than private hospitals although

34

this has not yet been the experience in practice. Respondents in the North West had

little detailed knowledge on the NHI proposals and were unclear on the implications of

NHI for private wards in public hospitals.

6. CONCLUSIONS

This report covers an aspect of public hospital functioning in South Africa – the creation

of private wards or differentiated amenities. These wards currently seem to be of low

political priority, especially if new policy proposals around the implementation of a

national health insurance system become reality. However, the differentiated amenities

have been created and, as this research shows, are functioning (sometimes on quite a

significant scale) in certain public hospitals. Therefore, it remains relevant to think about

how they function and how they affect the public-private balance in a health system that

is already characterised by an imbalance of resources between public sector (lower

income) users and private sector (higher income) users.

This has also been a topic of concern in the international literature on private wards. This

literature discusses, among other things, the limits imposed on securing a subsidy from

the private to the public wards by low revenue generation and the danger of the

consumption of general budgetary resources for private purposes (Suwandono et al.,

2001; Nakamba et al., 2002a; Phua, 2003). More generally, the international literature

suggests that to achieve equity gains from private wards certain conditions (as

summarised in the table below) must be achieved.

35

Conditions for achieving equity gains from private wards in public hospitals

public ward users (low income) private ward users (high income) who benefits

revenue generated in private wards used to a) improve quality of amenity care to basic standards (but remaining below that of private wards) b) support sustained improvements in quality of clinical care e.g. improve staff availability, improve equipment

revenue generated in private wards used to a) support better amenity care than public wards (to encourage use) b) support levels of clinical quality of care comparable with that received by public ward users

who pays

no fees or fees lower than those paid by private ward users revenue generated in private wards used to support price reductions for public ward users e.g. reduced transport expenditure through better ambulance services

fees higher than for public ward users and greater than total cost of providing services

Source: Wadee and Gilson, 2005

The collective experience of the provinces, as presented here, certainly makes clear that

in this interface between the public and private dimensions of the hospital there are a

large number of costs and benefits that could be allocated to either private (higher

income) patients or public (lower income) patients. One could argue, for example, that

some of these private wards are bringing in significant amounts of revenue which are

being used for general benefit within the hospital – generating wider benefit for public

patients. Others would point out, however, that some of these wards (according to those

who manage them) are not generating much or enough income – so may end up being a

cost burden on the hospital as a whole. It could then be argued that these wards,

regardless of their financial performance, help to retain scarce professionals in the public

sector – a benefit to public users generally. A critic would counter that there sometimes

seems to be considerable ambiguity about whether the health care providers are

spending all the time they should with their public patients or devoting more time than

they should to their private patients.

36

Making judgements about these tensions and dynamics is complex. The detailed TAH

case study led to the judgement that the hospital did generate revenue from private

wards, but that it seemed unlikely to be covering costs. It was, however, earning extra

revenue for the hospital and using this for wider hospital benefit. It also made the

following conclusions against six hypotheses drawn from relevant international

experience:

Hypothesis TAH conclusion

Inappropriate price levels, resulting from poor cost data and weak assessment of likely demand will undermine revenue generation levels

Supported to some extent. Charges nationally set fees not tailored to changing input costs. Unable to determine exactly what costs are. Problems with accurate billing and recovering bad debt. Uncertain demand from private patients and medical insurance schemes.

The incentives inherent in the fee for service mechanism will promote a private ward bias in resource allocation within the hospital

Little evidence to support this. Influence of fee-for-service system contained by staff not being paid on this basis and the absence of a direct link between revenue collection from private wards and additional revenue allocated to the hospital.

Revenue retention arrangements will have a strong influence over the potential for revenue use to result in equity gains

Study supports proposition. Revenue retention arrangements at hospital influenced potential for equity gains positively.

Weak actor management skills will allow medical professionals to influence the design in ways that benefit themselves personally, and at the expense of revenue generation

Little support from this study. Little resistance from health professionals. Management insistence that benefits not accrue to individuals or clinical departments facilitates buy-in. Doctor support sustained because small part of overall work in hospital.

A lack of clear guidelines on revenue use and resource allocation will undermine the use of revenue in ways that benefit public wards

Not strong support for proposition. Clear guidelines in place. However, decision-making on over-recovery allocation cumbersome, which may create tension and affect buy-in. Managerial concern over possible private ward bias also important influence over revenue allocation.

Poor accountability over budgetary allocations within the hospital will encourage a private ward bias

Proposition not supported. Management concerned over reverse subsidy, so keen to ensure that service delivery focus is on the public sector and that service delivery not driven by revenue-generating ability of the private ward.

Although this current piece of research was not set up to make these sorts of detailed

judgements, it does allow consideration of the similarities of the TAH experience with

other private ward arrangements and itself provides a basis for drawing out policy

relevant lessons.

37

First, the following table specifically summarises the structural arrangements of the TAH

model against the largest other model of private ward operation, Folateng. The key

differences focus on budget management, staff incentives and revenue retention

guidance. It is of particular concern that in Folateng there is a possible financial incentive

for a private ward bias in staff time use and that there appears to be unclear guidance on

revenue use.

TAH Folateng

Integration with hospital

Physically integrated Budget integration

Physically integrated Budget separation (ward as cost centre)

Service differentiation

Better hotel service than public wards

Better hotel service than public wards Generally good and renovated appearance

Sub-ward types and organisation

Patients with same conditions in same ward Separate OPD for private patients Share main hospital ICU Plans to develop separate theatre

Larger scale wards Some wards have own ICU beds Some wards have own OPD

Overall billing approach

Patients directed to private ward if have medical insurance or able to pay two-thirds deposit Laboratory tests paid separately by patient

Efforts to collect payment before service/get medical insurance authorisation before service. No cash deposits/partial payments allowed Nursing care included in ward tariffs Range of providers bill patients separately, as distinct from private tariffs

Ward staffing arrangements & incentives

Doctors treat patients as part of their overall duties, no extra payment (except those on joint PGWC-University posts) Significant use of agency nurses

Doctors not supposed to work on wards during normal hours Doctors bill patients separately, on top of ward fees Heavy use of agency nursing staff

Support service provision

Mix of in-house and outsourced services Direct link between laboratory and patient/medical insurance company

Outsourcing of catering, cleaning and portering

Revenue retention

Defined system for dealing with and retaining surplus revenue

In principle, private wards don’t retain revenue/surpluses, and don’t decide on their use Lack of clarity on other aspects of financial flows

Micro-political relationships with mother hospital

Little or no resistance from various groups of health professionals

Private ward frustrations with mother hospital admin processes Some private wards face resistance from other sections of hospital

38

Second, perhaps the most critical lesson from all provincial experiences is that there

often seems to be little effort to monitor and manage the balance of overall relative

benefit between public and private patients, despite the known dangers. As described

above, these wards do not seem to function within any national guidance or frameworks.

Where specifically asked, none of them could produce a policy document or operating

manual that regulates their establishment and functioning, with respondents stating, for

example, that they were bound by general governmental rules. And, as was seen from

some of the interviews, there is sometimes doubt about the extent to which the

public/private boundary is respected in the day-to-day actions and decisions of the

people working in these wards. The available data on costs and revenue use also do not

allow evaluation of the balance of overall relative benefit; and no-one seems to be

charged with responsibility for using any data that exists or improving data availability to

allow more careful management.

Finally, given these experiences, this policy area of private wards in public hospitals

therefore seems ripe for a more systematic approach in terms of which:

• Private wards are governed by explicit rules that take into account their

specific nature and the dilemmas they are likely to encounter;

• Systematic thought is given to the whole range of benefits and costs that can

accrue to both the private and public sectors;

• Serious efforts are made to measure and track these costs and benefits over

time - to monitor the boundary between the public and the private – to

ensure an appropriate balance;

• Systems are developed to ensure that the public system and public patients

derive as much benefit from these wards as possible;

• Lessons are derived from existing experience and shared between hospitals

and provinces.

39

REFERENCES

African National Congress (ANC). (2007). ANC 52nd national conference: resolutions. Accessed at: http://www.anc.org.za/ancdocs/history/conf/conference52/resolutions.html.

African National Congress (ANC). (2009). Elections 2009: ANC Manifesto. Accessed at:

http://www.anc.org.za/elections/2009/manifesto/manifesto.html. Birn, A.-E., Zimmerman, S. and Garfield, R. (2000). To decentralise or not to

decentralise, is that the question? Nicaraguan health policy under structural adjustment in the 1990s. International Journal of Health Services, 30(1): 111-128.

Folateng. (2009). Website of the Folateng ward in the Charlotte Maxeke Johannesburg

Academic Hospital (http://www.johannesburghospital.org.za/folateng.html). Hanson, K., Atuyambe, L., Kamwanga, J., McPake, B., Mungule, O. and Ssengooba, F.

(2002). Towards improving hospital performance in Uganda and Zambia: reflections and opportunities for autonomy. Health Policy, 61: 73-94.

McIntyre, D., Thiede, M., Nkosi, M., Mutyambizi, V., Castillo-Riquelme, M., Gilson, L.,

Erasmus, E. and Goudge, J. (2007). SHIELD work package 1 report: A critical analysis of the current South African health system. Cape Town: Health Economics Unit, University of Cape Town.

Nakamba, P., Hanson, K. and McPake, B. (2002a). Markets for hospital services in

Zambia. International Journal of Health Planning and Management, (17): 229-247. Nakamba, P., McPake, B. and Hanson, K. (2002b). Two-tier fees and the allocation of

resources within public tertiary hospitals in Zambia. Unpublished manuscript. Puah, K.H. (2003). Attacking hospital performance on two fronts: network corporatization

and financing reforms in Singapore. In: Preker, A.S. and Harding, A. (eds.), Innovations in health service delivery: the corporatization of public hospitals. Washington D.C.: The World Bank.

State of the Nation Address. (2009). State of the Nation Address by His Excellency JG

Zuma, President of the Republic of South Africa, Joint Sitting of Parliament, Cape Town. Accessed at: http://www.info.gov.za/speeches/2009/09060310551001.htm.

Suwandono, A., Gani, A., Purwani, S., Blas, E. and Brugha, R. (2001).Cost recovery

beds in public hospitals in Indonesia. Health Policy and Planning, 16(supplement 2): 10-18.

The Star. 17 August 2009. Abandoned hospital set for revamp due to bed-space woes:

Kempton Park institution to become the first state-run private facility. Wadee, H., Gilson, L., Blaauw, D., Erasmus, E., and Mills A. (2003). Public-private

interactions in the South African health sector: experience and perspectives from

40

national, provincial and local levels. Report for the Local Government and Health Consortium. Johannesburg: Centre for Health Policy.

Wadee H and Gilson L. (2005) The search for cross subsidy in segmented health

systems: can private wards in public hospitals secure equity gains? Chapter in Mackintosh M and Koivusalo M (eds) Commercialisation of Health Care: Global and Local Dynamics and Policy Responses. Basingstoke: Palgrave pp.251-266.

Wadee, H. and Gilson, L. (2007). Private wards in public hospitals: what are the policy

and governance implications? Johannesburg: Centre for Health Policy.

i

APPENDICES

Appendix A: Interview Guide For National And Provincial Policy-Makers

1. For national level: I would like to begin by asking you which provinces are implementing private wards in public hospitals (differentiated amenities)? – Record the names of the provinces – Explore which provinces are more active – Probe for whether the respondent knows the names of specific hospitals that have private wards

2. For provincial level: I would like to begin by asking you which public sector hospitals, as far as you are aware, have private wards (differentiated amenities)? – Record the names of the hospitals provided by the respondent

3. How much effort at your (national/provincial) level is currently going into thinking about and establishing differentiated amenities? – Explore the prominence of this policy area relative to other areas of public-private engagement,

e.g. co-location public-private partnerships. – Explore the prominence of this policy area over time, e.g. has activity around it increased or

decreased over time. – Explore the reasons for: a) the current level of effort; b) the prominence of this policy area relative

to others; and c) changes in the prominence of this policy area over time.

4. Who are the key actors driving developments around differentiated amenities? What are their concerns and what roles do they play? – Probe for actors at the national, provincial and facility levels.

5. What key legislation or policies govern the establishment of differentiated amenities? – Explore the legislation or policies so as to be clear about their meaning and intent. – Explore the origins of the legislation or policies, e.g. National Treasury, Provincial Treasury,

National Department of Health. – If possible, get the policy documents.

6. What are the steps in the establishment of a differentiated amenity in a hospital? – Explore the preparatory work that needs to be done. – Explore the approvals that need to be obtained and the actors responsible for granting those

approvals. – Explore the extent to which attention is paid to the interests of various actors and to managing

those potentially diverse and conflicting interests

7. Some of the key concerns or questions about differentiated amenities relate to: a) raising sufficient revenue, b) what happens to the revenue raised, c) how the revenue benefits public patients, d) whether resources are diverted from public to private wards, and e) how staff are remunerated for their work in these wards.

8. For each of these issues (if not already covered under question 4): What is your current thinking/practice around these issues? What rules or principles do you have in place in relation to these issues?

9. We would like to know more about current trends in the establishment and management of differentiated amenities. Are there any areas of improvement or innovation? Are there any areas that are of concern? – Probe for possible impact of social/national health insurance system

10. Lastly, if you think about the experiences of hospitals with differentiated amenities that you are aware of: What stands out for you, how would you characterize those experiences? What are the key factors that contribute to the successful implementation of differentiated amenities? What are the key factors that constrain the implementation of differentiated amenities?

ii

Appendix B: Interview Guide For Managers Of Private Wards

1. Unpacking/confirming the basic elements of the private ward model – What happens to the revenue raised? Is any of it retained by hospital? Role of provincial treasury

in deciding on and using revenue? – How do they bill patients? Explore the implementation of the Uniform Patient Fee Schedule

(UPFS) and the classification of patients according to the UPFS? – Which types of personnel are allowed to work in these wards and how are they remunerated? – How are key services organized? In-house? Outsourced? – How do they structure their relationship with the main/general hospital? How does the flow of

money work? How are resources shared? – How do private wards benefit patients in the rest of the hospital? – What is the potential for the private wards to be diverting resources away from the public part of

the hospital? 2. Explore the perceived benefits and drawbacks of differentiated amenities

– Specifically: does it enable improvement in other parts of the hospital? 3. Explore the factors that have enabled and constrained the implementation of differentiated

amenities, and the implementation lessons that have been learnt from this. – Explore specifically, the quality of information and billing systems. Can they track their costs?

Accurately record it? Then bill patients? – Actor-related factors: Who supports and who opposes private wards?

4. The future of differentiated amenities

– The current momentum behind private wards and whether it is it likely to be extended? – Likely impact of Social or National Health Insurance on private wards? – Key concerns going forward. Things the managers are worrying about, things they think will need

to be addressed? – What can be done to improve implementation?

iii

Appendix C: Questionnaire For Hospitals With Private Wards

! Please complete the questionnaire below and send it back to ______________________ . ! Each section of the questionnaire should be completed by the appropriate person at your institution. ! Please complete the form as best you can. ! All hospital statistics should be given for the financial year from 1 April 2007 – 31 March 2008.

Hospital name Tel:

Region District

Superintendent

Questionnaire completed by Date

Position

1. Total beds as at 31 March 2008

2. Total admissions – 1 April 2007 – 31 March 2008

3. Total inpatient days – 1 April 2007 – 31 March 2008

4. Total hospital expenditure – 2007/08 financial year R

5. Total hospital revenue – 2007/08 financial year R

6. Total beds as at 31 March 2008

7. Total admissions – 1 April 2007 – 31 March 2008

8. Total inpatient days – 1 April 2007 – 31 March 2008

9. Total ward expenditure – 2007/08 financial year R

10. Total ward revenue – 2007/08 financial year R

11. Total amount billed – 2007/08 financial year R

12. Total direct financial transfers / payments to hospital– 2007/08 financial year R

13. Total direct financial transfers / payments from hospital– 2007/08 financial year R

iv

14. Total admissions in 2007/2008 financial year by medical aid status:

Total

Covered by medical aid

Not covered by medical aid

Total

15. Total admissions in 2007/2008 financial year by category:

Male Female Total

General Medical

General Surgical

Orthopaedic

Gynaecological / Obstetric

General Paediatric

ICU

Other

Total

16. Number of staff who currently work in the private ward. Estimate the full-time equivalents (FTEs) for each of the

following categories:

Total FTEs for staff

members who work full-time in private ward

Total FTEs for staff members who work part-

time in private ward

Specialists

Medical officers

Professional nurses

Enrolled nurses

Nursing assistants

Therapists

Management

Administrative staff

General assistants / Cleaners

v

17. For each of the following services available to private ward patients, indicate who is responsible for employing the

staff who provide the service. If a number of different arrangements occur simultaneously, tick all the boxes that apply.

18. For each of the following services available to private ward patients, indicate:

• Who initially bears the costs of providing the service; and • Who is responsible for reclaiming the costs from private patients and/or medical schemes.

If a number of different arrangements occur simultaneously, tick all the boxes that apply.

THANK YOU FOR YOUR TIME !

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