Revelations of ethically suspect and opaque pricing practices in private hospitals have jolted the healthcare industry in recent weeks, but that is not the only problem the industry faces.
Recent media reports have referred to the practice, in some hospitals, of charging medical schemes exaggerated fees for medical consumables. Essentially, the hospital asks a supplier to invoice it for a certain price for an item, say R100. It then charges medical schemes that price. However, the hospital demands an “off-invoice†rebate from the supplier, for example, R70. So the hospital is invoiced R100, it pays the supplier R100, bills the medical scheme for R100 and then, separately, collects a rebate of R70 from the supplier (see illustration below). It’s a complex form of markup. This practice is not illegal. However, it is opaque, and adds a layer of hidden transactions to the payment system.
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