Patients wearing hospital-branded pyjamas sleep in the general ward of Natalspruit hospital in Katlehong, South Africa, on Monday, Sept. 19, 2011. "There is a base of 28.5 million people in the African market where there will be demand for the healthcare," Andre Meyer, Medscheme Ltd.'s chief executive officer said. Photographer: Nadine Hutton/Bloomberg Natalspruit hospital in Katlehong, South Africa. (Photo: Nadine Hutton/BB)

South Africa’s private health care market is uncompetitive and needs tougher regulation to ease the dominance of three main hospital operators and insurers led by Discovery Ltd., according to a much-delayed report on the industry.

The Health Market Inquiry, which has been investigating the industry for four years, made a series of recommendations in an 800-page report intended to increase competition and transparency in the industry.

(Related: South Africa Proposes Major Changes to Health Care System)

It found that Mediclinic International PLC, Netcare Ltd. and Life Healthcare Group Holdings Ltd. have a combined 90% market share of the private hospital market while Discovery generates far higher profit than its competitors.

The probe was initiated by the Competition Commission amid broader concern that private healthcare is only available to a minority of people who can afford it. More than two decades after the end of white rule, the country’s inequality rates are among the highest in the world and more than one in four people are unemployed.

“Part of our recommendations will be aimed at regulators who, we have concluded, are not as sensitive to core competition concepts as they should be,” the inquiry said in its report.

Earning Profit

Discovery Health — a company known in the United States for helping to establish some of the first personal health accounts in the U.S. market — said its profitability is due to how well it runs the business and not because it charges higher fees.

Netcare said it’s still looking through the report, though there are several flaws that it intends to address in further submissions.

Mediclinic Southern Africa said it also plans to respond to the findings. Life Healthcare did not immediately respond to requests for comment.

Representing the inquiry, Ntuthuko Bhengu said at a briefing that a new regulator would be chosen through a public process of nominations and a parliament vote. Stakeholders have until Sept. 7 to provide comments on the provisional findings and proposed recommendations, with a final report expected by Nov. 30.

—With assistance from Roxanne Henderson.

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