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The South African Society of Physiotherapy (SASP) has lost its bid to scrap legal provisions that allow medical schemes to recover claims paid in error or as a result of fraud.The high court in Pretoria dismissed the society’s application to have section 59(3) of the Medical Schemes Act declared unconstitutional and invalid.The development brings to an end a five-year battle that saw the SASP challenge the minister of health, the Council for Medical Schemes and all South African medical schemes. There were 79 medical schemes when the SASP launched its case in 2021, but the number has since dropped to 71.While the manner in which schemes implement section 59(3) has come under intense scrutiny after they were accused by a group of doctors of racially profiling healthcare providers, the case brought by SASP challenged the legal basis for the “clawbacks” instituted by schemes. Section 59(3) enables schemes to recover funds by withholding payments to healthcare providers or withholding benefits from members.The SASP had argued that the clawback provisions in the Medical Schemes Act infringed on physiotherapists’ constitutional rights to administrative action. It maintained that when disputes arose, medical schemes were de facto players and referees, as they both investigated and adjudicated suspicious claims. It had asked the court to give that power to an independent party and order a review of six years of contested audits.But in a ruling handed down on Wednesday, judge Corrie van der Westhuizen found that section 59(3) of the Medical Schemes Act does not infringe on the constitutional rights to administrative action or access to courts. Existing statutory provisions enabled healthcare providers to appeal medical scheme decisions at the Council for Medical Schemes, and in court, he said.The Health Funders Association (HFA), one of South Africa’s key organisations representing medical schemes and administrators, welcomed the ruling, saying it has important implications for future scheme stability. The ruling means medical schemes can continue to use section 59(3) to recover payments lost to error, fraud, negligence or misconduct, it said.Medical schemes currently recover about R1bn a year through fraud, waste and abuse management initiatives, said HFA CEO Thoneshan Naidoo.It is vital for schemes to retain their ability to safeguard member contributions, which would be markedly higher if schemes could not recover money that had been paid out erroneously, he said.“It’s not all fraud — only a small percentage of it is maliciously intended. Notwithstanding that, medical schemes need a mechanism to recover funds, which is what section 59(3) allows,” he said.Only a small minority of healthcare providers become the subject of fraud, waste and abuse investigations, of which eight out of 10 are triggered by tip-offs, said Naidoo.The Board of Healthcare Funders (BHF), which also represents medical schemes and administrators, said the judgment affirms the lawfulness of section 59(3) in the broader regulatory framework governing medical schemes.“The BHF has consistently maintained that the clawback provision serves an important financial stewardship function by enabling medical schemes to recover payments made in error, or losses arising from fraud, theft, negligence or misconduct, thereby helping to protect member funds,” said BHF MD Katlego Mothudi.The BHF recognised that concerns had been raised over how section 59(3) had been implemented in practices. “We believe there is value in continued engagement among medical schemes, healthcare providers, regulators and other stakeholders to promote greater consistency, transparency and guidance on the implementation of section 59(3),” he said.The SASP had not responded to Business Day’s request for comment at the time of publication.
