Fraud, waste and abuse

Here is a summary and conclusion of the Final Report of the Section 59 Investigation, dated 25 April 2025:

🔍 Summary

The Section 59 Investigation Panel was appointed by the Council for Medical Schemes (CMS) to examine allegations of unfair racial discrimination and procedural unfairness by major South African medical schemes—Discovery, Medscheme, GEMS, and Polmed—in their detection and handling of fraud, waste, and abuse (FWA) by healthcare providers.

1. Context and Background

  • The investigation stemmed from complaints by predominantly Black, Indian, and Coloured healthcare providers(collectively referred to as “Black providers”) who alleged they were disproportionately targeted by the schemes’ FWA systems.
  • A significant body of qualitative (testimonies, submissions) and quantitative (data analysis) evidence was collected from 2012–2019.

2. Findings of Discrimination

  • Statistical expert Dr. Zaid Kimmie conducted a detailed racial analysis of FWA Outcomes Data and consistently found that Black providers were significantly more likely to be found guilty of FWA than non-Black providers—across all schemes and various provider categories.
  • Relative risk ratios (RRs) for Black providers ranged between 1.5 and over 12 times higher depending on scheme and discipline (e.g., physiotherapists, psychologists, social workers).
  • Despite multiple methodological critiques by the schemes, none of the alternative models materially changed the pattern of disparity.

3. Panel’s Legal Framework

  • The Panel applied Section 9 of the Constitution and the Equality Act, affirming that even unintentional systemic disparities can amount to unfair discrimination.
  • The purpose was not to label schemes as racist but to identify and correct structural or systemic inequities in their FWA processes.

4. Procedural Fairness Issues

  • The investigation also highlighted significant due process failures, including:
    • Late or absent communication with providers.
    • Lack of clear algorithmic transparency.
    • Coercive debt recovery practices without fair hearing.

5. Updated Evidence and Reanalysis

  • Following criticisms of earlier analyses, Dr. Kimmie refined his models, excluding corporate practices and adjusting for interaction frequency. The key findings still held.
  • Direct payment status—initially raised as a possible confounder—was shown not to invalidate the findings of racial bias.

✅ Conclusion

The Panel concluded that:

  1. Unfair racial discrimination did occur in the operation of FWA systems across multiple schemes—particularly Medscheme and GEMS, where the disparities were starkest.
  2. The discrimination was systemic and indirect, rooted in how FWA detection tools and procedures operated—not necessarily due to intentional bias.
  3. Procedural unfairness was widespread, requiring urgent reforms.
  4. The medical schemes failed to rebut the presumption of unfair discrimination or justify the disparate impact on Black providers.

🛠 Key Recommendations

  • Independent oversight of FWA investigations.
  • Transparency in algorithms and selection criteria used to flag providers.
  • Mandatory timelines for notifying providers of concerns.
  • Audit periods limited to under three years.
  • Restorative and corrective justice approaches, rather than punitive ones.

This report is a landmark assessment of structural inequality in the South African private healthcare sector and signals the need for systemic reform in how fraud investigations are conducted to align with the constitutional commitment to fairness and equality.

Final-Report-Section-59-Investigations-25042025.pdfDownload