Medical Law – The Medical Schemes Act and Direct Payment to Service Providers

Section 59 of the Medical Schemes Act, Act 131 of 1998, provides inter alia that:

1)    “A supplier of a service who has rendered any service to a beneficiary in terms of which an account has been rendered, shall, notwithstanding the provisions of any other law, furnish to the member concerned an account or statement reflecting such particulars as may be prescribed;
2)    A medical scheme shall, in the case where an account has been rendered, subject to the provisions of this Act and the rules of the medical scheme concerned, pay to a member or supplier of service, any benefit owing to that member or supplier of service within 30 days after the day on which the claim in respect of such benefit was received by the medical scheme”.

The question arises whether this section merely allows medical schemes to pay service providers directly or whether it in actual fact creates an obligation on medical schemes to make payments directly to service providers, as has been argued by service providers.

The Supreme Court of Appeal, in Medscheme Holdings (Pty) Ltd and Another v Bhamjee [2005] ALL SA 16 (SCA), found that Mr Bhamjee, a medical practitioner, had no basis upon which to demand that Medscheme (a registered medical scheme) pay him directly.

In this decision, the Court appeared to recognise that although section 59(2) creates a basis upon which medical schemes are allowed to discharge obligations owed to members by reimbursing service providers directly, the section does not oblige a medical scheme to do so where the provider had lodged an account with the medical scheme.

This view was confirmed in the recently decided and reportable matter of Tshwane Pharmacy (Pty) Ltd v GEMS which was heard by the North Gauteng High Court under case number 28532/11.

In this matter the Applicant (a service provider) applied to Court on an urgent basis for an order directing that the Respondent (a registered medical scheme) make payment to them directly, and not to their members.

The Applicant argued that the key phrase in section 59(2) of the Act is “benefit owing to the member or provider of the service” and that on a common sense interpretation of the section it means that where a member has not paid the supplier of the service the medical scheme has no discretion but is obliged to pay the supplier.

The Court did not agree with this argument, and held that section 59(2) must be interpreted in context. Subsection (1) provides that a supplier of a service who has rendered a service is obliged to furnish the member concerned with an account containing prescribed particulars. Subsection (2) then provides that when such an account has been rendered the medical scheme may pay to the member or the supplier of the service the benefit owing to that member or supplier of the service.

The Court also held that, in the context of the section, the benefit owing must refer to the amount owing by the member to the supplier for the service rendered. The Court stated that it is irrelevant that the benefit becomes owing to the member by virtue of the agreement between the member and the medical scheme and, to the supplier, by virtue of the agreement between the member and the supplier. The subsection does not create an obligation on the medical scheme to pay the supplier.

Furthermore, the Court held that the subsection clearly provides that payment is subject to the rules of the medical scheme, and in the case of the Respondent its rules stated unambiguously that the Respondent has the right to pay either the member or the supplier of the service.

Accordingly, the Court found no basis for an obligation on the Respondent to pay the Applicant directly and dismissed the application with costs.

From the above it is clear that in order to ensure payment for services rendered service providers must either claim payment directly from their patients, or ensure that they have contractual agreements with the medical schemes. For now, our Courts seem unwilling to impose a statutory obligation on medical schemes to make payment directly to service providers in the absence of such a contractual arrangement.