Judge blocks government plan to tell private hospitals and doctors where they can go

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Judge Anthony Millar has struck out sections of the National Health Act which, he said, would result in expropriation of property and services of professionals and was “akin to an attempt to indenture the private medical service in the service of the state”.

He said the sections were also a “blunt instrument” which would be used by the Director-General of Health to control private healthcare in the country. The Act has been promulgated but these sections have not yet come into effect.

In the firing line in the application before Judge Millar by Solidarity Trade Union and organisations representing the private health care industry were sections 36 to 40 of the Act which introduce a Certificate of Need (CON) scheme which would dictate geographically, where services are rendered.

The sections require all new private establishments, including hospitals and clinics, and private health care providers, to apply to the Director-General for a certificate, which would be valid for 20 years after which they would have to apply to renew it.

Existing facilities would have two years to apply for the certificate.

The scheme makes operating without a certificate a criminal offence, with a fine or imprisonment up to five years, or both.

Scheme's constitutionality challenged

In his ruling handed down on Tuesday, 23 July, 2024 Judge Millar said the government respondents had argued that because no regulations had been promulgated, the matter was not ripe for hearing. He said however, that this made no difference and the court could inquire into the constitutionality of the CON scheme.

“The applicants argue that at least six constitutional rights are infringed. They say it tramples on their rights including where they want to reside, send their children to school and the communities they belong to,” he said.

They had pointed out that there was nothing that forced the Director-General to recognise the need to take into account the social, professional and financial impact of the location.

It was also argued that it cost up to R500m to set up a hospital.

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Judge Millar said: “It seems to me a matter of common sense … that this could create a situation where no investor would invest unless their investment would be recouped over the 20-year period.

“This would have the effect of driving up the cost of healthcare in respect of not only new facilities to be constructed, but existing facilities, the value of which, absent a certificate, would be a fraction of their true worth.”

Judge Millar said it did not “behove the government in pursuing transformation to trample upon the rights of some, ostensibly for the benefit of many”.

“For deprivation to be lawful, it must neither be arbitrary nor procedurally unfair.”

He said the CON scheme was procedurally unfair, in that people’s rights and interests would not be considered and there was no provision for representations from those affected.

“The power to withhold the issue of a certificate or the renewal of a certificate is nothing more than a blunt instrument which would be used by the Director-General to reduce the number of private health care establishments and private health care providers who could lawfully provide medical care within a particular area in the hope that having been deprived of their property and ability to earn a living, they would accept the losses foisted on them and relocate to an area in respect of which the Director-General has determined that a certificate would be issued,” Judge Millar said.

“This sword of Damocles hangs over every private health care establishment and private health care provider in perpetuity.”

Resource expropriation

The judge said the CON scheme also permitted the Director-General to compel existing private establishments and providers of prescribed healthcare services to enter into public-private partnership and in doing so, share all their resources as a condition of the right to practise and operate.

“They will find themselves compelled to accept the impositions against the threat of the withdrawal of their certificate.

“This is by all accounts an expropriation of both property and services, akin to an attempt to indenture the private medical service in the service of the state.”

He found that the scheme violated the Constitution and was not rational. He said there was no rational connection between the scheme and the purpose for which it was enacted: to regulate the geographic distribution of health agencies.

“It is misguided to hold the view that the scheme, in implementation, will have the consequences of a redistribution or new facilities,” he said, striking down the sections and ordering that his judgment be lodged with the Registrar of the Constitutional Court.

He ordered the respondents to pay the costs.