The South African Society of Physiotherapy has lost its legal challenge against medical scheme clawbacks. 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 judgment ends a five-year legal battle involving the Minister of Health, the Council for Medical Schemes and the country’s medical schemes.
The case was launched in 2021. At the time, South Africa had 79 registered medical schemes. That number has since declined to 71.
Section 59(3) allows schemes to recover money paid out incorrectly or unlawfully. Schemes may withhold payments due to healthcare providers. They may also withhold benefits payable to members.
The provision applies where payments resulted from error, fraud, theft, negligence or misconduct.
Physiotherapists Challenged Section 59(3)
The South African Society of Physiotherapy argued that the recovery powers infringed physiotherapists’ constitutional rights to fair administrative action.
It said medical schemes acted as both investigators and decision-makers when reviewing suspicious claims. Schemes could then recover funds based on their own findings.
The society wanted this authority transferred to an independent body. It also asked the court to order a review of six years of disputed audits.
However, Judge Corrie van der Westhuizen rejected the arguments.
He found that Section 59(3) did not breach constitutional rights relating to administrative action or access to courts.
The court said healthcare providers already had legal routes to challenge medical scheme decisions. Providers can approach the Council for Medical Schemes. They can also take disputes to court where necessary.
Medical Scheme Clawbacks Remain Available To Funders
The ruling means that medical schemes can continue to use Section 59(3) to recover incorrect or unlawful payments.
The decision follows years of scrutiny over how schemes use their clawback powers.
A group of doctors previously accused medical schemes of racially profiling healthcare providers during fraud, waste and abuse investigations.
Those allegations focused on how the provision was implemented. The physiotherapy society’s case went further by challenging the system’s legal foundation.
The judgment confirms that the clawback provision itself remains valid.
Health Funders Highlight R1bn In Recoveries
The Health Funders Association welcomed the judgment. It said the ruling had important implications for the long-term stability of medical schemes.
CEO Thoneshan Naidoo said schemes recovered about R1bn each year through fraud, waste and abuse management programmes.
He argued that member contributions would be significantly higher without a lawful mechanism for recovering funds paid in error.
Naidoo said not all disputed claims involved fraud. Only a small proportion involved deliberate and malicious conduct.
However, schemes still needed to recover money that should not have been paid.
He added that only a small minority of healthcare providers were investigated. About eight out of 10 investigations were triggered by tip-offs.
Industry Calls For Greater Transparency
The Board of Healthcare Funders also welcomed the ruling.
Managing director Katlego Mothudi said the judgment confirmed the legality of Section 59(3) within the medical schemes regulatory framework.
He said the provision supported sound financial stewardship. It helped schemes protect members’ funds and recover losses caused by incorrect payments, fraud, theft, negligence or misconduct.
However, Mothudi acknowledged concerns about how clawback powers had been applied.
He called for continued engagement between medical schemes, healthcare providers and regulators. This could support greater transparency, consistency and guidance when suspicious claims are investigated.
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