The Council for Medical Schemes v Genesis Medical Scheme (20518/2014) [2015] ZASCA 161; 2016 (1) SA 429 (SCA); [2016] 1 All SA 15 (SCA) (16 November 2015)

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The Council for Medical Schemes v Genesis Medical Scheme (20518/2014) [2015] ZASCA 161; 2016 (1) SA 429 (SCA); [2016] 1 All SA 15 (SCA) (16 November 2015)

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THE
SUPREME COURT OF APPEAL
OF
SOUTH AFRICA
JUDGMENT
Reportable
Case
No:
20518/2014
In
the matter between:
THE
COUNCIL FOR MEDICAL SCHEMES
FIRST

APPELLANT
THE
REGISTRAR OF MEDICAL SCHEMES
SECOND

APPELLANT
and
GENESIS
MEDICAL SCHEME

FIRST RESPONDENT
THE
CHAIRPERSON, APPEAL BOARD OF
THE
COUNCIL FOR MEDICAL SCHEMES

SECOND RESPONDENT
NICOLA
JOUBERT

THIRD RESPONDENT
Neutral
citation:
The
Council for Medical Schemes v Genesis Medical Scheme
(20518/14)
[2015] ZASCA 161(16 November 2015)
Coram:
Leach,
Petse, Willis, Mbha and Zondi JJA
Heard:
07
September 2015
Delivered:
16
November 2015
Summary:
Rules
of medical scheme registered under
Medical Schemes Act 131 of 1998
seeking to limit payment of expenses for treatment of prescribed
minimum benefits envisaged by regulations under the Act to expenses

incurred at a public or state institution -  medical scheme may
not by its rules avoid obligation to pay full costs of treatment
even
where administered in a private institution.
ORDER
On
appeal from:
Western
Cape Division, Cape Town (Jamie AJ sitting as court of first
instance):
1
The appeal is upheld with costs, including the costs of two counsel.
2
The order of the court a quo is set aside and substituted with the
following:
‘
(a)
The ruling of the Appeal Board of 3 May 2012 is amended by the
deletion of the words “to the level of a public hospital”

.
(b)
The application to review and set aside the above ruling of the
Appeal Board is otherwise dismissed with costs, including the
costs
occasioned by the employment of two counsel.
(c)
No order is made in respect of the counter application.’
JUDGMENT
Leach
JA
(Petse,
Willis, Mbha and Zondi JJA concurring)
[1]
As its name suggests, the first respondent, Genesis Medical Scheme
(Genesis), is a medical scheme envisaged by the Medical Schemes
Act
131 of 1998 (the Act). The third respondent, Ms Nicola Joubert, was
at all material times a member of Genesis. She was also
entitled
under its rules to receive benefits relating to medical treatment
administered to her dependant daughter, Roxanne. As
more fully set
out below, Genesis disputed that it was required to compensate Ms
Joubert for certain of the treatment Roxanne received
for an injury
to her right lower leg. When Genesis refused to pay, Ms Joubert
complained to the second appellant, the Registrar
of Medical Schemes
(the Registrar), who ruled in her favour. Under s 49 of the Act,
Genesis appealed against the Registrar’s
decision  to the
Appeal Committee of the first appellant, the Council for Medical
Schemes (the Council). When that appeal
failed, Genesis then appealed
further under s 50 of the Act to the Council’s Appeal Board,
again without success. For convenience
I shall refer to these two
appeal bodies as the Appeal Committee and the Appeal Board,
respectively. I should also mention that
their reasons for their
decisions differed somewhat as did the effect of their respective
orders.
[2]
Still dissatisfied, and relying on the provisions of the
Promotion of
Administrative Justice Act 3 of 2000
, Genesis then applied to the
Western Cape High Court (the court a quo) to review and set aside the
ruling of the Appeal Board.
In doing so it cited the Council, the
chair of the Appeal Board and Ms Joubert as respondents.
The
Registrar, too, was subsequently granted leave to intervene as fourth
respondent in the proceedings, and supported a counter
application by
the Council for certain declaratory relief relating to Genesis’s
obligation to pay for the treatment of certain
conditions whether
obtained from either private or public healthcare service providers.
[3]
On this occasion Genesis succeeded. The court a quo reviewed and set
aside the ruling of the Appeal Board and substituted, in
its stead,
an order upholding Genesis’s appeal against the decision of the
Appeal Committee and declaring that it was not
obliged to pay for the
particular medical treatment in issue. The court a quo further
dismissed the counter application. With leave
of the court quo, the
Council and the Registrar now appeal to this court against those
orders.
[4]
The background to the dispute is as follows. On 13 January 2008
Roxanne, who was 17 years of age at the time, sustained an injury
to
her right lower leg at a motor-cross event held in Durban. The injury
was severe. Described as being a ‘sub-total amputation
of her
lower limb’ it consisted of a compound, comminuted fracture of
the tibia and fibula. Immediately after the accident,
Roxanne was
rushed to St Augustine’s Hospital, a private institution in
Durban, where the wound was debrided and the leg
stabilised by the
fitting of a Jetex fixator, a so-called ‘external prosthesis’,
used to align and stabilise the factures.
Three days later, Roxanne
was airlifted by private aircraft to Cape Town. There she was
admitted to the Vincent Pallotti Hospital,
also a private
institution, where she was seen by an orthopaedic surgeon, Dr
Bernstein. On 19 January 2008, Dr Bernstein operated
once more,
during which another external prosthesis, known as an Ilizarov frame,
was fitted to Roxanne’s leg.
[5]
It was after these operations that problems first arose between Ms
Joubert and Genesis. On 21 February 2008, in an email addressed
to
the Registrar, Ms Joubert complained that Genesis had refused to pay
medical expenses for her daughter’s injuries, contending
that
they had been sustained in an accident on a quad-bike. This, she
alleged, had not been the case. In the subsequent review,
Genesis
conceded that there had initially been some confusion as to whether
Roxanne had been injured while riding on a quad-bike,
in which event
no benefits would have been payable in terms of the scheme’s
rules, but stated that the issue had been quickly
resolved and that
in fact it had paid all the expenses incurred in respect of Roxanne’s
injuries up to that stage. Consequently,
on 18 March 2008, Genesis
wrote to the Council stating that Ms Joubert’s claims ‘have
been settled’.
[6]
Time passed but, unfortunately, by April 2008 union of the fractures
had not occurred. As Roxanne wished to travel to Germany
later that
month, on 17 April 2008 she underwent a further procedure at the
hands of Dr Bernstein, again at the Vincent Pallotti
Hospital, in
order to remove the external prosthesis. In its place she was fitted
with a custom made boot which made it easier
for her to travel.
[7]
Unfortunately, by February 2009, more than a year after Roxanne had
been injured, the fractures of her leg had still not united.

Consequently, on 16 February 2009, Dr Bernstein performed yet another
operation at the Vincent Pallotti Hospital. In an attempt
to
facilitate union, the leg was again fitted with an external
prosthesis, this time a Taylor spatial frame device. Before this

procedure was carried out, Ms Joubert had furnished Genesis with what
she had been informed by the medical staff at the hospital
were the
appropriate codes relating to the treatment. On the strength of this
information Genesis had confirmed that it would meet
the costs of the
procedure. It is common cause that, for some reason, the codes Ms
Joubert had been given were incorrect and did
not relate to any form
of prosthesis. It was only when the hospital forwarded its statement
of account for payment that Genesis
noted that a prosthesis had been
used and, even then, the statement was wrong as the code it referred
to was for an internal prosthesis
and not the external device that
had been fitted. As a result, Genesis informed Ms Joubert that it was
only prepared to pay a maximum
of R30 000 (that being the
maximum amount allowed under its rules in respect of an internal
prosthesis) and not the amount
charged of some R75 000 which
related to the cost of fitting the external device.
[8]
Ms Joubert was not prepared to accept this without a fight.  On
27 February 2009, she sent an email to the Registrar in
which, after
referring to her initial complaint of 2008 and stating that ‘this
is a continuation of the same complaint’,
she briefly outlined
how she had obtained authorisation for the February 2009 operation
before it had been performed. She went
on to complain that Genesis
had now advised that it was only prepared to pay R30 000 rather
than the full amount charged and
asked ‘how can they come two
weeks after the op and state they are not paying etc?’
[9]
The Registrar referred the matter to Genesis for comment. In its
response of 6 April 2009, it stated it to be ‘self-evident
that
the current complaint is not a continuation of the first complaint as
alleged’, that the hospital’s account had
referred to the
code for an internal prosthesis for which its rules allowed an amount
of R30 000, that the Taylor spatial frame
was in fact an external
prosthesis in respect of which its rules provide no benefits, and
that in the circumstances Ms Joubert
was liable for the entire amount
of the hospital’s charge.
[10]
Genesis then hardened its attitude even further. It decided that it
ought not to have paid for the first two external prosthesis
that had
been fitted to Roxanne’s leg in January 2008, the first in
Durban and the second a few days later at the Vincent
Pallotti
Hospital in Cape Town, and reversed these payments, presumably acting
under the provisions s 59(3) of the Act.
[11]
Although there is no evidence of any written complaint relating to
these reversals, Ms Joubert must have raised them with the
Registrar
as, in an email of 17 June 2009, the Registrar’s legal officer
called upon Genesis to provide its reasons for making
these
reversals. The legal officer also stated that Roxanne’s
condition was a ‘PMB’ (an acronym for prescribed
minimum
benefit) the treatment for which under s 29(1)
(p)
of the Act and reg 8 of the regulations promulgated under the Act
(reference to all of which will be made below) ‘is defined
as a
reduction/relocation’ and that as the treatment had been for a
PMB condition ‘it is irrelevant whether the scheme’s

rules make provision for funding of the device in question.’
[12]
Genesis did not agree. In an emailed response of 3 July 2009, it
alleged:
(a)
That
the term ‘relocation’ used in the regulations is
‘unfamiliar in medical circles’- an allegation that
the
Registrar investigated and established was not correct (in the
Registrar’s subsequent ruling it is stated the term ‘is

widely used in the treatment of fractures and is very well known
terminology’).
(b)
That
the external fixators had been incorrectly coded by the hospitals and
that it was not liable for the costs thereof under its
rules.
(c)
That
if a member elects to have her PMB condition treated at a public
rather than a private hospital, ‘Genesis will pay for
the
treatment prescribed in the Act.’
As
an aside, Genesis went on to state:
‘
(I)t
is unclear just how almost R60 000 worth of fixators were discarded
so easily. The first such one after just three days of
use. One can
only wonder what impact such a situation is having on the ever rising
cost of healthcare that the Registrar is so
often quoted as
criticising. The most recent external fixator carries a price tag of
R75 000 and appears to be very similar
to the first two, there
even being parts that are common to both.’
[13]
The simple answer to this suggestion of the unnecessary use of
external fixators is that they were used to save the amputation
of
Roxanne’s lower limb, with all the associated financial costs
that would have involved, let alone the physical and mental
grief
that it would have entailed. Moreover, as appears from a letter of Dr
Bernstein dated 4 August 2009, a copy of which Genesis
attached to
its review papers, the three different fixators were not only listed
by their suppliers as  ‘single use
items’ but had
different properties and were used for different purposes. The
initial Jetex device had limited stability
and was applied for damage
control. The Ilizarov fixator was a more complex device and the
Taylor spatial frame allowed for accurate
alignment and
compression/distraction that was not possible with previous
constructs.  In any event, I should record that
we were informed
during the appeal that Genesis now accepts that the use of all three
devices constituted reasonable medical practice
and not wasteful
expenditure. It is accordingly unnecessary to comment further on this
aspect of the matter.
[14]
After its response of 3 July 2009, further emails passed between the
Genesis and the Registrar in which each side expressed
its divergent
view – the Registrar stating that as the treatment was for a
PMB condition, Genesis was obliged to bear the
cost regardless of its
rules; Genesis, on the other hand, contending that under its rules it
was only obliged to pay for such treatment
if it was provided in a
public hospital. Eventually, on 16 March 2010, the Registrar issued a
written ruling that Genesis ‘is
liable to fund in full all
diagnostic services, treatment and care cost of the conditions
(Roxanne) received treatment for in terms
of PMB legislation.’
It can be accepted this amounted to a finding that Genesis was liable
for the cost of all three prostheses
used to treat Roxanne.
[15]
Genesis proceeded to appeal against this ruling to the Appeal
Committee under s 49 of the Act. However, the appeal was associated

with more than a hint of chaos. On 17 August 2010, the Appeal
Committee upheld the appeal to the limited respect that Genesis ‘is

liable to pay for the costs of diagnosis, treatment and care that
(Roxanne) would have received at a public or state hospital.’

It went on to record that there was a dispute between the Registrar
and Genesis as to whether a Taylor spatial frame prosthesis
was
available at public hospitals, a factual dispute that could easily be
resolved and that, if it was so available, Genesis ‘must
pay
the cost of that treatment in a public hospital.’ Genesis
alleges that this ruling was made at a time when the appeal
was still
part heard. Be that as it may, Genesis filed a supplementary
submission in which it conceded that Taylor spatial frame
is
available in state hospitals but contended that this is not the end
of the enquiry and that its rules make no provision for
the funding
of external prostheses. It stressed that on all three occasions
Roxanne had received treatment in a private facility
and that its
rules require it to pay in full for PMB conditions only when obtained
from a state hospital. After receipt of these
submissions, the Appeal
Committee issued a further ruling which concluded that Genesis was to
pay ‘for the cost of the Taylor
spatial frame prosthesis at
public or state hospitals.’ In doing so, it appears to have
overlooked that the cost of the first
two external prostheses had
also been the subject of the Registrar’s ruling against which
Genesis had appealed.
[16]
Aggrieved at this, Genesis proceeded to appeal to the Appeal Board
under s 50(3) of the Act. In doing so it contended
that only its
refusal to pay for the third prosthesis (the Taylor spatial frame
device) had been properly before both the Registrar
and the Appeal
Committee, and was then before the Appeal Board. It repeated, once
more, its contention that it was not obliged
under its rules to pay
for an external prosthesis fitted at a private hospital. Again, this
contention was rejected. However, although
the Appeal Board dismissed
the appeal, it issued the following ruling:
‘
(Genesis)
is required to compensate the member for the costs incurred for the
diagnosis, treatment and care of a PMB condition to
the level of a
public hospital for all three external fixators.’
[17]
This ruling is not supported by either side. Genesis, of course,
contends that only the cost of the third prosthesis was in
issue and
that it is not obliged to compensate its members for any external
fixators fitted at a private hospital. On the other
hand, the
standpoint of Ms Joubert and the appellants in this appeal is that
Genesis is obliged to pay for all three of the external
fixators used
to treat Roxanne, and that its obligation to do so is not limited to
the level of what would have been charged at
a public hospital.
[18]
In any event, still dissatisfied, Genesis proceeded to apply to the
court a quo to review the Appeal Board’s decision.
And as
already mentioned, the Registrar intervened as a respondent and
supported the council’s counter application for declaratory

relief.
[19]
In this way the matter came before the court a quo. On this occasion,
Genesis enjoyed success, with the court finding:
(a)
That
the ruling of the Appeal Committee against which Genesis had appealed
to the Appeal Board had related solely to the third prosthesis
(the
Taylor spatial frame device) and not to the first two prostheses;
(b)
That
absent a cross-appeal, the Appeal Board had no statutory power to
exercise jurisdiction in respect of the first two prostheses
and, for
that reason, the ruling of the Appeal Board insofar is it related to
those prostheses could not stand;
(c)
That the rules of Genesis did not allow for payment of the cost of an
external fixator such as
the third prosthesis ‘where
same was obtained from a hospital other than the public or state
hospital’ and that the
Appeal Board had erred in reaching the
contrary conclusion;
(d)
That, accordingly, the decision of the Appeal Board relating to
Genesis’s liability for the external
prostheses fitted to
Roxanne could not stand;
(e)
That for similar reasons the counter application could not succeed;
and that both the Council
and the Registrar had misconstrued their
relief and ought rather to have employed s 31 of the Act (which,
inter alia, empowers
the Registrar to order medical scheme to amend
its rules should they be applied in a manner inconsistent with the
Act) or section
51 thereof (which empowers the Registrar to apply to
court for relief in the interest of beneficiaries to obtain certain
relief
including an order that the rules be amended).
[20]
In the light of this reasoning, the court a quo set aside the ruling
of the Appeal Board and substituted in its stead an order
that
Genesis ‘is not obliged to pay the costs of the Taylor Spatial
Framework external prosthesis fitted to (Roxanne) during
the period
February 2009.’ It further dismissed the counter application
and ordered the Council and the Registrar to pay
the costs of the
proceedings. It is against this order that the appellants now appeal.
[21]
One of the many issues raised in this appeal may be disposed of
without much ado. As appears from what I have already said,
Genesis’s
attitude throughout has been that Ms Joubert’s complaint to the
Registrar related solely to the costs of
the third prosthesis, the
Taylor spatial frame device, and not to the two prostheses used
earlier. This contention was based on
the fact that, by 18 March
2008, Genesis had settled Ms Joubert’s claims for the initial
treatment, which included the cost
of the first two prostheses. Thus,
so Genesis argued, only the disputed cost of the third prosthesis,
being the subject of Ms Joubert’s
subsequent complaint of 27
February 2009, could have been the subject of a ruling by, in turn,
the Registrar, the Appeal Committee
and the Appeal Board; and
therefore the latter had erred in ruling in respect of all three
prostheses.
[22]
Although accepted by the court quo, Genesis’s argument on this
issue is overly simplistic. As already mentioned, after
her written
complaint of February 2009 Ms Joubert must have complained further to
the Registrar about the reversal of the payment
for the first two
prostheses as Genesis was requested to provide its reasons for doing
so. It complied and provided its reasons,
they being the same as
those it relied upon to justify its refusal to pay for the third
prosthesis. The Registrar then issued his
ruling. In the
circumstances it would be artificial in the extreme to hold that Ms
Joubert’s complaint, so ruled upon, only
embraced the third
prosthesis.
[23]
However, this dispute is really something of a storm in a teacup as
counsel for Genesis informed us from the bar that, prior
to this
appeal, Genesis had a change of heart and has paid for all three
prostheses (in effect reversing its earlier reversal of
its payment
for the first two). In the circumstances, as Genesis has since paid
for the prostheses, it is only concerned with the
principle whether
it had been obliged to do so. That being so, it truly matters not
whether the Appeal Board erred in ruling on
all three prostheses
rather than merely the Taylor spatial frame device.
[24]
The subsequent payment made by Genesis and its decision to litigate
in respect of the principle of its liability, also renders
it in
unnecessary to determine the procedural unfairness that it alleged
had occurred before the Appeal Board, not only in its
failure to
limit the inquiry to liability for the third prosthesis, but in not
enquiring whether the first two prostheses were
available in state or
public hospitals and in allowing the Registrar to appear and argue on
behalf of Ms Joubert. It is also unnecessary
to rule on whether the
Appeal Board, in authorising the Registrar to represent it in the
main application in the court a quo, made
apparent its own bias
against Genesis, an argument advanced in the heads of argument in
this court.
[25]
That being so, I turn to deal with the primary issue of dispute,
namely whether the rules of Genesis are such, and fall to
be so
applied, that it is not liable to compensate a member for the cost of
an external prosthesis fitted in a private hospital.
In dealing with
this issue it is necessary at the outset to consider certain of the
relevant statutory provisions.
[26]
Under s 20 of the Act, a medical scheme may not carry on business
unless it is registered under s 24. Section 29 provides that
the
Registrar shall not register a medical scheme, and that no medical
scheme may carry on business, unless its rules make provision
for a
number of specific matters. In particular ss 29(1)
(o)
and
(p)
provide that the rules must make provision for:
‘
(o)
The
scope and level of minimum benefits that are to be available to
beneficiaries as may be prescribed.
(p)
No
limitation shall apply to the reimbursement of any relevant health
service obtained by a member from a public hospital where
this
service complies with the general scope and level as contemplated in
paragraph
(o)
and may not be different from the entitlement in terms of the service
available to a public hospital patient.
’
[27]
The minimum benefits referred to in s 29(10)
(o)
are those prescribed in regs 7 and 8 of the regulations promulgated
in terms of s 67 of the Act
by
the Minister of Health in Government Notice R1262 of 20 October 1999,
and amended from time to time thereafter. At all times
material to
the present matter, reg 7 contained the following definitions:
‘ “
designated
service provider” means a health care provider or group of
providers selected by the medical scheme concerned as
the preferred
provider or providers to provide to its members diagnosis, treatment
and care in respect of one or more prescribed
minimum benefit
conditions;
“
emergency
medical condition” means the sudden and, at the time,
unexpected onset of a health condition that requires immediate

medical or surgical treatment, where failure to provide medical or
surgical treatment would result in serious impairment to bodily

functions or serious dysfunction of a bodily organ or part, or would
place the person’s life in serious jeopardy.
“
prescribed
minimum benefits” means the benefits contemplated in section
29(10)
(o)
of the Act, and consist of the provision of the diagnosis, treatment
and care costs of-
(a)
the
diagnosis and treatment pairs listed in Annexure A, subject to any
limitations specified in Annexure A; and
(b)
any
emergency medical condition.
“
prescribed
minimum benefit condition” means a condition contemplated in
the Diagnosis and Treatment Pairs listed in Annexure
A or any
emergency medical condition.’
[28]
Regulation 8, in turn, provides:
‘
(1)
Subject to the provisions of this regulation, any benefit option that
is offered by a medical scheme must pay in full, without
co-payment
or the use of deductibles, the diagnosis, treatment and care costs of
the prescribed minimum benefit conditions.
(2)
Subject to section 29(1)(
p
) of the Act, the rules of a medical
scheme may, in respect of any benefit option, provide that ─
(
a
)
the diagnosis, treatment and care costs of a prescribed minimum
benefit condition will only be paid in full by the medical
scheme if
those services are obtained from a designated service provider in
respect of that condition; and
(
b
)
a co-payment or deductible, the quantum of which is specified in the
rules of the medical scheme, may be imposed on a member
if that
member or his or her dependant obtains such services from a provider
other than a designated service provider, provided
that no co-payment
or deductible is payable by a member if the service was involuntarily
obtained from a provider other than a
designated service provider.
(3)
For the purposes of subregulation (2)(
b
), a beneficiary will
be deemed to have involuntarily obtained a service from a provider
other than a designated service provider,
if─
(
a
)
the service was not available from the designated service provider or
would not be provided without unreasonable delay;
(
b
)
immediate medical or surgical treatment for a prescribed minimum
benefit condition was required under circumstances or at locations

which reasonably precluded the beneficiary from obtaining such
treatment from a designated service provider; or
(
c
)
there was no designated service provider within reasonable proximity
to the beneficiary’s ordinary place of business or
personal
residence
.’
[29]
Annexure A referred to in the definition of ‘prescribed minimum
benefits’ contains an itemised schedule of medical
conditions
and the treatment to be allowed for each, these being the ‘categories
(Diagnosis and Treatment Pairs) constituting
the Prescribed Minimum
Benefits Package.’ Each such ‘pair’ is allocated a
specific code. Code 900H refers to
a PMB diagnosis of ‘open
fracture/dislocation of bones or joints’ for which the
allowable treatment is ‘reduction/relocation,
medical and
surgical management.’
[30]
The compound comminuted fracture Roxanne sustained to her lower limb
was clearly a PMB condition falling squarely within that
described by
code 900H. That, I understand, Genesis accepts. Accordingly, even
though Genesis’s rules do not make specific
provision for an
external prosthesis, it would be obliged under the legislative matrix
outlined above to pay for such a device
if used in treating the
injury. After its initial quibble about three such devices having
been used, it now accepts, as I have
already mentioned, that the
treatment administered to Roxanne was reasonable. Accordingly, having
regard solely to the legislation,
Genesis would appear to be liable
to pay in full for Roxanne’s treatment, including the costs of
the three prostheses - subject
of course to the provisions of reg
8(2) and the proviso thereto, as read with reg 8(3), which would
limit its liability to the
costs that would have been charged had
such treatment been obtained from a ‘designated service
provider’ (DSP).
[31]
It is here that things become more complicated. Genesis has been at
loggerheads with the Council in regard to the appointment
of DSPs.
Prior to 2007, clause 1.1 of its rules provided for Genesis to pay
‘100% of actual cost, in respect of benefits
defined as (PMB’s)
. . . when obtained from a Public or State Hospital’. However,
on 4 October 2006 the Council wrote
to Genesis in regard to various
proposed rule changes for the following year. Inter alia, it stated
that it was ‘imperative’
for its rules to indicate DSP’s
and that they should further ‘clearly provide for the
co-payment applicable’
in the event of a non-DSP being
voluntarily used. It concluded that in the event of no DSPs being
identified, ‘the rules
should state that the members have a
free choice of provider.’
[32]
Genesis objected to this directive. On 8 December 2006, in a somewhat
sarcastically worded letter to the Council, it stated
that it had
obtained legal advice from senior counsel to the effect that a
medical scheme cannot be compelled to appoint DSPs.
In the light of
this response, on 14 December 2006 the Council informed Genesis that
its proposed rule changes for 2007 would not
be approved. In so
doing, it stated:
‘
(I)t
should be noted that the arrangement whereby the public sector is
regarded as the “designated service provider”
(DSP) for
prescribed minimum benefits (PMBs) is unacceptable . . .. The PMB
construct in Genesis is unreasonable and misleading
to members as
there is no way for a member to determine up-front the true
availability of the service provider and consequently
the value of
the benefits provided by the scheme. The various provincial
departments of health furthermore place access restrictions
on
medical scheme members or members in schemes with no contracts. Given
this, no general designation involving the public sector
can be
regarded as “reasonably available” as the health service
has already denied access. Furthermore the extent of
the benefits
limits applied by the scheme will result in the beneficiary not
receiving the benefits in respect of PMBs he is entitled
to thereby
undermining the PMB framework.
Based
on this, the rules will not be approved, in terms of section 31(3)
(a)
of the Act where there is any designation of the public sector as
this would be unfair to members. Given this, all provisions relating

to limits and co-payments in respect of PMB’s will not apply,
irrespective of the service provider used. This would need
to be
clarified in the rules and communicated properly to members.’
[33]
The Council’s statement that the arrangement by which the
public sector is to be regarded as the DSP was clearly a reference
to
rule 1.1 of Genesis’s rules relating to PMBs
[1]
seeking to limit  liability for PMB’s to expenses obtained
in the public sector. Be that as it may, the threat not to
approve
its rules appears to have caused Genesis to back down somewhat as,
with effect from 1 January 2008 it amended clause 1
to provide, inter
alia, as follows:
‘
1.1
100% of actual cost in respect of benefits defined as (PMBs) in
the Act . . . when obtained from a Public or State Hospital
or (DSP).
.
. .
1.4
If the beneficiary voluntarily obtains diagnosis, treatment and care
in respect of a (PMB) condition from a provider other
than a (DSP) ,
the benefit payable in respect of such service is subject to a
co-payment equal to the difference between the actual
cost incurred
and the cost that would have been incurred had the (DSP) being used.
.
. .
1.6
If a beneficiary involuntarily obtains diagnosis, treatment and care
in respect of a (PMB) condition from a provider
other than a (DSP)
the benefit will be 100% of the cost in relation to that (PMB)
condition.
1.7
For the purpose of 1.6 beneficiary will be deemed to have
involuntarily obtained a service from a provider other
than a (DSP)
if –
(a)
the service was not available from the (DSP) or would not be provided
without unreasonable delay;
(b)
immediate medical or surgical treatment for a (PMB) condition was
required under circumstances or at locations which reasonably

precluded the beneficiary from obtaining such treatment from a (DSP);
or
(c)
there was no (DSP) within reasonable proximity to the beneficiary’s
ordinary place of business or personal residence.
’
[34]
It is readily apparent that these rules to an extent reflect the
provisions of reg 8, particularly in respect of the payment
for
services rendered by DSPs, the co-payment requirement where another
service provider’s services are obtained rather than
those of
the DSP, and the payment to other service providers whose services
were involuntarily obtained. However, cynically, Genesis
has never
appointed DSPs and has remained steadfast in its view that it is not
obliged to do so. Accordingly, as it has no DSPs,
and although its
rules appear likely to deceive its members in that regard, its
standpoint is that under clause 1.1 it is obliged
to pay for the cost
of treating a PMB condition only when that treatment is ‘obtained
from a Public or State Hospital.’
In the context of Ms
Joubert’s claims, as the three prostheses were provided at
private institutions, it argues that it is
not liable for their cost
even though they were used to treat a PMB condition.
[35]
The foundation of this argument is s 32 of the Act. It provides that
the rules of the medical scheme ‘shall be binding
on the
medical scheme concerned, its members, officers and on any person who
claims any benefit under the rules or whose claim
is derived from a
person so claiming.’ Relying on this, Genesis argues that the
rules constitute a contract between a medical
scheme and its members
and that, once such rules are approved by the Registrar, the
relationship between the scheme and its members
is governed solely by
the rules and that the provisions of the Act and the regulations fall
away.
[36]
Genesis relied heavily upon the judgment in
Nimed
Medical Aid Society v Sepp and others NNO
1989
(2) SA 166
(D) to support this argument. The court in that matter, in
dealing with provisions of the predecessor of the current Act, the
Medical
Schemes Act 72 of 1967 which are substantially similar to
those of the current provisions, was called upon to decide whether
contributions
to medical scheme were payable under the provisions of
a law. Didcott J concluded that they were not as ‘the rules of
any
medical scheme amount to a contract between it and the members
that binds both sides’.
[2]
I accept that this is so, but the finding in that regard,
particularly in the context of what was in issue in that case, is no

reason to accept that any obligation imposed by the statute upon a
medical aid scheme to pay certain amounts becomes unenforceable
when
its rules, which do not contain such provision, are registered.
[37]
One of the underlying purposes of the PMB provisions in the Act and
the regulations is to ease the demand upon public resources,
which
provide hospital and medical services at little or no cost, while at
the same time ensuring that members of the medical scheme
suffering
from PMB conditions are able to obtain treatment at a satisfactory
level. Thus in the preamble to annexure A to the regulations
it is
stated:
‘
The
objective of specifying a set of Prescribed Minimum Benefits within
these regulations is two-fold:
(i)
To
avoid incidents where individuals lose their medical scheme cover in
the event of serious illness and the consequent risk of
unfunded
utilisation of public hospitals.
(ii)
To
encourage improved efficiency in the allocation of Private and Public
health care resources.’
[38]
Section 29(1)
(o)
and reg 8 which, read together, require a medical scheme to ‘pay
in full’ the costs of treatment of PMB conditions
at a scope
and level as may be prescribed, were clearly designed to ensure that
members would not be obliged to bear the cost of
providing such
treatment. They make no mention of a medical scheme being obliged to
do so only in the event of the treatment being
obtained from the
public sector. Indeed the entire tenor of the legislation is to the
contrary effect, the provisions referring
to DSPs clearly indicating
that private sector treatment was envisaged – such provisions
allowing a medical scheme to select
DSPs with whom it may reach
agreement on charges beneficial to it and thereby limit its exposure
to liability under reg 8(2).
[39]
In the circumstances the Minister, in specifying the table of PMBs
and the allowable treatment for such conditions, clearly
intended to
ensure that members of medical schemes would enjoy cover in relation
to those specific medical conditions and encourage
them to seek
treatment in either private or public hospitals. That objective would
be defeated by a medical scheme only providing
cover for the
treatment of PMBs if obtained from the public sector, thereby
effectively shifting the cost of treating PMB’s
from medical
schemes to the State. That is precisely what Genesis has attempted to
do by not appointing DSPs. Instead of providing
an option for its
members to obtain treatment for PMB’s in the private sector, it
seeks to oblige its members to obtain treatment
for those conditions
in state institutions at little or no cost to itself.
[40]
This, Genesis says, it can do as that is the effect of its contract
between itself and its members and that, even if its rules
conflict
with the Act and the regulations, they are binding upon its members
until such time as they are amended. In this regard
it drew attention
to the powers of the Registrar under s 31(4) and 51 of the Act to
compel a medical scheme to amend its rules,
and argued that as the
Regisrar has not yet done so, its registered rules cannot be
interpreted to mean something for which they
do not provide.
[41]
It would be cold comfort for a member of a medical scheme to know
that although the Act and the regulations promulgated thereunder

provide for payment of an amount for private sector treatment, the
medical scheme is excused from meeting that charge until the

Registrar proceeds to take steps to have its rules changed. But in
any event, the rules of the medical scheme cannot be viewed
in
isolation and Genesis’s submission is untenable.
[42]
Effectively  Genesis’s argument is that by accepting to be
bound by its rules its members have contracted out of
the obligations
imposed upon a medical scheme under the Act and that, in the
circumstances, the full benefit of what was provided
by the Act must
be regarded as waived by its members. I accept, as a principle, the
general rule that any person may waive rights
conferred by law solely
for his or her benefit but that rule does not apply where both public
as well as individual interests are
concerned. Thus ‘where
public as well as individual interests are concerned, where public
policy requires the observance
of the statute, then the benefit of
its provisions cannot be waived by the individual, because he is not
the only person interested.’
[3]
As mentioned above, the provisions of the Act have as their goal the
obligation of a medical scheme to provide a prescribed level
of
treatment for all its members suffering from PMB conditions, whether
obtained from the private or public sector. This is clearly
a matter
involving public interest and in respect of which public policy
requires compliance by medical schemes. This is even more
the case
when one bears in mind the intention to provide protection of certain
classes of persons who bargain from an inferior
position, as members
do in regard to their medical schemes. In this regard the comments of
Lord Hailsham in his famous speech in
Johnson
and another v Moreton
1980
AC 37
(HL) go to the point. He said:
‘
[It]
can no longer be treated as axiomatic that, in the absence of
explicit language, the Courts
will
permit contracting out of the provisions of an Act of Parliament
where that Act, though silent as to the possibility of contracting

out, nevertheless is manifestly passed for the protection of a class
of persons who do not negotiate from a position of equal strength,

but in whose well-being there is a public as well as a private
interest. Such acts are not necessarily to be treated as simply
jus
pro se introduction,
a
“private remedy and a private right” which an individual
member of the class may simply bargain away by reason of
his freedom
of contract. It is precisely his weakness as a negotiating party from
which Parliament wishes to protect him.’
[43]
In my view these considerations effectively answer Genesis’s
argument. The relationship between a medical scheme on the
one hand
and its members on the other, is not governed solely by that scheme’s
rules but also by the obligations imposed
by statute upon medical
schemes. These latter obligations cannot be evaded by a medical
scheme purporting to contract with its
members by prescribing rules
having a contrary effect. It is not only, as counsel for the
appellants argued, simply a question
of legality and the enforcement
of an obligation imposed on medical schemes by statute, but the
enforcement of public policy that
leads to that result.
Consequently, DL Pearmain
The
Law of Medical Schemes in South Africa
,
correctly
observes that ‘(a)lthough the Act states that a scheme is bound
by its rules, if one or more of those rules is contrary
to law, the
law will take precedence.’
[4]
After all, s
29(1)
(o)
provides
that no medical scheme shall carry on business unless it provides for
the scope and level of minimum benefits that are
prescribed. If
Genesis carries on business as a medical scheme, which it does, then
it must supply the benefits it is required
to provide by the Act and
the regulations.
[44]
Simply put, the law obliges medical schemes to pay the costs of
treating PMB conditions in full, and that is what Genesis must
do.
Genesis had the opportunity to appoint DSPs. It could even have
concluded agreements with the public sector as its DSP, which
would
not have been offensive if the Registrar was satisfied that there was
a clear agreement between it and the relevant public
health
authorities
[5]
.
But it failed to appoint DSPs, either in the private or public
sector. Consequently, as a result of its own failure in that regard,

the ameliorating provisions of reg 8(2) are not available to it and
it became obliged to pay in full for the treatment administered
to
Roxanne in respect of the PMB condition from which she suffered. That
includes the cost of the three prostheses that were used
from time to
time.
[45]
The court a quo therefore erred in reaching the contrary conclusion,
and the appeal must succeed. Having said that, as both
sides were
agreed that the Appeal Board had misdirected itself by ruling that
the cost of the three prostheses was to be limited
to what their cost
would have been had they been supplied in a public hospital, the
court quo ought to have ordered the deletion
of that portion of the
Appeal Board’s directive – although that in itself was
insufficient success to justify Genesis
being awarded its costs a
quo.
[46]
That brings me to consider the appellants’ counter application
for declaratory relief. In that regard, on appeal, the
appellants
sought an amendment of their notice of motion to alter the relief
that they sought. This was not opposed by Genesis
but, in my view, it
seems to be unnecessary to make any order in respect of the counter
application. The relevant principles of
Genesis’s liability
have been dealt with in the context of Ms Joubert’s claim which
was the subject of the review,
and it seems superfluous to fashion a
further declaratory order. Indeed, counsel for the appellants did not
advance his argument
for such relief with any vigour and indicated
that the appellants’ interests would adequately be served by
setting aside
the order appealed against. In the circumstances the
appropriate order is to make no order in respect of the counter
application.
[47]
The following order will issue:
1
The appeal is upheld with costs, including the costs of two counsel.
2
The order of the court a quo is set aside and substituted with the
following:
‘
(a)
The ruling of the Appeal Board of 3 May 2012 is amended by the
deletion of the words “to the level of a public hospital”

.
(b)
The application to review and set aside the above ruling of the
Appeal Board is otherwise dismissed with costs, including the
costs
occasioned by the employment of two counsel.
(c)
No order is made in respect of the counter application.’
_______________________
L
E Leach
Judge
of Appeal
Appearances:
For
the Appellants

J G Wasserman SC (with him A J Lapan)
Instructed by:
Hogan Lovells
(South Africa),
c/o Mcloughlin
Clark Inc, Cape Town
Symington &
De Kok, Bloemfontein
For
the First Respondent:
E W Fagan
SC (with him E van Huyssteen)
Instructed by:
Clyde & Co, Cape Town
Lovius Block,
Bloemfontein
For
the Second and Third Respondents:

None
[1]
These are
contained in appendix 1 to its rules.
[2]
170H-I.
[3]
Per Innes CJ
in
Morrison
v Angelo Deep Gold Mines Ltd
1905
TS 775
at 781.
[4]
DL
Pearmain:
The
Law of Medical Schemes in South Africa
para
7.1.1.
[5]
Pearmain
op
cit
para 7.2.