van den Heever BMC Public Health 2012, 12(Suppl 1):S5 http://www.biomedcentral.com/1471-2458/12/S1/S5 Page 7 of 13 Figure 2 Private hospital and other medical schemes claims costs per person per annum, South African Rands (2010 prices) Data from Council for Medical Schemes’ Annual Reports [29]. Medical scheme claims costs increased more steeply during the 1990s than during the post- reform period which was implemented from 2000. Private hospital costs initially increased more steeply during the post reform phase after the market became concentrated from 2000. Private hospitals returned to the pre-2000 trend in 2004 but at a structurally higher cost. membership declines. Competing medical schemes there- fore faced no market-related penalties for passing cost increases on to contributors, provided they kept their increases in line with those of other schemes. The pricing strategies therefore focused exclusively on gaining market share from occupational schemes rather than competi- tion amongst commercial schemes, further dulling incen- tives to be cost-efficient. The incentive-driven behavioural change of schemes affected the behaviour of medical service providers dur- ing this period as schemes had little interest in serious cost containment. Poor regulation of specialists from a competition perspective allowed successful horizontal collusion (between specialists) to foreclose early attempts by schemes in 1997 to introduce forms of selective contracting [19]. Such scheme initiatives could have influenced subsequent hospital and specialist cost trends. Whereas doctor-owned hospitals emerged during the 1980s, corporate ownership of hospitals became a major trend only during the 1990s, with significant and rapid market consolidation into three corporate groups by 1999, a period of roughly ten years. Although the hospi- tal market was technically not an oligopoly in 1999, it was a mere two years thereafter [16]. From 1994 only three hospital groups bought independent hospitals. At some point during the early 1990s a market power threshold was crossed which accelerated the consolida- tion by the three groups. (Figures 2 and 3). This market power was initially directed at indepen- dent hospitals who were vulnerable to non-price compe- tition against the more revenue secure hospital groups. Their increasing and stable surpluses were used to chase demand by competing for specialists rather than com- peting for patient volumes (demand) though price dis- counts. Specialists, who operate independently of