The shift to day hospitals has been long in coming, but it’s finally starting to catch on — which, hopefully, will start benefiting one of the JSE’s most disappointing entrants of the past decade: listed hospital group Advanced Health.
Even the hospital sector’s big guns, Mediclinic, Netcare and Life Healthcare, have joined the fray in setting up day hospitals as the uptake of outpatient services is starting to gain traction only now. These services typically entail surgeries and scopes where the patient can go home on the same day as the procedure.
Fedhealth Medical Aid principal officer Jeremy Yatt ascribes this to the advancement of surgical technology. “Back in the day, a cataract surgery would entail staying over in hospital for a day,” he tells the FM. “Now, it is done in the surgeon’s rooms.”
Fuelling the take-off in outpatient services was certainly consumers’ reaction to the Covid pandemic. If there is anything positive to be said about the pandemic, it is that patients became less wary of same-day surgeries and other same-day medical procedures.
There are two reasons for consumers’ increased benevolence towards day hospitals, Momentum Health Solutions executive Damian McHugh tells the FM.
“First, there was resistance from consumers to go to acute hospitals during the pandemic. Most of them were reluctant to end up in hospitals that were treating Covid patients,” he says.
“Second, elective procedures weren’t allowed during the pandemic, with day hospitals offering some equivalent same-day surgeries.”
Not all the surgeries offered in an acute hospital are readily available in day hospitals yet. But this is changing quickly.
“Technology is driving more and more surgical procedures to day hospitals,” says Advanced Health CEO Gerhard van Emmenis, “this includes procedures such as same-day knee [replacements] and arthroplasty. We have done more than 100 of these procedures in the past year.”
These same-day surgeries and procedures benefit medical aids and their members alike. Day hospitals have far lower expenses due to their limited operating hours and concomitant reduced labour costs (night shifts fall away, for example).
So, do medical aids push harder for members to opt for less same-day procedures than traditional treatments in acute hospitals? “There isn’t necessarily a push from all medical aids,” says McHugh. “Medical aids want the best possible health outcomes for members at the best prices for members.” Yatt agrees. “The prime consideration is not price, because goedkoop koop, is duur koop. It’s about the outcomes of procedures.”
And there seems to be no difference between the outcomes for same-day procedures and those done in acute hospitals. “Our data shows that the quality of medical procedures is often better in a day hospital than an acute hospital,” says Yatt.
Though the procedures provided by day hospitals are “much cheaper” than similar ones at acute hospitals, according to Yatt, accessibility of day hospitals is a stumbling block.
“There are about 420 public hospitals, 215 private hospitals and 120 day hospitals in South Africa,” says McHugh. “When you eliminate the very niche day hospitals, such as those offering only ophthalmological procedures, the number that offer a broad range of same-day procedures diminishes.” There is also, according to him, large variations in availability in the different provinces.
Besides the three listed private hospital groups, there are only two day hospital chains in South Africa. However, there are several nonchained day hospitals. Unlisted Cure Day Hospitals owns 10 day hospitals and manages one other. Listed Advanced Health owns nine day hospitals in South Africa and has a share in a further six in Australia.
Even as Advanced has seen a large uptick in patient procedures during Covid, and a subsequent small decline during the previous fiscal year, the company has struggled to get its South African unit profitable. Advanced’s South African operations contributed 33% to revenue, with the balance coming from Australia, during its fiscal year to end-June.
That’s despite the fact that the South African operations have far larger capacity than the Australian unit: 22 theatres and 412 revenue-generating doctors compared with its 15 theatres and 152 revenue-generating doctors in Australia. Clearly, this is frustrating to management which, earlier this year, informed shareholders that its board had appointed a subcommittee to assess “options and alternative strategies available to unlock and enhance value for [the company’s] shareholders”.
The company’s stock, which is 71% owned by Eenhede Konsultante, an associate company of chair Carl Grillenberger, has lost more than half its value this year. Over the past five years the price is down more than 71%, leaving Advanced on a market cap just south of R100m.
“Advanced Health is currently focusing on cost efficiency and being transparent with both the patient and the medical schemes when it comes to what they pay ... and on how we measure and illustrate quality through outcomes,” says Van Emmenis. “Our business has grown as a result of the Covid pandemic and we strive to continue on this trend.”
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