South Africa’s two remaining listed hospital chains couldn’t be taking a more different approach to the future. Whereas Netcare is adamant about improving patient care outcomes through digitalisation, Life Healthcare is banking on pharmacology and imaging to grow revenue and profits.
And whereas Netcare shed its international operations years ago, Life has only recently announced the sale of its AMG imaging unit in Europe, holding out the hope of a nice capital return to shareholders in 2024.
Netcare is taking the long road, if CEO Richard Friedland’s comments at the release of the company’s financial results for the year to September 30 are anything to go by.
“We made a very determined move in 2017, and particularly in 2018, to move away from the traditional market assumption ... from an asset-heavy, or capex-heavy, strategy,” Friedland tells FM. This means advancing “the ability to engage with people and to retain them in our own ecosystem over time”.
Getting people to engage with their health is a long game, however, entailing a whole-life approach, from birth to death, and the patient having all their health-care needs at their fingertips.
Patients who are better engaged are five to six times more likely to stay with their provider. Over and above that, they’re saving money as tests aren’t being replicated between providers
— Richard Friedland
“We will grow by attracting people over their lifetimes, from cradle to grave,” Friedland says. “Patients who are better engaged are five to six times more likely to stay with their provider. Over and above that, they’re saving money, as tests aren’t being replicated between providers.”
In essence, for a patient who walks into Netcare’s network of Medicross health centres — where, among others, GPs and dentists work — the health data that is collected will be available in future should such a patient end up in a Netcare ambulance or hospital.
The company has forked out R572m over the past six years to build and implement its CareOn digital system in almost all its hospitals. Friedland is adamant that CareOn is poised to deliver better health outcomes to patients, offering increased attendance by nurses, who will have less filing to do, and that it will cut operational costs in future.
The money-saving result should bode well for medical aid schemes, the largest funders of private hospitals, and will affect the membership fees they charge. For instance, Discovery Health Medical Scheme, the largest in the country, announced a weighted average increase of membership fees of 7.5% for next year — compared with October’s CPI inflation of 5.4%.
“We’re spending a fortune on health care; it’s inefficient,” says Friedland. “The model is broken. We need to fix that by educating patients. The only way you can do that is by giving them their [medical] records so that they understand what happens.”
He uses an example from Netcare’s renal dialysis unit. When offered access to their medical records, only 6% of patients took it up. When it was explained that there are a number of factors which can be checked by the patient, the acceptance rate jumped to about 85%.
With the rollout of CareOn, which includes the provision of more than 12,000 Apple iPads, the biggest challenge wasn’t whether the equipment would get stolen, but rather to what extent health-care workers, especially nurses, would use it.
To ease nurses who didn’t use computers regularly into adoption of the equipment, Netcare used the game Candy Crush to familiarise them with the technology. “Nurses took to the technology like fish to water,” Friedland says.
While Netcare is extending its digitalisation plan across hospitals, Life Healthcare is banking on the international rollout of its Neuraceq radiopharmaceutical product. It is used in diagnosing Alzheimer’s disease and is housed at Life Molecular Imaging, where revenue jumped by 18% in the year to September 30.
“The Neuraceq opportunity is gaining momentum,” says Life CEO Peter Wharton-Hood.
But first, Life will need to wrap up the sale of its AMG imaging business in Europe, announced last month, to a consortium of private equity investors for £910m.
We foresee distributing more than R8bn to shareholders in early 2024. We will retain about R2bn for further growth opportunities
— Peter Wharton-Hood
“We will use the proceeds to settle all our international debt and pay for the transaction costs, the balance being repatriated to South Africa,” Wharton-Hood says. “We foresee distributing more than R8bn to shareholders in early 2024. We will retain about R2bn for further growth opportunities, and have already earmarked those specifically for a transaction relating to Fresenius renal care and further investment in Life Molecular Imaging.”
Locally, both hospital groups reported an increase in paid patient days and occupancy rates. Netcare’s total paid patient days grew 6.7% whereas Life’s rose 9.5%. Occupancy at Netcare increased to 64.4% from 60.1% the previous year, whereas Life reported a jump to 67.6% from 61.1%.
The increased number of paid patient days, together with higher occupancy rates, helped drive up hospital income in the year to end-September. In aggregate, Netcare’s revenue increased 9.5% to R23.7bn whereas Life Healthcare showed a 10.3% jump in turnover to R22.6bn in continuing operations (excluding AMG, which is held for sale).
Netcare’s results prompted a sharp rally in its shares — they were up 8.5% on a total return basis for the week by the time of going to print, narrowing this year’s share price loss to 1.5%. Life shares meanwhile have gained 9.3% on a total return basis in the year to date.
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