Demand for health on the increase, despite costs IF THE results of SAs listed private hospital groups are anything to go by, the demand for private care in this country continues to rise despite concerns that it is unaffordable, even to those who have medical cover. The financial year to September was another bumper season for Netcare, Mediclinic International and Life Healthcare - SAs only listed private healthcare groups. Together they account for 75 percent of SAs medically insured population. Though all of them have offshore operations, SA remains their cash cow. However, at group level, the numbers are skewed, affected by currency differences and weaker performances by offshore operations in some instances. Mediclinics normalised group revenue was up 21 percent, to R14bn, boosted by foreign currency gains in the interim period under review. Netcares grew by 10 percent, to R27,8bn, while Life Healthcare posted an eight percent top-line rise, to R11,8bn. If offshore operations are taken out of the equation, the SA businesses have been consistent performers. Netcare SAs revenue from hospitals and emergency services grew 8,6 percent to R14bn, while earnings before interest, tax, depreciation and amortisation (Ebitda) rose 12 percent, to R3bn. Patient days grew by 2,7 percent, while net revenue per patient day increased 5,7 percent. Mediclinic Southern Africas normalised revenue increased by 11 percent, to R5,6bn, for the period under review, driven by a 5,8 percent growth in bed days sold. Normalised Ebitda was 12 percent higher at R1,2bn. Life Healthcares hospital divisions revenue increased by eight percent, to R11bn, driven by a 2,7 percent increase in PPDs (paid patient days) and higher revenue per PPD of 5,3 percent. Paid patient days or bed days sold refer to a formula hospital groups use to measure their efficiencies by counting the number of days they were paid for compared with actual beds used. The companies say what drives hospital admission is ageing and a growing disease burden. Michael Flemming, the outgoing CE of Life Healthcare, said SAs disease burden was four times that of the UK and twice that of Ghana and Nigeria. And, because of the disease profile in this country, there was significant demand for beds. Netcare CE Richard Friedland concurred, citing figures published recently by the Council for Medical Schemes, which noted an increase in chronic and lifestyle diseases. In its 2012 annual report, the council reported an 84 percent increase in the prevalence of diabetes type 2 per 1 000 people between 2006 and 2011. The prevalence of renal diseases surged by 50 percent, bipolar disorders by 228,6 percent and hypertension 36,8 percent over the same period. The rise of lifestyle diseases in developing countries like SA is a new phenomenon, as they were mostly limited to wealthier countries. This means there remain huge opportunities for growth. Analysts are upbeat despite potential regulatory concerns, including the competition probes into the sector. Bonolo Magoro, analyst and partner at First Avenue Investment Management, said regulatory pressure would always exist in this sector, given the call by health ministries across the globe to lower costs. She said that as a volume-driven industry, investors should look to have exposure to healthcare providers that focused on providing the lowest-cost service, and had built capacity that was aligned with capturing volume growth. Bonolo said consistent high cash generation, consistent renewal of corporate value and low use of leverage were some of the factors to consider when evaluating opportunities in this space. She said it was a defensive sector in a disciplined oligopoly in SA, and urged investors to explore this sector with keen interest. Andile Makholwa: Financial Mail
Posted on: Fri, 29 Nov 2013 11:07:07 +0000
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