Johannesburg - Private hospital group Netcare capitalised on the increased burden of diseases in an ageing population and grew its revenue from admissions by 5.7 percent despite its volumes, in terms of patient days, increasing by just 2.7 percent.
Netcare said the average age of the patients its hospitals admitted was 42 years, 10 years older than the average age of medical schemes’ beneficiaries.
“[The revenue growth] is driven by cases we deal with, but it is still below the inflation rate of 6 percent. It speaks volumes… It shows that we are not drivers of huge costs,” Richard Friedland, the chief executive of Netcare, said.
Just less than a week ago, the Global Credit Ratings agency released a medical schemes bulletin that showed schemes were experiencing higher claims ratios from service providers.
But Friedland said, in Netcare’s experience, the increase in numbers of people covered by the medical schemes, ageing of beneficiaries and the prevalence of chronic diseases were the three things to be blamed.
According to the Council for Medical Schemes’ 2012/13 annual report, 2 million more people have become medical scheme beneficiaries since 2000.
Friedland said the demand for private health-care services had followed the same trend and the group capitalised on that by adding 70 new beds across its local network of hospitals in the year to September.
Netcare spent £39.8 million (R650.7m) in the year under review, mostly on projects to improve the quality of its hospital portfolio.
From now until the end of the 2014 financial year, Netcare will add 98 new beds in its hospital network. Friedland said the idea was to expand all the existing hospitals to full capacity. “We have a number of pending applications to add new beds in different hospitals but we can’t say which ones… We will make announcements when they are approved.”
In 2015, Netcare would begin the construction of two new hospitals in Polokwane and in Pinehaven, west of Johannesburg. This would add 209 further beds.
Friedland said a strong trading performance from the South African operations, where revenue grew by 6.2 percent to R15.5bn, as well as some improvement in its UK operations, were the drivers of the group’s revenue growth of 10.4 percent to R27.8bn.
Netcare’s adjusted headline earnings per share from continuing operations rose 25.4 percent to 142 cents and the group declared a final dividend per share of 40.5c, 19.1 percent higher than last year.
Analyst Jean Pierre Verster at 36One Asset Management said the results were solid and slightly better than Life Healthcare’s in terms of patient days and revenue. However, he said this also indicated that Netcare’s pricing might have been slightly ahead of competitors due to positive case mix.
He said the group’s plans to expand its local hospitals showed that while Netcare had been more focused on its UK operations, it was paying more attention to South Africa. He said this was a good move as there was still a lot of room to grow in the local market.
“All the big three hospital groups have announced capacity expansion plans, so it speaks to the demand for hospital services as a result of the increased burden of disease. There is still a lot more opportunity to capture in the market as health care is made more accessible though affordable medical aid membership,” Verster said.
The shares rose 0.83 percent to close at R24.30 yesterday. - Business Report