Amelia Morgenrood
JOHANNESBURG - Up to middle 2016, investors were thrilled with Mediclinic; not only was its South African operations stable and profitable, but it was also on an impressive offshore expansion drive.

The share price was just as rewarding, and Mediclinic was one of the best-performing stocks on the JSE for many years - blue blood and very popular. By early 2017 the cracks became evident and the company started battling on all fronts, as it faced regulatory constraints to domestic expansion and struggled to succeed abroad. 

Last week, market players breathed a sigh of relief at the first sign of improvement; Mediclinic published an encouraging trading update for the six months to September 2019. Revenue was up 6.5percent in constant currency terms during the period. Mediclinic Southern Africa saw an increase of 2.7percent of inpatient bed days sold during the period, while inpatient and outpatient volumes in Mediclinic Middle East rose 9 and 5.5percent respectively.

Chief executive Ronnie van der Merwe said at all three divisions of its core acute-care business is being supplemented by continued expansion across the continuum of care. Analysts were concerned with its ongoing regulatory problems in Switzerland, but Hirslanden continued to make good progress in adapting the business to the regulatory changes affecting the Swiss healthcare system.

Hirslanden has initiated a new day case surgery strategy, which focuses on a lower cost and more efficient service delivery model. It continued to attract additional clinical professionals, delivered ongoing cost management and efficiency savings, and advanced the Hirslanden 2020 strategic project. Hirslanden delivered growth of around 5percent in both revenue and inpatient admissions

Mediclinic is genuinely international, and South Africa represents only 30percent of its revenue, while 23percent is generated in the Middle-East and 46percent from Switzerland.

The Mediclinic group comprises 78 hospitals, five sub-acute hospitals, 13 day case clinics and 22 outpatient clinics. Hirslanden in Switzerland operates 18 private hospitals, two day case clinics and three outpatient clinics, with more than 1 900 inpatient beds.

Mediclinic Southern Africa operates 53 hospitals, five sub-acute hospitals and nine day-case clinics. In Namibia, the company has three hospitals with more than 8500 inpatient beds in total; and Mediclinic Middle East operates seven hospitals and 22 clinics with more than 900 inpatient beds in the United Arab Emirates.

Mediclinic is focusing on the growing day-procedure market and it now has 13 day clinics and 22 outpatient clinics.

The Competition Commission's health market inquiry began work in January 2014 and was tasked with investigating whether there were barriers to competition in the private healthcare market that drive up prices and hamper patients’ access to care. The report released two weeks ago does not really strengthen the argument for National Health Insurance (NHI). It still finds a range of features that distort and prevent competition and recommends regulatory measures to manage costs and quality.

Amelia Morgenrood is a PSG Wealth financial adviser based in Pretoria. Views are of the author and not necessarily the general view of the entire PSG entity. Mediclinic shares are currently held on behalf of clients.

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