Netcare rises to the challenge

Notwithstanding the strong demand for private healthcare, Netcare’s operations in South Africa are operating in an extremely challenging environment, the hospital group said on Monday.

This environment was due to ”increased regulatory and cost pressures”, it said.

The company was releasing its group interim results for the six months ended on March 31 2008.

Besides the critical shortage of skills, ”the issue of substantially improving access and affordability of healthcare in SA remains the key priority”, Netcare said.

Netcare was fully supportive of the African National Congress’s social transformation agenda, which included improving the provision of housing, education and healthcare.

To this end, ”Netcare is actively engaged in developing innovative solutions, to address affordable and accessible healthcare delivery mechanisms to at least all employed South Africans”.

Netcare believed that ”a national health Insurance framework and a review of public sector delivery models” would greatly enhance the capability of ”both public and private sectors to extend healthcare on a universal basis”.

Netcare, the largest private hospital network in SA and the United Kingdom, said that group financial highlights included an 11% increase in basic earnings per share, an 11% increase in profit before taxation, and 8% rise in interim reduction of capital per share to 14 cents per share, a 16% increase in group revenue, 12% organic growth as well as a 15% increase in United Kingdom core operating profit.

In SA, the group said that in January this year, it fundamentally changed its billing methodology within its hospital division and contained annual average tariff increases for wards and theatres to significantly below consumer price inflation resulting in an average price increase per admission of 6,2% — 3,5% below inflation.

This situation, the group said, would ”necessitate an urgent review for the subsequent period.

In SA, patient day growth of 4,7% was experienced in Netcare’s existing hospitals and together with its acquired hospitals, patient day growth was 13,6%.

”The average length of stay in our hospitals remained flat and the average occupancy increased,” it said.

Netcare has been selected by the Lesotho government as preferred bidder on a project to build a 390-bed hospital in Maseru, refurbish three primary healthcare clinics and provide clinical services.

Netcare added that ”significant progress” had been made in building its primary care network in SA, expanding it by 22,6% to 3 565 participating doctors.

The South African operations delivered strong revenue growth of 17,1% to R4,907-million.

Operating profit from continuing operations was up 3,4% to R636-million.

The margin was negatively impacted ”by non-recurring costs of R10-million relating to restructuring and the losses arising from power failures, the increased contribution from primary care (at lower margin), the under recovery on the sub-inflation tariff increase, increased labour cost due to skill shortages and other cost pressures. – Sapa

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