Investing in the Future of Quality Healthcare

One of South Africa’s leading listed healthcare organisations, Life Healthcare, is investing in the long -term future by continuing to acquire strong businesses that will result in positive outcomes for patients. It’s a solid business model that shows no signs of slowing but provides certainty where it is most needed.

Perhaps the most certain thing in business is that one industry above all others does not welcome uncertainty – healthcare. When people are most in need there is no room for confusion, hesitation, vagueness or doubt.  Thankfully, in South Africa, there is world-class private healthcare, and the industry is home to some of the very best. Large, modern, well-equipped healthcare facilities are what to expect from the private sector. Even with a shortage of qualified nurses in the country, the private space continues to thrive because of short waiting times and exceptional outcomes.

A small number of large businesses make up the private space, and each is highly regarded with patients paying a premium for the best service available, often in spaces set amongst rose gardens, or overlooking the ocean, or nestled in cosy valleys with mountainous backdrops.

Life Healthcare is one of the industry leaders, with operations across 13 international markets and 64 hospitals in South Africa. The company has 4000 specialists in its network and treats 600,000 in-patients annually.  

To eliminate uncertainty and provide patients with total clarity at all times, Life Healthcare has worked hard to build scale and value. Since establishment in 1983, the company’s reputation has boomed thanks to a focus on quality service delivery.

Going forward, the company’s growth strategy is multifaceted but incorporates merger and acquisition (M&A) activity as a key pillar. Recent acquisitions have strengthened the brand significantly and have allowed for aggressive growth in areas previously untapped by Life Healthcare. Importantly, these developments also contribute to strong financial performance which allows for ongoing innovation and growth across the company.

NUCLEAR IMAGING

In March, Life Healthcare acquired the non-clinical imaging operation of TheraMed Nuclear in Gauteng. By using specialist technology and nuclear-based medicines and molecules, the company can detect and treat various organ dysfunctions and cancers. Three sites in Gauteng provide SPECT imaging, similar to PET-CT but using radiotracers and special cameras to create 3D imagery of internal organs.

“PET-CT scans are important to help clinicians determine if a tumour may be cancerous, whether cancer has spread to other parts of the body or how well treatment is working,” said Group Chief Medical Officer, Dr Mark Ferreira.

Life Healthcare CEO, southern Africa, Adam Pyle added: “The acquisition further entrenches our commitment to investing in medical imaging in South Africa, with our capability now extending into nuclear and molecular imaging. As part of this journey, we plan to drive improved accessibility for clinicians and their patients in earlier detection and more accurate treatment planning for cancer patients across the country.

“This first nuclear-medicine acquisition for Life Healthcare serves to complement the expansion of our Oncology services and furthers the growth in our non-acute business, following our acquisitions of the non-clinical operations of East Coast Radiology and Eugene Marais Radiology.”

Ultimately, greater access to early diagnosis will be the outcome, and this will save lives.

“We believe that including imaging and diagnostics within our business operations aligns well with our core operating model and strategic objectives. In time, we hope our efforts will expand access to quality care for all South Africans, especially critical care of oncology patients,” said Pyle.

Growth through acquisition can mean cheaper back-office functions after a combination of existing portfolios, but the key here is synergy in service provision.

KIDNEY CARE

In May 2023, Life Healthcare was again on the growth path, acquiring the renal dialysis clinics of Fresenius Medical Care. 51 clinics across the country will join Life Healthcare’s existing renal care programme where positive outcomes are the number one goal. Fresenius Medical Care had many people already mid-programme and this, said Pyle, was essential to continue.

“We are delighted to have been entrusted by Fresenius Medical Care to take over the renal care of their patients in southern Africa which will complement our existing renal dialysis services. As part of Fresenius Medical Care’s global dialysis provider portfolio optimisation, Life Healthcare will take over most of their renal services in southern Africa. It is therefore essential that their existing patient care plans continue uninterrupted and hence the role Life Healthcare has committed to.”

All patients and employees were transferred to Life Healthcare, with a 12-month onboarding process established to ensure a smooth process.

Dialysis is a process usually started when kidneys fail. Toxins and fluids build un in the bloodstream because the kidneys are no longer capable of filtering the way they should. Currently, the process is intrusive and uncomfortable and significant care must be taken to ensure relief.

At the end of 2022, a special new unit was launched at the Vincent Pallotti Hospital in Cape Town. The Ethos™ radiotherapy system uses artificial intelligence to adjust treatments depending on the needs of the patient. This precision approach better targets tumours and reduces the radiation dose. It also improves efficiency across decision making, speeding up processes and removing some uncertainties.

“The Ethos™ radiotherapy system offers a faster and more personalised, targeted approach to radiotherapy treatment which means we really are placing the patient at the centre of care. It’s our way of navigating our patients into the future of oncology care as we continue to live our purpose of making life better,” commented Pyle.

Again, the company is investing in best-in-class technology to better the lives of patients and provide stronger, more reliable treatment, that brings positive outcomes, quicker.

ROBUST PERFORMANCE

To fuel further expansion, Life Healthcare listed on the A2X in December 2022. Primarily listed on the JSE, this secondary listing on Sandton’s A2X follows in the footsteps of other healthcare companies looking for additional capital raising instruments.

“By making use of innovative technology and efficiencies we are able to provide our patients with quality care and improved outcomes,” said Group CEO Peter Wharton-Hood.

“Our listing on A2X extends this principal to our shareholders by providing them with an alternative platform, that, through the use of the latest high-performance technology, offers savings in the form of price improvement and lower exchange fees whenever they transact in Life Healthcare shares,” he added.

All of the progress in the past 12 months have made for significant progress financially. In May, Life Healthcare announced its results for the six months ending 31 March 2023. Group revenue was up by almost 13% to R15.3 billion and operating profit rose by 13.5% to R2.7 billion thanks to strong performance across acute and non-acute business.

“We have again shown solid operational performance across all markets, maintaining momentum, and making steady progress in executing on our long-term strategy. We remain well-positioned for sustainable growth in 2023 and beyond,” said Wharton-Hood.

Revenue was up by 11.6% and EBITDA grew by 13.5% year-on-year. Acquisitions and new partnerships were vital in this strong performance.

“Our operations saw a good increase in underlying activities, whilst improved occupancies resulted in good revenue growth and improved margins. Increased activity came off the back of normalising operations after Covid-19, and the successful completion of our network deals. We launched our value-based, integrated care product for renal dialysis in January 2023, to provide more consistent, holistic, and cost-effective care for patients and negotiated our first renal value-based contract with one of South Africa’s leading medical schemes. These results include an additional cost of R40 million related to increased diesel usage as a result of the electricity challenges,” said Pyle.

Going forward, progress will continue and uncertainty for patients will be minimised through consistent delivery of modern services. In turn, the company expects to continue delivering strong results.  

“We are bullish about seeing further volume growth in the remainder of the financial year and expect to see paid patient days (PPD) volumes grow around 10% in southern Africa for the full year. We also anticipate scan volume growth of between 6% and 8% in our UK and European diagnostic imaging market. The Group remains in a strong financial position, with net debt to EBITDA at 2.17x, compared to the 2.03x as at 31 March 2022,” said Wharton-Hood.