Performance review: Southern Africa

Geographical presence

Facilities in South Africa

Chief Executive Officer: Southern Africa overview

The South African economy remains under pressure with little or no employment growth resulting in the stagnation in medical aid membership which is a key driver in our value offering. In addition, there are other macro pressures, such as the consolidation of medical healthcare funders, HMI activity and the NHI White Paper which the Group remains cognisant of.

Life Healthcare experienced some challenges in occupancy and reduced PPD growth in the acute business compared to the previous year, yet we retained our market share and were able to recruit a significant number of doctors to alleviate some of our specialist shortages.

Complementary services are growing at a satisfactory rate and we are identifying and exploiting further opportunities. This includes investment in meaningful greenfield and brownfield expansions.

Significant highlights were the continued improvement in our B-BBEE efforts, raising the Group from non-compliant status under the new codes to a compliant level, and improvements in various quality metrics. The business obtained excellent employee retention figures and is increasingly benefiting from the effects of improvement efforts from the prior year. When coupled with reduced electricity and water consumption (notwithstanding increased bed numbers and facility growth), these highlights reflect a consistent commitment to efficiency in all forms of business growth.

The CARE programme resulted in a noticeable improvement in treatment of patients evident in the increase in patient satisfaction levels. The Group and its employees were impacted by the Life Esidimeni tragedy in a professional and emotional capacity, through a loss of contracts and an unacceptable loss of former patient lives. We express our condolences to the families of these former patients. New and returning patients are far more likely to obtain the level of care they deserve through the revitalisation of the Life Esidimeni Gauteng partnership. A number of patients have already returned to our facilities which has positively impacted morale in the healthcare services division.

Going forward in a cost-constrained society, we intend to align to medical healthcare funder needs and challenges in order to respond appropriately during the annual reviews of contracts. Doctor partnerships and co-operation in developing service offerings for medical healthcare funders will become critical. We will seek to develop our delivery model to a clinician-based approach as opposed to a facilities-directed structure. This will help evolve our offering to meet the expectations of consumers in relation to the quest for affordable quality healthcare.

Our southern Africa operations will look to partner with government on matters of training and NHI development to find workable solutions that will preserve the vital role played by private healthcare in South Africa.

Lourens Bekker

Chief Executive Officer: Southern Africa

Performance review

Growth1

Hospital division

Indicator 2017 2016 Year-on-year
trend
       
Paid patient days (PPDs)A, B 2 226 337 2 265 653 arrow
Occupancy (%) 70.0 72.5 arrow
Length of stay (LOS) (days) 3.71 3.68 arrow
A The 2017 indicator is externally assured. arrow
B The 2016 indicator is externally assured. arrow

quick facts

Occupancy refers to the number of beds in the Group utilised by patients, while length of stay (LOS) refers to the average amount of time spent in the hospital per patient visit.

LOS is an important measurement as it provides insight into the profile of the patient population and disease burden, LOS is increasing with an ageing population that has a slower recovery rate when being hospitalised.

1 Refer to strategic performance in numbers and  Group structure and services provided for the growth in facilities, beds, stations, etc.
Case mix changes

Overall PPD performance was subdued as a result of the macroeconomic factors, including intensified case management efforts by medical healthcare funders. This resulted in a PPD decline of 1.7% translating into lower occupancy levels. LOS has increased to 3.71 days (2016: 3.68 days). This was due to an increased level of specialised care combined with a growth in the number of mental health and acute rehabilitation cases.

The shift in ageing of patients continues to impact our PPDs. In a flat market this trend is expected to continue.

Ageing impacts the LOS – the average LOS for patients over 50 is over 30% higher than patients under 50.

The percentage of medical cases relative to surgical cases has continued to increase year-on-year, although at a slower rate than before. Medical cases are traditionally driven by the macro factors such as age and disease burden, but medical healthcare funder pressures are negating this effect.

The overall relative growth in mental health and acute rehabilitation activities further added to the medical case mix.

Acute hospital and complementary service growth
Capacity growth
Acute     Our acute hospitals added 101 beds (2016: 125), with a mix of general and ICU beds. The Group has a further 100 beds currently under construction, expected to add capacity by the end of 2017.
Mental health     One greenfield facility became operational during the year, adding 60 mental health beds at Life Carstenview in Gauteng. Life Riverfield Lodge also expanded capacity by 21 beds during May 2017.
Renal dialysis     Growth in renal dialysis was subdued. Additional chronic stations were added at Life Robinson Private and Life Springs Parkland during the second half of 2017. This brings the total number of stations added for the year to 22 (2016: 36).
Oncology     Our premier oncology facilities at Life Hilton Private Hospital in KwaZulu-Natal and Life Vincent Pallotti Hospital in Cape Town continue to operate effectively. The addition of a new premier oncology unit at Life Eugene Marais Hospital in Pretoria was completed and operationalised. The facility boasts state-of-the-art radiotherapy equipment, able to treat complex cancer tumours through stereotactic radiotherapy. Life Healthcare increased our shareholding in Free State Oncology in Bloemfontein.
Acute rehabilitation     No additional beds were added.
Acute hospital and complementary service pipeline
Category Forecast
2018
Forecast
2019
     
Capacity expansion at existing acute facilities 120
New acute facilities
New mental health/acute rehabilitation facilities 125
Capacity expansion at mental health/acute rehabilitation facilities 20
Total 120 145

Healthcare services division

Life Esidimeni secured the Gauteng mental health contracts following the non-governmental organisations (NGOs) redeployment matter (see below). This resulted in positive growth after approximately 460 patients returned to our facilities.

Life Employee Health Solutions (EHS) operates through Life Occupational Health and Careways, providing wellness, occupational and primary healthcare services to a range of businesses. Life Employee Health Solutions increased the number of people treated by securing four new combined EHS contracts. The acquisition of the Border Occupational Health and Environmental Services business in East London strengthened our footprint in the Eastern Cape, adding 5 532 lives. Life Employee Health Solutions experienced revenue growth based on increased lives serviced, but this is at a lower price, adversely impacting margins.

Careways lost a number of contracts due to tender processes and companies taking wellness services in-house. The number of lives covered decreased by 4.3% to 248 804 (2016: 259 974). New growth exceeded lost contracts at lower margins and for smaller-sized organisations. Increased focus will be placed on growth and client retention strategies going forward.

The number of Careways on-site clinics increased to 78 (2016: 74). The Careways network of affiliates increased by 27% and improved our geographic reach, thereby reducing costs required to service clients in more remote areas.

Product diversification positively impacted strategic growth prospects with existing clients. Careways retained its top 10 anchor clients since its acquisition by Life Healthcare, and provides services to 10 companies which are also serviced by Life Occupational Health. The Group is increasingly combining the offerings of these two entities to strategically grow both businesses.

Challenging economic conditions resulted in the loss of a number of contracts due to the liquidation or closure of client sites. Despite this, Life Occupational Health experienced a positive year due to an aggressive growth strategy and strong client retention. The number of lives covered increased by 39.6% to 222 895 (2016: 159 685), and clinics decreased by 3.0% to 288 (2016: 297).

Approximately 36% of the occupational health business comes from the mining sector, which experienced minimal growth. The Mining Charter requires service providers to be a minimum 25.1% black-owned. This was addressed by introducing a B-BBEE trust that is funded by the Group to award nursing degree bursaries for previously disadvantaged individuals. Regions not particularly dependent on mining continue to perform well and further growth is expected in 2018.

The occupational health clinic management system is being developed for occupational health service use. This is an automated paperless system for the clinics to replace the Medoc management system. We foresee full operational activity in February 2018. The Careways Wellness System replacement for the iCare system is anticipated to be complete by June 2018.

EOH Workplace Health and Wellness transaction

Post approval by the Competition Commission, Life Occupational Health acquired the EOH Workplace Health and Wellness division (EOH WHW), from EOH Abantu Proprietary Limited effective 1 October 2017.

Life Healthcare now has improved access for clients needing integrated health and wellness offerings, and has a prominent foothold in occupational health and wellness service provision across all business sectors. The Group will leverage EOH WHW’s systems and solutions, including medical surveillance, primary healthcare, wellness interventions, travel medicine, executive wellness, medical incapacity/disability management, employee assistance programmes, organisational resilience programmes and on-site corporate gym management services. An integration team was established to ensure synergies are maximised.

Mental health investigation

In 2016, the Gauteng Department of Health terminated a long-standing chronic mental healthcare contract with Life Esidimeni. This came about as part of government’s efforts to implement a policy of community-based non-institutional care for mental healthcare patients, and to reduce expenditure by the provincial department. Approximately 1 500 patients were transferred to NGOs of varying capacity and experience, sadly leading to the death of numerous patients.

The Office of the Health Ombud investigated this process. The findings gave insight into the disconcerting circumstances relating to the transfer of the mentally ill patients from Life Esidimeni to various NGOs. Reference to Life Esidimeni in the report was positive and reassuring in relation to the care that was offered at our facilities.

Following the Ombud’s findings, approximately 460 former mental healthcare patients were transferred back to Life Esidimeni care centres in Gauteng. The National Department of Health applied new standards of licensing to care facilities which provided the opportunity for Life Esidimeni to upgrade its facilities and increase employee capacity in the process. The costs of the new requirements will be recovered through a higher tariff.

We are committed to supporting the Department of Health through a more community-based care model over the next few years. This could present new opportunities and help position the Group positively in the face of increasing competition from smaller NGOs offering similar services.

Quality: Clinical governance

Clinical governance and quality management systems

We manage all quality-related elements of our southern Africa operations using a single Quality Management System (QMS). All processes and systems that may impact the delivery of a quality service are aligned to the system, and administered by our quality department with the support of the board’s new clinical governance, quality and safety committee. All quality incidents are reported through an online reporting system with standardised categories to allow for effective data management, analysis and reporting. Incidents are classified according to major or minor incidents, and data trends are identified annually for pro-active management.

The clinical governance and quality management hierarchy and activities are as follows:

Standards

Life Healthcare is the only hospital group in South Africa to have achieved multi-site ISO 9001:2008 quality management group certification for all acute hospitals and our Life Occupational Health clinics. We are implementing the new ISO high-level structure in order to comply with the 2015 standards. Life Occupational Health extended its certification to ISO 45001 Occupational Health and Safety Management System Standard to further align with the requirements of our clients.

The Department of Health National Core Standards were promulgated in 2011 as the minimum standards for quality in all hospitals. Life Healthcare has integrated the standards in its QMS over a period of five years, ending in 2015. The statutory requirements set by the Department of Labour, as stipulated in the Occupational Health and Safety Act and other related acts, are used as the minimum standard for processes and procedures.

BetterObs

Life Healthcare launched the BetterObs programme in all its maternity units on 1 June 2017. The programme is developed in collaboration with the South African Society of Obstetricians and Gynaecologists (SASOG) and has four main pillars: the obstetrician, paediatrician, hospital and patient. BetterObs is focused on developing unambiguous practice guidelines and good teamwork that promotes professional integrity in delivering optimal patient care. We foresee a positive impact in mitigating risk.

Quality1

Indicator 2017
target
2017 2016 Year-on-year
trend
         
Quality metrics        
Recommend (%) 70.0 70.0 69.4 arrow
Patient experience (%) 8.0 8.4 7.7 arrow
Clinical indicators    
Patient incident rate2 (per 1 000 PPDs)A, B n/a3 2.69 2.53 arrow
Healthcare associated infections (HAI) (per 1 000 PPDs)2, A, B n/a3 0.42 0.37 arrow
1 Refer to strategic performance in numbers for more quality indicators.
2 Patient incidents: Unintended or unexpected events which could have, or did, result in harm – this includes medication, falls, pressure ulcers, procedure-related incidents, behaviour, death due to unnatural causes, burns, other patient incidents, patients absconding and other patient information incidents.
3 Patient targets were removed in 2017 in order to encourage better reporting.
A The 2017 indicator is externally assured. arrow
B The 2016 indicator is externally assured. arrow

Life Healthcare monitors additional quality measures such as mortality rates and readmission rates according to American standards (aligned to those used by Medicare in the USA). Going forward, other quality outcomes such as mortality rates for certain conditions will be published. This proactive reporting will promote transparency with stakeholders, particularly medical healthcare funders.

Patient experience

Life Healthcare uses an independent service provider to obtain patient feedback through a survey process. All patients discharged from our hospitals receive an SMS or email within 24 hours of being discharged. The survey touch points and questions are based on Hospital Consumer Assessment of Healthcare Providers and Systems in the United States, with additional admission and food-related questions. This system is supported by a manual comment card process that patients and their families can use to provide qualitative feedback and comments.

Our acute facilities, emergency units and acute rehabilitation facilities participate in the electronic post-discharge survey.

Our mental health facilities were included in the process for the first time this year. We are able to obtain real-time reports with detailed feedback on a Group, regional and facility level. This serves as an insightful management tool, allowing for identification of deviations for monitoring and improvement.

Our patient experience scores improved across all our metrics year-on-year. The improvement is linked to our effective governance approach and activities such as the CARE programme. Our “definitely recommend” inpatient score improved by 0.6%, and overall experience emergency unit score improved by 0.6%. We had 50 454 (11.7% increase) more comment cards and 32 665 (8.2% increase) more positive responses. This emphasises our positive performance according to the complaint rate per 1 000 PPDs of 0.71 (2016: 0.74).

The lowest scoring touch points for inpatient feedback are food and medication information – these are handled as focus areas throughout our facilities. The emergency unit’s lowest scoring touch point is prioritisation. In response, there is increased operational focus on applying the correct triage and improving communication to the patient and family members.

Globally, patient experience has become pivotal in terms of assessing the quality levels of a hospital. The industry feedback from patient experience provides an indication of preferred service providers and greatly impacts the reputational positioning of our facilities and the Group. A leading medical healthcare funder continues to publish the results of a member experience survey for private hospitals nationally. Although subjective, the results aid the establishment of internal quality benchmarks. A Top 20 private hospital ranking is published by Discovery Health annually and provides some indication as to overall patient experience. Life Healthcare has two large hospitals in the rankings that are otherwise dominated by smaller hospitals.

As of November 2017, facilities’ real-time patient experience scores will be reported on the Life Healthcare website.

CARE programme

The CARE programme, launched in 2015, continues to promote positive patient and client interaction, positively influencing patient experience scores and client feedback scores. The first phase focused on teaching our internal employees positive engagement techniques. The second phase has started and involves all 5 000 outsourced service providers and includes catering, cleaning, security, coffee shop, gardening and grounds. The programme focus will be establishing an understanding of the outsourced employees’ role in the overall patient experience and harnessing that understanding to leverage positive, empathetic care.

To sustain the CARE programme’s impact on our permanent employees, we instituted monthly CARE sessions that take place at team meetings and are compulsory for all departments. The intent is to promote a simple and functional dialogue that translates into committed actions that will enhance employee and patient experiences.

As a sustainability measure, an energising video has been developed and showcases success stories of CARE to motivate our employees. This will be introduced to the business in 2018.

Patient incidents

Life Healthcare reports on and attempts to mitigate all incidents with additional focus on four key patient risk areas as outlined in the graph that follows. All patient incidents are reported and investigated by the responsible managers at hospital and Group level. Root causes are identified, and corrective action is implemented to avoid recurrence or similar incidents. A pro-active near-miss reporting system is in place for potential incidents. Alerts are reported and drive internal preventative measures at hospital level through increased awareness of any potential unsafe conditions or actions.

The overall patient incident rate increased by 0.16 as a result of changes in incident categories and progressive reporting improvements.

Clinical infections

Life Healthcare has a number of systems to manage and monitor clinical infections, including an electronic surveillance system (ICNet), internal and external audits, and comprehensive work procedures based on international best practice evidence. Infection prevention and control measures are re-enforced by regular campaigns such as hand hygiene, outbreak management and “sharps1” injury awareness.

We primarily report on healthcare associated infections (HAI), as the metrics involved are the most material measures for the proactive management of infections.

HAI metrics increased from 0.37 to 0.42 per 1 000 PPDs as a result of more multi-resistant organisms. The use of ICNet supported the ability to generate automated laboratory reports and improved the efficiency of our reporting.

1 Sharps refer to any device or object used to puncture or lacerate the skin, such as syringes.

quick facts

HAI combines all the healthcare associated infections determined according to the Centre for Disease Control guidelines.

  • Ventilator associated pneumonia (VAP)
  • Surgical site infections (SSI)
  • Central line associated bloodstream infections (CLABSI)
  • Catheter associated urinary tract infections (CAUTI)
  • Various hospital acquired infections as per the Centre of Disease Control (CDC)

Life Healthcare antimicrobial stewardship (AMS) programme

The AMS programme has shown significant growth over the past year. Due to the rapid increase in antimicrobial resistance globally, the focus of our AMS programme is to ensure the responsible use of antimicrobials in our hospitals through a multi-disciplinary approach.

AMS assessments done by pharmacy and nursing personnel are recorded electronically, and the number of assessments performed has improved by 36.5% year-on-year. These assessments involve an evaluation of compliance to several identified AMS bundle elements. The overall percentage of our AMS bundle compliance was 91.4% (2016: 89.1%), above the Group’s target of 85%. Interventions are being suggested for elements of non-compliance. The percentage acceptance of interventions suggested was maintained above the group target of 80%, at 83.9% (2016: 88.3%).

In addition, we focused on responsible utilisation of antimicrobials for surgical prophylaxis aligned to our evidence-based guidelines. Quarterly audits were introduced in April 2017. For these audits, our pharmacists audit compliance is assessed according to several elements of prophylaxis per surgical discipline. According to the baseline audit, an improvement of 5% in the total percentage compliance to guideline recommendations was achieved. This is significant as the number of audits conducted by pharmacists increased by 29.3%.

Our clinical pharmacy programme has developed and continues to focus on improving patient outcomes. This is reflected in the number of interventions suggested which have increased by 35.7% over the year. The pharmacists interact directly with the multi-disciplinary team at the patient’s bed-side, and provide valuable pharmacotherapy input and guidance. Progress is clearly reflected by the 57.1% year-on-year increase in the number of ward rounds that pharmacists have conducted with our doctors.

Efficiency: Procurement

Life Healthcare’s total procurement spend was R9.4 billion (2016: R10.4 billion), with R4.1 billion (2016: R3.8 billion) spent on pharmaceutical products and R4.1 billion (2016: R4.1 billion) on medical equipment, services and consumables. 60% (2016: 60%) of the Group’s procurement spend is exposed to exchange rate volatility. The top four spend categories include surgical consumables, pharmaceuticals, services and nursing agencies. The Group was successful in containing prices to within CPI levels.

We continue to drive efficiencies through rigorous tender processes, rationalisation of products and equipment, and compliance and asset management. Specific programmes related to alternative procurement strategies were implemented and will allow the Group to leverage opportunities across a basket of products. Our procurement reporting capability improved as a result of the implementation of the enterprise resource planning (ERP) procure-to-pay system.

Key dependencies in our supply chain include availability of inventory and services due to shortages of raw materials, increase in demand, labour unrest and exchange rates. Key medical equipment maintenance agreements within South Africa were standardised.

Sustainability: Electricity, water and waste
Indicator 2017 2016 Year-on-year
trend
       
Electricity usage (kWh)1 148 560 938 154 022 258 arrow
Water usage (kℓ)1 1 246 804 1 289 002 arrow
Healthcare risk waste (HCRW) (kg/PPD)A 1.81 1.73 arrow
1 These figures are based on best estimates using available information.
A The 2017 indicator is externally assured. arrow

We established the environment and climate change forum as a high-level structure to drive environmental sustainability. The purpose of the forum is to give direction to the quality and engineering departments on EMS-related matters, and to report on environmental matters to the board, through the board social, ethics and transformation committee.

Electricity

Total electricity consumption reduced by 2% from 68 kWh/PPD in 2016 to 67 kWh/PPD in 2017. This was driven by energy-efficient projects such as the PV solar project at Life Fourways Hospital, heat pump programmes and LED lighting projects. Phase 1 of the LED lighting and occupancy sensor project was completed at five of our large hospitals during September 2017. We anticipate a saving of more than 1MW per month, which will be monitored via the online metering system. We have already exceeded our energy saving target of 10% over five years through the effective implementation of our energy saving projects. Further reduction targets will be reviewed for the next financial year.

quick fact

The 580 kilowatt peak2 (kWp) Life Fourways Hospital solar (PV) project was commissioned on 1 October 2016. The PV plant supports 13% of overall electricity consumption at the hospital.

2 Term used to define the maximum generation capability of the PV system.

With the exception of Life Piet Retief Hospital, all acute hospitals in our southern African operations have at least two generators allowing for a secondary backup. Life Hunterscraig Private Hospital, a psychiatric hospital, and Life St James Hospital each have a single generator and uninterruptible power supply devices. A detailed review of generator assets and loads at facilities was conducted. New, larger generators are being purchased for larger hospitals as and when required. The replaced units are re-assigned to smaller hospitals where needed.

Carbon emissions

In 2012, Life Healthcare set out to reduce Scope 2 carbon emissions at acute hospitals in southern Africa by 2% annually. The aim was to achieve a cumulative reduction in emissions of 10% by 2017. We achieved a 3.6% reduction in Scope 2 emissions in this period, based on a consistent calculation using the South African factors. The business’s CO2 efficiency remains high: CO2/R’m is R1 301 (2016: R1 099), an 18.4% increase, largely driven by tariff increases. A sustainability scorecard was implemented in 2016, and we will use 2017 as a baseline year for future reporting and target setting. We intend to include carbon savings from recycling and PV generation in future reporting.

1 2015 and 2016 are calculated using Eskom factors. 2017 is calculated using the South African factor, which takes renewable energy into account.
Water

The Group’s water consumption reduced by 2% to 0.56 kl/PPD (2016: 0.57 kl/PPD). The improvement is largely due to employee awareness, installation of more efficient autoclaves and the re-use of grey water and run-off water for landscaping. The autoclaves were installed at various hospitals as part of their equipment replacement capital expenditure and save approximately 30ℓ of water per sterilisation cycle.

Water shedding or shortages are mainly related to the recent drought and government-maintained infrastructure challenges. In line with international trends, Life Healthcare has 24-hour water back-up installed at all acute facilities. This ensures adequate water storage to reduce the impact of water outages on operations.

Each hospital has an emergency plan with a list of approved vendors to call in emergencies. These lists are readily available on the Life Healthcare intranet.

Waste arrow

Hospitals are encouraged to investigate opportunities to minimise waste. HCRW is the only measurable waste stream reported throughout the Group. The volume increased from 1.73kg/PPD in 2016 to 1.81kg/PPD. The increase is due to changes made to pharmaceutical waste regulations and fluctuations in patient treatment profiles. Large volume parenteral containers, colloquially known as “drips”, are now treated as HCRW by legislation, and their widespread use in our facilities has influenced the total volume. Different patient profiles, for example medical and renal patients, will generate different levels of waste which can affect waste totals, depending on the case mix for the year.

Sustainability: Broad-based black economic empowerment

Life Healthcare recognises the importance of an inclusive, broad-based and integrated approach to empowerment.

Ownership     The Group has undertaken an impact assessment of black ownership in Life Healthcare for the period before and after the rights offer in April 2017. The evaluation included the extent to which black people and black women hold economic interests and voting rights, and the flow through mandated investments as defined in the Codes of Good Practice. These are as follows:
   
Voting rights deemed to be held by black people
Voting rights deemed to be held by black women
Economic interest deemed to be held by black people
Economic interest deemed to be held by black women
17.52%
6.33%
12.01%
4.42%
    The board approved the sale of 25%+1 share of Life Occupational Health to The Life Healthcare Nursing Education Trust (the Trust). The Trust is now registered to provide nursing degree bursaries to previously disadvantaged individuals. During the course of the financial year, the Group finalised the Trust deed and formally appointed three independent and three Company trustees. The first trustee meeting was held in September 2017.
Enterprise and supplier development (ESD)     Enterprise development (ED)
The following ED initiatives achieved maximum ED scores:

  • Doctor loans for equipment and support initiatives
  • An R18 million B-BBEE Nursing Trust loan
  • R5 million grant donation to the B-BBEE Nursing Trust

Supplier development (SD)
Fibon Energy, a level 1 exempt micro enterprise, was granted a supplier development loan of R25 million over five years. This loan was for design, commission and installation of three solar systems at Life Wilgeheuwel, Life Wilgers and Life Rosepark. Fibon will sell the electricity generated from each solar system to Life Healthcare. Fibon will also provide energy management services at market-related rates with a focus on providing accreditation and green building certifications to targeted Life Healthcare hospitals.

Procurement     B-BBEE procurement spend

Level 2017
%
2016
%
2015
%
       
Level 1 to 3 B-BBEE spend 19 34 35
Level 4 to 8 B-BBEE spend 52 39 35
Non-B-BBEE spend 26 23 26
Exempt 3 4 4

The change in the levels of B-BBEE procurement spend is as a result of the stringent new scorecard regulations.

Socio-economic development     Our corporate social investment activities are aligned with the definition of socio-economic development in the Codes of Good Practice. The activities contribute to meaningful and sustainable projects in the communities we serve through various initiatives. Refer to CSI governance and oversight for more information on the Group’s corporate social investment.
Employment equity     Refer here for information on the Group’s internal transformation efforts.
Training     Refer here for information on the Group’s training programmes.

B-BBEE recovery forecast

The Group has engaged in several B-BBEE scorecard enhancement initiatives to improve the scores.

  • Ownership: Life Healthcare is reviewing the interest from potential new black investors to acquire shareholding in Life Healthcare. This process is ongoing.
  • Management control: ACI appointments to the board and other management levels are achieving desired target scores.
  • Skills development: various new executive and senior management training programmes are in progress. These programmes will enhance the general training spend in the business. There has been an increase in the intake of unemployed learners, unemployed disabled learners, and the absorption rates of unemployed learners into the business.
  • Enterprise and supplier development:

    • Preferential procurement: Instead of buying directly from abroad, the Group is supporting the local distribution companies of various multi-nationals for medical equipment and pharmaceuticals. Each division, including engineering, pharmacy and Group procurement, will have their own preferential procurement scorecard for effective monitoring and control. An education and awareness drive will be undertaken with non-compliant vendors.
    • Enterprise development: The number of loan requests from doctors seeking new equipment has increased. The supply of such loans contributes to ED and further initiatives will be pursued and aligned to net profit after tax targets.
    • Supplier development: Additional supplier development initiatives will be pursued and aligned to net profit after tax targets.
  • Socio-economic development: Life Healthcare will continue to pursue funding of new projects aligned to net profit after tax targets.
Sustainability: Human resources

South Africa continues to experience a significant shortage of clinical skills such as nurses, pharmacists and doctors. This influences our ability to appropriately staff our existing facilities with adequate skills.

Indicator 2017 2016 Year-on-year
trend
     
Number of nurses registered in training 1 358 1 052 arrow
African, Coloured and Indian (ACI) employees (%) 72.6 72.2 arrow

quick facts

  • 14 466 permanent employees (2016: 14 269)
  • Achieved the lowest employee turnover rate (10.6%) in the last 10 years

Employee retention

Headcount

Category 2017 2016 2015
       
Administrative employees 2 934 2 930 2 879
Nursing personnel 9 332 9 166 9 180
Pharmacy employees 333 334 323
Rehabilitation employees 241 224 258
Services employees 1 366 1 379 1 316
Other 260 236 226
Total permanent 14 466 14 269 14 182
Temporary personnel1 1 094 1 106 1 285
Total employees 15 560 15 375 15 467
1 Includes sessional hourly paid employees, and excludes agency employees.

Our employee turnover rate reduced to 10.6% (2016: 14.1%), excluding retrenchments and Section 197 transfers. This is mainly as a result of a number of human resource (HR) interventions relating to employee relations and reviewing conditions of employment such as benefits, a targeted allowance structure and career development opportunities. Our workforce is predominantly female, and competitive maternity benefits continue to act as a significant attraction and retention mechanism. Above-inflation wage increases in the public sector is a continuing challenge in managing cost.

The annual employee engagement and enablement survey was conducted in March 2017. A total of 9 288 employees were included in the sample, and a 64% response rate was achieved. The survey highlighted various improvement areas. These key themes are:

  1. Improve and enhance the visibility of leadership
  2. Create employee engagement platforms to foster two-way communication and improve collaboration
  3. Provide line-of-sight and accessibility of the career development processes
  4. Provide education on pay and benefits

Each theme will be addressed through interventions to be implemented over the next two years, leading up to the next survey in 2019.

Nurses

Employing a sufficient amount of registered nurses remains a challenge. To aid in remedying the deficit, Life Healthcare implemented a number of training and development programmes, including a nursing mentoring programme. The annualised nurse turnover rate was 18.7% (2016: 18.9%) for registered nurses and 15.4% (2016: 20.4%) for qualified specialist nurses. This is being addressed through training, recruitment and retention strategies.

Nurses from Max Healthcare were periodically seconded to southern Africa. There are 27 professional nurses participating in the Max Healthcare exchange programme. The Group has 124 foreign nurses gaining international exposure and training at Life Healthcare hospitals.

Life Healthcare continues to have high reliance on agency employees as a result of employee preferences on work times, and our encouragement of flexible hours for young mothers caring for their families. Seven accredited nursing agencies provide a service to Life Healthcare. Nursing agency rates are standardised at regional level, and agency management criteria are aligned to national service level agreements. The Group aims to have a total monthly agency employee count of 25% or less to aid flexible staffing. High-risk hospitals and units are managed and monitored on a daily basis through nursing cost dashboards. The national average agency utilisation is 22.5% (2016: 23.4%). There is a noticeable improvement in the management of employee costs through effective agency utilisation and overtime costs following the implementation of cost control measures.

Pharmacists

Through the implementation of strategic interventions, Life Healthcare has seen a marked decrease in the annual turnover rate of pharmacists of 16.2% in 2017 (2016: 21.1%). The Group has various pharmacist recruitment and retention initiatives in place to further mitigate the risk of this skills shortage. These include our:

  • clinical pharmacy programme;
  • pharmacy manager development programme;
  • pharmacist intern programme; and
  • pharmacy preceptor programme in collaboration with a leading university.

These initiatives are supported by appropriate recruitment activities with support from market-leading recruiters, and provide training opportunities for our employees to improve their competency and skills.

Sustainability: Transformation

Employment equity in the management bands

Management level 2017
%
2016
%
2015
%
       
Top management 29.0 33.0 36.0
Senior management 36.0 30.0 30.0
Middle management 39.0 39.0 40.0
Junior management 59.0 58.0 56.0

We continued with initiatives that enhance the employee experience and build a culture of inclusivity through various forums. These include the national transformation committee, employee forums like the consultative forums at hospital level and various employee communication forums.

The changes in our employment equity are as follows:

  • 5% decrease in top management due to the executive restructuring which included the introduction of Group and South African executive structures.
  • 6% increase in senior management as a result of the appointment/promotion of six ACI candidates into this level.
  • Middle management is the talent feeder into senior management. Therefore, it decreased by 3% partly due to the improvements in senior management and partly due to recruitment activities and ACI retention challenges within this level.
  • Junior management increased by 3% due to the continued challenges of sourcing and retaining ACI talent at this level.

The percentage of women in the Group remained high at 83% (2016: 83%). Of the executives and managers (middle management and above), 63% (2016: 58%) are female, and four of the Group’s nine non-executive directors are women. The number of people with disabilities increased to 102 (2016: 101).

Industrial relations

Overall unionisation levels increased to 20.7 % (2016: 17.9%) as a result of inter alia the union’s drive to increase membership. Wage negotiations with organised labour are becoming increasingly difficult in an environment characterised by high wage settlements.

The Group continues to maintain healthy relations with organised labour and experienced no industrial action in the year.

Trade union affiliation

Trade union 2017
%
2016
%
2015
%
       
NEHAWU1 12.6 9.4 11.1
HOSPERSA2 5.6 5.8 5.8
DENOSA3 1.4 1.6 1.8
Other4 1.1 1.1 1.0
1 National Education, Health and Allied Workers.
2 Health and Other Service Personnel Trade Union of South Africa.
3 Democratic Nursing Organisation of South Africa.
4 Includes BPMHSW (Botswana Private Medical and Health Services Workers Union) and General Industrial Workers Union of South Africa.

Training and development

Life Healthcare spent approximately R133 million (2016: R115 million) on training. 327 (2016: 201) learners were enrolled in nursing, pharmacy and technical and vocational education training learnerships. We granted bursaries to 300 employees (2016: 181) to encourage further studies toward the scarce skills required, 119 (2016: 110) of which are for registered nurses trained at other tertiary institutions, and 80 (2016: 57) students are sponsored for basic nursing degrees.

Nurses in training

Nurse category 2017 2016 2015
       
Enrolled nurses1 44 236 493
Bridging programme leading to registration as a nurse 820 604 605
Specialist nurses (ICU, high care, theatre) 271 89 103
1 Programme phased out.

The Group operates a registered higher education institution – The Life College of Learning. The college has seven learning centres. Of the 1 358 students (2016: 1 052) registered in the Life College of Learning, 91.5% (2016: 91.4%) are female and 90.4% (2016: 87.7%) are ACI candidates.

There was a 29.1% increase in the number of employees enrolled in post basic studies this year, and a 62.7% increase in the number of registered nurses being sponsored for training. This increase was in response to a looming challenge – the South African Nursing Council (SANC) nursing qualifications are changing, and the current basic nursing qualifications will be phased out by 2021. The new qualifications are late in being phased in, leading to an expected scenario in 2020 where no new nurse graduates will become available to meet the needs of the business and industry. The enrolled nursing programme was phased out nationally in June 2015; thus, the college no longer accepts intakes for this programme. Currently enrolled nurses will complete the course.

Additional funding was provided to assist external nurses who wanted to train at the Life College of Learning. Life Healthcare recruited more nurses with bachelor’s qualifications from local universities. The approach was to ‘buy-out’ the contracted employment of prospective graduates and offer bursaries to the student nurses.

The management development programme facilitates the improvement of nursing management and leadership at middle management level. High-performance individuals are identified and developed to create a leadership pipeline. This supports enhancement of specific leadership and management skills for employment equity individuals. 18 candidates were selected for the programme, 55.5% of whom are ACI candidates. The programme will commence in August 2017.

Student education level

Level 2017 2016
     
Basic 864 840
Post-basic diploma 221 67
Operating department assistance2 66 37
Midwifery 50 22
Short learning programmes 157
Total 1 358 966
2 Three-year operating department assistant diploma in health sciences

Talent and succession management

A succession management process was rolled out through national talent reviews. A psychometric assessment process was completed for identified successors at senior management levels. Its feedback informed individual development plans, leadership programmes and mentorship programmes.

Leadership development programmes are in place at all levels of management. The Group partnered with various providers in delivering these programmes, including the Gordon Institute of Business Science.

Reward and recognition

The Group performs regular market benchmarking of remuneration. We assess the individual and their role in ensuring equitable reward and recognition. Refer to our remuneration report. We have a recognition programme in place where monthly and quarterly award winners are eligible for an annual award at the Life Achiever awards.

Quality: Employee health and safety

In addition to complying with the Occupational Health and Safety Act (OHSA) and the Compensation for Occupational Injuries and Diseases Act (COID), Life Healthcare encourages employees to be actively involved in occupational health and safety through its quality processes. All new employees receive quality, health and safety, and environment induction. In addition, employees participate as health and safety representatives and are involved in monthly health and safety committee meetings in line with OHSA requirements. Potentially hazardous conditions are identified and reported on throughout the alert process.

quick fact

The Careways employee wellness programme usage across the Group is 17.5% (against an industry benchmark of 11.2%). The integrated employee wellness model for the Group was finalised to provide a holistic wellness offering and enhance employee productivity and maintain wellness.

Indicator 2017
target
2017 2016 Year-on-year
trend
         
Employee incident rate (per 200 000 labour hours) 5.13 4.43 3.71 arrow

The Group reports on all employee incidents, and identifies trends and key risk areas e.g. employee injuries, needle-stick injuries, employee falls, employee mobility incidents, occupational health-related incidents, infection-related incidents and exposure to bodily fluids. A hazardous biological agents (HBA) risk assessment is conducted every second year (as required by the OHSA), focusing on the identification of risks and mitigation of exposures for employees, relevant service providers and members of the multi-disciplinary team.

The year-on-year employee incident rate increased and is partly related to attempts to achieve 100% reporting. There was an increase in slips and falls, mainly in the operating theatres due to wet floors and working in a confined area. Employee education and safety awareness focuses on these areas to reduce incident rates.

Sustainability: Doctors

Doctor recruitment and retention

In order to ensure sustainability of our hospital businesses, and to grow in appropriate areas, it is necessary to maintain a stable doctor base that supports an accessible and comprehensive healthcare service in the communities in which they serve. New doctors generally do not immediately generate the same level of activities and revenue as the doctors whom they replace. This is due to time required for practice establishment, influenced by circumstances and often the speciality concerned. This presents mixed opportunities and challenges for the business, and highlights the importance of long-term relationships with doctors to sustain our operations.

We were successful in associating with 148 new doctors to replace the 64 that left due to alternative opportunities, relocation and retirement. Activities and trends among specialists and doctors are monitored at hospital, regional and national levels to identify recruitment needs or other interventions required.

In July 2017, the HPCSA updated its policy on recruitment and granted Life Healthcare special dispensation to employ medical officers for ICU, maternity and accident and emergency units under strict conditions. This potentially improves the Group’s ability to influence quality and service levels in these areas of operation.

Life Healthcare continues to build the doctor stakeholder manager portfolio, whose function is to engage with the hospitals, medical associations, tertiary institutions and doctors to establish a pipeline of specialists for the future. In addition, Life Healthcare provides assistance for training in certain sub-specialties, aligned to current and expected needs.

The average age of our doctors is 51.5 years (2016: 51.2 years), which has increased marginally over time. The average age of new doctors in 2017 was 45 years.

Clinical efficiency

Phase one of the doctor quality and efficiency reporting programme was completed in June 2017. This targeted 15 Life Healthcare hospitals with the greatest efficiency opportunities. The doctors welcomed the report and made constructive suggestions on areas to enhance. The current data indicates efficiency improvements in the majority of hospitals included in phase one. The second phase, which provides reports to 1 200 clinicians across all our hospitals, was completed in August 2017. These are clinicians who have 120 or more admissions per annum.

Risk and insurance

The increasing cost of obstetric and neurology insurance remains a key challenge for our doctors, and the increasing incidence of medical malpractice claims continues to significantly impact the industry. Life Healthcare is engaging directly with insurers to deliver the most cost effective insurance options to our doctors. We are working on developing clinical products and programmes that reduce risk, particularly in areas such as obstetrics, where a comprehensive BetterObs programme has been rolled out. Refer above.

Efficiency: Information technology

IT governance

The IT operational performance is monitored and managed daily, with monthly reports via a capacity, availability, performance and security dashboard. Key IT security, software and infrastructure components are reported on against their thresholds and managed accordingly. Severity 1 incidents (with the highest business impact) and security incidents are managed on a high priority basis for resolution. These are reported and managed at various risk management forums. All categories performing outside of the set threshold are actioned and tracked in the daily sessions. Overall, IT achieved satisfactory results for the year, and all projects were delivered with less than 10% variance on the final intended outcomes.

Group IT governance

The board is responsible for overseeing the Group’s IT governance and management, and for implementing the structures, processes and mechanisms to execute the IT governance framework. Life Healthcare’s board has delegated management of IT to the Group Chief Executive Officer. All IT risks are overseen by the board risk committee, while the board remains responsible for IT overall, including matters of IT security and strategy.

All territories operate on a single governance model, with IT steering committees established in all the territories, reporting into the Group IT steering committee. This committee includes the Group Chief Executive Officer, Group Information Officer, Group Chief Financial Officer and the Chief Medical Officer: Alliance Medical.

The key areas of focus in 2017 were:

  • IT security strategy: The IT security strategy is updated annually, and remains a standing topic at the board risk committee and board meetings. Latest threats and corresponding controls are reviewed, evaluated and discussed during these meetings.
  • Information governance: The implementation of data life cycle planning, data de-identification, encryption, controlled access to data, vulnerability and threat management is in progress via the cybersecurity strategy project. This supports the business strategy for ensuring the highest levels of confidentiality.
  • Outsourced IT infrastructure project: The ability to recruit skilled people into technical roles remains a challenge. This creates a strong dependency on the outsourcing of key technical skills.

quick facts

Within the information security management system (ISMS) framework, the following IT governance elements are managed:

  • Information security, management and privacy
  • IT risk management
  • Disaster recovery
  • IT legislation
  • IT audit

The Group again achieved international ISO 27001 ISMS certification. The findings and recommendations from the review were included on the Group’s risk register, and will be monitored by the IT steering committee. The ISO journey facilitates ongoing review of all control processes related to IT security within the business environment.

IT projects

We modified the Infotech World Class IT Operations model for our use. Life Healthcare ensures ISO 27001 compliance at all times with enhanced local privacy and healthcare requirements.

Capital expenditure of R89 million (2016: R97 million) was invested in IT systems and applications. Material IT projects linked to the Group’s growth and efficiency strategies are highlighted below.

Projects completed or in pilot phase    
  • The Impilo e-billing project was completed with national roll-out to all theatres and wards. The system provides real-time, online management of patient processes.
  • The new occupational health clinic management system is in its pilot phase at the Meadowdale Clinic.
  • The electronic intensive care unit (e-ICU) project is in its pilot phase at Life The Glynwood.
  • The strategic supplier relationship management project was to outsource all the South African infrastructure products and services to a single strategic service provider. The data centre was moved to EOH in April 2017 with minimal business disruption.
Cybersecurity strategy project     This focuses on safeguarding the Group from cyber threats. It requires the implementation of technical and administrative controls according to the Life Healthcare cybersecurity governance framework. It will ensure the necessary controls are in place to comply with the IT component of the Protection of Personal Information Act (PoPI) for South Africa. The requirements phase is completed, and design will commence in the first quarter of 2018.
Global ERP system     The Group implemented the use of the enterprise software, SAP, in southern Africa, and our billing engine will be operated through the Impilo e-billing project. Pilot testing will start in the second quarter of 2018.
Vision X     Vision is the HR workflow system used in Life Healthcare. It includes payroll, leave management and other HR-related functions. The system is nearing end of life and has to be upgraded to ensure continued support. Its successor, Vision X, is in the final testing phase with go-live intended for early 2018.

Key focus areas for 2018

We will focus on implementing a comprehensive cybersecurity strategy project and improving operational alignment to new systems. We will evolve clinical systems into integrated electronic systems that will enhance data analysis and inform business intelligence. Specific focus will be given to evolving our application and explanation of IT governance to King IV standards.