Strategy overview

We updated our strategy in line with the current and expected future operating environments of global healthcare provision. We reviewed Life Healthcare’s key strengths and weaknesses to ensure appropriate leveraging and mitigation respectively.

Strategic objectives

The strategic focus areas of growth, efficiency, quality and sustainability feed into the three strategic objectives as outlined below. The table also provides insight into our progress towards achieving these objectives.

1 Accelerate the transition from a South African focused acute care group to an international, diversified healthcare provider:
  • Target of between 40% and 50% of revenue from international businesses and between 40% and 50% from non-acute revenue
Significant progress
With the acquisition of Alliance Medical, 23.6% of our revenue (2016: 7.2%) and 19.0% of normalised EBITDA (2016: 2.8%) are from international territories.
2 Evolve the Group’s delivery model to target a more diversified offering increasing revenue from non-acute lines of business:
  • Scale up the Group’s complementary service offering, including increasing our geographic presence in acute rehabilitation, mental health, renal dialysis, oncology, radiology and pathology
  • Expand our service offering by investigating allied opportunities within the healthcare arena
Significant progress
The acquisition of Alliance Medical increased the Group’s business line diversification. 27.6% of Group revenue (2016: 11.0%) is now non-acute. The Group also made incremental progress in complementary service provision. Some of the key enhancements are:
  • increased beds and presence in mental health;
  • new oncology units and equipment;
  • the conclusion of the EOH Workplace Health and Wellness transaction; and
  • extensive Life Employee Health Solutions contracts such as the Gauteng provincial government contract covering over 160 000 lives.
3 Focus on increasing performance and health of the Group with the aim of Life Healthcare being the preferred hospital group in terms of efficiency and quality healthcare services:
  • Address key enablers including quality standards, nursing efficiency, enabling technology and doctor engagement
  • Build capabilities across operational, executive and international teams
Moderate progress
We established a clinical governance, quality and safety board sub-committee to holistically enable our efforts across the Group. This supports further control of clinical outcomes in an environment where we do not employ the bulk of doctors we interact with. Our doctor quality and efficiency reporting programme was piloted successfully with marked doctor efficiency improvements.

An additional five regional clinic managers (who are qualified medical doctors) were employed in South Africa, to engage with clinicians on clinical matters. Knowledge and skills sharing across territories supports capability development across the Group.

Strategic focus areas

We enhanced our core focus areas of growth, efficiency, quality and sustainability. Our strategy revision has further aligned our focus areas to the Group’s five-year objectives.

Growth

What does this mean?

Grow the southern Africa business

The Group seeks to be a market-leading, innovative provider of cost effective quality healthcare. This is achieved by effectively partnering with clinicians to operate our acute hospital business and complementary services.

Life Healthcare employs a range of growth enhancement approaches to expand our footprint and develop new clinical products to diversify our offerings, such as:

  • expanding facilities within existing hospitals (brownfield expansion) by adding additional beds, wards and/or operating theatres – brownfield projects will be pursued at hospitals with high occupancies and where good returns are projected;
  • growing our complementary services business and expanding our healthcare services;
  • acquiring facilities that complement our existing geographic spread of hospitals;
  • building new facilities (greenfield expansion) in areas with no Life Healthcare footprint – greenfield projects have to meet set criteria including a proven need for services, desired occupancy levels and a solid doctor commitment;
  • pursuing potential opportunities to assist government to extend universal healthcare, primarily through Life Esidimeni and possibly Life Employee Health Solutions;
  • exploring new revenue models and clinical pathways to enhance profitability and effectiveness; and
  • assessing and integrating significant alignment opportunities within our various territories.
Establish a sizeable international business footprint

The Group’s international expansion is focused on selected attractive markets with the potential to support the longer-term growth of the private healthcare market.

Alliance Medical

The acquisition of Alliance Medical enables significant growth opportunities internationally. The geographies within which Alliance Medical operates continue to show good underlying demand for complex diagnostics.

Alliance Medical is uniquely positioned to enhance existing partnership models to fulfil the growth needs for complex diagnostic imaging. This will be done through a combination of greenfield solutions and targeted acquisitions that complement the existing footprint and integrated business model.

Scanmed

Due to regulatory changes in Poland, Scanmed focused on efficiency enhancement and integration into the Group. Scanmed concluded four-year contracts with the NFZ for 85% of its business with the balance expected to be completed in 2018.

Max Healthcare

The business’s growth strategy focuses on adding bed capacity with the aims of having over 3 100 operational beds by 2021. The Indian healthcare market continues to show promise and growth, driven by an expanding middle class with increased demand for private healthcare services. An ageing population with a growing disease burden indicates long-term opportunities to enhance and expand facilities in the country.

2017 performance

2017 priorities 2017 progress
Grow the southern Africa business  
  • Prioritise brownfield projects requiring additional capacity, aiming to add 115 acute beds
  • Open the 60-bed Life Carstenview mental health facility
  • Continue applying for bed licences in areas that will enhance Life Healthcare’s footprint and deliver good growth
  • Continue to invest in facility upgrades and more advanced technology equipment
  • Commission Life Oncology at Life Eugene Marais Hospital
  • Finalise the B-BBEE trust for Life Occupational Health
  • Diversification through expansion of existing services and entry into new markets
  • Development of new products and services tailored to the affordable market and/or aimed at lowering the cost of care

51 brownfield beds were added in acute hospitals, and 22 brownfield and 60 greenfield beds were added in complementary services. The oncology unit at Life Eugene Marais Hospital was opened mid 2017, and a mental health facility was opened at Life Carstenview.

R382 million was invested in facility upgrades and technology equipment. The southern Africa business was granted 160 (2016: 176) bed licences.

The B-BBEE trust for Life Occupational Health was finalised in June 2017. The EOH Workplace Health and Wellness transaction was completed with effect from 1 October 2017.

Establish a sizeable international business footprint  
  • Life-sizing1 of Poland
  • Position the Polish business to appropriately win new government contracts
  • Expansion into a third territory
  • Margin expansion through cost containment, integration and operational leverage in Poland and India

The Poland turnaround strategy progressed well, and four-year contracts covering 85% of the business were concluded with the NFZ with the remaining 15% expected to be completed in 2018. Despite the cardiology tariff cuts, revenue for Scanmed remained stable at R1 095 million.

Max Healthcare continues to show good revenue growth and EBITDA margins remained stable at 10.8% (2016: 10.9%).

The Alliance Medical acquisition expanded the Group’s footprint into western Europe, particularly the UK, Italy, Ireland, Spain and Germany.

1 A Life Healthcare term that defines the high-performance culture and operational values of our Group.

2018 priorities

Southern Africa
  • Recruit additional doctors to replace departing and diminishing-activity doctors, and fill critical vacancies
  • Focus on increasing existing occupancies
  • Adopt a more cautious bed growth strategy focusing on brownfield growth
  • Entrench and expand the mental health and acute rehabilitation footprint
  • Invest in facilities through upgrades and procurement of appropriate technology equipment
International
  • Alliance Medical:
    • Complete the roll-out of the PET-CT contract sites
    • Continue to develop long-term imaging service partnership solutions with NHS Trusts and commissioners
    • Continue the molecular imaging growth in Europe and the clinic acquisitions in Italy
  • Scanmed:
    • Complete the outstanding NFZ contracts
  • Max Healthcare:
    • Continued bed growth in existing facilities and organic growth of the digicare, pathology and oncology day centre businesses
Efficiency

What does this mean?

We are focused on providing high quality care while effectively managing all hospital costs, including cost of sales, labour and overheads. This allows the Group to maintain high levels of efficiency while allocating resources optimally. Relationships with our employees, medical healthcare funders, procurement partners and doctors are included as efficiency-enabling opportunities.

2017 performance

2017 priorities 2017 progress
  • Continue to leverage formulary compliance in pricing negotiations
  • Develop and implement select clinical pathways with direct links to product, hospital and supporting service providers’ utilisation
  • Appoint regional clinical managers in southern Africa to drive improved efficiencies at hospitals
  • Identify hospitals with opportunities to improve efficiencies and additional areas where improvements can be made
  • Improve clinical coding accuracy through continuous training, focus and introduction of exception reports in southern Africa.

Various operational efficiency initiatives were implemented. These include point-of-care approaches, environmentally friendly operational upgrades and increasing the use of digitised tools to streamline processes and improve business intelligence through data analysis.

A pilot programme for doctor quality and efficiency reporting delivered doctor efficiency improvements and was rolled out to 1 200 clinicians throughout southern Africa, with continued engagement and feedback.

Formulary compliance efforts are reflected in price containment that contributed to positive margins.

Various IT infrastructure upgrades are complete or being piloted to support future efficiency improvements across a range of hospitals, including financial and patient administration management.

2018 priorities

Southern Africa
  • Develop clinical pathway products which can be implemented
  • Continued leveraging of pricing negotiations through compulsory and formulary compliance
  • Enhance the doctor quality and efficiency reporting and continue engaging with clinicians
  • Introduce cost optimisation projects including the iShift (advancement through continuous improvement) initiative focused on efficiency and removal of waste in processes
  • Commence development of the clinical information system
International
  • Margin expansion through cost containment, integration and efficiency initiatives in Scanmed and Max Healthcare
Quality

What does this mean?

Stringent reporting, analysis and action for quality metrics are essential in delivering world-class healthcare. The Group aims to maintain and improve its quality performance through rigorous quality reporting and benchmarking. This includes clinical outcomes, patient satisfaction and stakeholder health and safety.

2017 performance

2017 priorities 2017 progress
  • Enhance patient experience in key areas such as maternity, surgical wards, paediatric and neo-natal
  • Improve flow of patients through emergency units
  • Finalise international quality measures to be implemented and benchmarked against Life Healthcare norms
  • Extension of the electronic intensive care unit (e-ICU) pilot to more beds

The Group initiated programmes such as BetterObs, and transitioned into the second phase of the CARE programme to include approximately 5 000 outsourced service providers that influence or impact patient experience. These initiatives resulted in a marked improvement on patient satisfaction.

We employed an additional five regional clinical managers in southern Africa to improve collaboration with doctors, especially for new care delivery models. Our new clinical governance, quality and safety board committee was formed to monitor and improve all aspects of our clinical performance from a board perspective. In addition, this committee will review international quality measures.

The e-ICU project remains in pilot phase and increased to include 13 beds at Life The Glynnwood.

2018 priorities

  • Improve flow of patients through emergency units, with a focus on enhanced service offering to all patients
  • Agree on international quality measures for implementation and benchmarking
  • Publish facility patient experience scores online
  • Introduce enhanced care plans as part of clinical pathways
Sustainability

What does this mean?

Social, environmental and financial stability underpinned by effective stakeholder engagement support our sustainable operation locally and internationally. The Group recognises the importance of our licences to operate in various territories and the stakeholders in each who directly influence our success. Life Healthcare remains focused on its sustainability goals by:

  • building partnerships with medical healthcare funders to ensure network participation, and providing preferred network products and services to meet patient and funder needs – this will support retention of our overall share of the healthcare market;
  • implementing sustainable human capital strategies and practices that meet the challenges of a dynamic commercial and legislative environment;
  • driving our B-BBEE strategy to harness corporate growth and development opportunities in a sustainable manner and ultimately improve our B-BBEE rating;
  • building partnerships with doctors and other key healthcare professionals;
  • partnering with government in all our territories and participating in healthcare reform in South Africa;
  • securing long-term partnerships with public health providers for molecular and diagnostic imaging services;
  • developing quality cooperation and positive relationships with the public and municipal bodies of the Polish government to secure long-term financing for our healthcare services – this includes NFZ and other public authorities who control healthcare funds; and
  • implementing an environmental sustainability strategy.

2017 performance

2017 priorities 2017 progress
  • Actively recruit sub-specialists from Life Healthcare and Colleges of Medicine South Africa (CMSA) to take up opportunities within the Group
  • Develop enhanced partnerships with admitting doctors and incorporate referring general practitioners in emergency units
  • Identify undergraduate doctors and provide early orientation to hospital private practice for specialists in training
  • Accelerate nursing bridging course take-up prior to introduction of the new qualification criteria
  • Drive and maintain a competitive B-BBEE scorecard rating to facilitate growth
  • Differentiate ourselves through a patient-centric brand strategy
  • Finalise the B-BBEE trust with 25% +1 share ownership in Life Occupational Health

Under strict conditions, we are able to employ doctors for our ICU, maternity and accident and emergency units after special dispensation was obtained from the HPCSA in July 2017. The Group will apply this dispensation with careful discretion going forward. We increased the number of associated doctors by 84, with the average age of new doctors being 45 years.

The Life College of Learning has 1 358 students registered, with a 35.8% increase in registered nurses to mitigate the risk associated with the phasing out of the current basic nursing qualifications.

The Group established the Life Healthcare Nursing Education Trust in June 2017 to provide nursing degree bursaries for previously disadvantaged individuals.

Improving our B-BBEE score remains a challenge, and we increased to a compliant rating following several initiatives to improve our rating.

2018 priorities

  • Drive a competitive B-BBEE scorecard and improve our rating to facilitate growth for South Africa
  • Identify and recruit undergraduate doctors and provide early orientation to hospital private practice for specialists in training
  • Continued improvement in our environmental performance including reducing water usage by 2% measured in kilolitres
  • Install solar panels at a minimum of one additional facility
  • Manage healthcare risk waste (HCRW) to below 2.5kg/ppd
  • Obtain ISO 14001 accreditation of medium-sized facilities
  • Embed integrated talent management and succession strategies
  • Replace the current billing engine with Impilo