Return of Gauteng psychiatric patients boosts Life Healthcare
The private hospital operator grew profit despite a loss from its Indian joint venture, which it is in the process of selling
Profit from Life Healthcare’s South African hospitals was not dragged down severely by losses from foreign operations, in contrast with recent results from its competitors Mediclinic and Netcare.
The group’s overall revenue grew 13% to R23.5bn a net profit jumped 71% to R1.9bn in the year to end-September, its results released on Friday morning said.
The jump in profit was thanks to a R297m reduction in finance costs to service debt taken on in its R10bn acquisition of UK diagnostics group Alliance in 2016.
Life Healthcare’s Polish subsidiary Scanmed turned to an operating profit of R7m from a R34m loss in its 2017 financial year.
Although the group stemmed the bleeding from its Indian joint venture by selling its half of Max Healthcare to US private equity group Kohlberg Kravis Roberts and Company for 80 rupees per share in September, the loss contributed by Max during its 2018 financial year widened to R118m from R27m.
Life Healthcare said the final amount it will get from the sale of Max depends on the exchange rate when the deal is concluded. Using September’s exchange rate of R1 per 4.93 rupee, it should receive about R4.3bn.
The group’s Southern African hospital division contributed 69% of its revenue and 79% of its operating profit during its 2018 financial year.
Its Southern African hospitals grew revenue 7.3% to R16bn and operating profit 8.2% to R3bn.
“In line with the group’s strategy of increasing transparency around quality outcomes, the Southern African business became the first hospital group in SA to publish quality scores on a per hospital basis from October 2018,” Life Healthcare CEO Shrey Viranna said in the results statement.
Reasons for its domestic growth included “the return of the Gauteng mental healthcare users”.
Life Healthcare’s Esidimeni psychiatric hospital division unfairly became synonymous with the tragedy caused by the Gauteng government attempting to cut costs by moving patients from its hospitals to unqualified small businesses.
Private hospital operators measure their performance in “paid patient days” (PPDs).
Regarding its Southern African hospitals, Life Healthcare said it benefited from an 1.1% increase in PPDs, a rebound from a 1.7% decline in its 2017 financial year.
Its revenue per PPD grew 6.1%, “made up of a 5.6% tariff increase and a 0.5% positive case mix impact”.
“The overall weighted occupancy for the year remained relatively constant at 70%, with 131 brownfield expansion beds being added,” the company said in its results statement.
Alliance grew its revenue by 31% to R5bn and its operating profit 8% to R294m. Alliance’s revenue was boosted by its acquisition of three clinics in Italy.