Netcare warns 21-day lockdown might not be long enough
Private hospital group withdraws its full-year guidance amid uncertainty over Covid-19 outbreak
Private hospital group Netcare says the three-week lockdown initiated by President Cyril Ramaphosa might not be long enough to achieve the government’s aim of slowing the spread of Covid-19 to prevent the health system from being overwhelmed.
JSE-listed Netcare, which is one of SA’s three biggest private hospital groups, and said on Monday that it had already spent R150m in stepping up protective measures in its facilities and readying itself for an anticipated surge in Covid-19 patients. It has paused capital expenditure projects totalling R800m, put strategic projects on hold and is suspending future share buybacks, it said in a trading update to investors.
The group has also stopped all non-essential elective surgery and closed its in-house pharmacies to the public, to reduce the risk of asymptomatic carriers transmitting the virus to staff or patients.
As of Monday, SA had recorded only 1,326 cases and relatively few hospital admissions, but those numbers are expected to rise rapidly in the weeks ahead.
Netcare, headed by Richard Friedland, said the situation in SA was “extremely concerning”, and its actuarial modelling indicated the already constrained health system would struggle to cope with the looming increase in the number of patients requiring hospitalisation and beds in intensive care units.
“Our modelling suggests that, as has been experienced in other countries, and depending on the effectiveness of the lockdown, it will require ongoing evaluation to determine if the time period is sufficient to achieve its intended goals,” it said.
Given the state’s limited hospital bed capacity, the health department has been negotiating with the private sector to draw on its resources.
Netcare said it had agreed to treat state patients on a not-for-profit, cost-recovery basis.
It said the private health-care sector remained constrained due to SA’s weak economy, referring to the fact that the key driver of medical scheme membership is employment. The group remained under pressure from medical schemes, which are increasingly directing their members to restricted networks to cut costs.
Netcare said it expected patient days in its core hospital business to decline by 2.7% in the six months to end-March 2020, as growth in mental health care admissions would not be sufficient to offset the drop in acute hospital admissions caused by rival hospitals gaining network share with medical schemes, and the effects of Covid-19 in March.
In the period before March, earnings before interest, tax, depreciation and amortisation (ebitda) margins were expected to be broadly in line with guidance and last year’s performance of 20.5%. But the impact of the disease on ebitda margins in March was uncertain, it said.
Netcare said it had decided to withdraw its full-year guidance to investors due to the uncertainty surrounding the impact and possible knock-on effects of Covid-19, and might need to revise its dividend policy.