Litigating against NHI is a last resort, says Life Healthcare CEO

Litigating against National Health Insurance (NHI) is the “last and least desirable resort”, the head of private hospital group Life Healthcare said on Wednesday.

President Cyril Ramaphosa signed the NHI Act into law last week, prompting trade union Solidarity and civil rights organisation AfriForum to begin legal proceedings.

Numerous other interest groups, including associations representing medical schemes and healthcare professionals, have indicated they intend to litigate too.

Hospital groups have, however, been more guarded in their response, despite their reservations about the act’s provisions.

“The minute you sue, your relationship goes,” said Life Healthcare CEO Peter Wharton-Hood, advocating for “constructive engagement” and closer collaboration between the public and private sector.

“The demand and capacity is there, but it needs sensible commercial deliberations,” he said in an interview shortly after the release of Life Healthcare’s results for the six months to March 31.

Private hospitals had spare capacity that could be used for public sector patients, but not in all domains, he said. For example, Life Healthcare had no spare capacity in its intensive care units but could potentially double the number of renal dialysis patients it currently serves.

Life Healthcare’s Southern Africa division has 64 hospitals in SA and operates complementary health services including renal dialysis and mental healthcare units. Its Life Medical Imaging division sells Neuraceq, an imaging drug used to evaluate patients with Alzheimer’s disease.

Disposal

The group reported a 29.9% increase in headline earnings per share from continuing operations to 47c for the six months to end-March, driven by an increase in hospital admissions generated by network agreements with SA’s key medical schemes and administrators. The results were also buoyed by strong Neuraceq sales.

An interim dividend of 19c per share was declared, up 11.8% from a year earlier.

Profit after tax from continuing operations increased to R735m, from R600m before. 

The group concluded the disposal of UK-based Alliance Medical Group at end-January. It was disclosed as a discontinued operation and was not included in the results of the continuing operations for the period under review.

Life Healthcare received R10.2bn in net cash proceeds from the disposal after the settlement of all offshore debt and transaction costs. A special dividend of R8.8bn was paid on April 8.

After the reimbursement approval of a disease-modifying drug in the US in October 2023, the number of doses of Neuraceq sold grew 74.4%, contributing to a 77.5% increase in revenue in Life Medical Imaging.

The group’s Southern African operations experienced strong demand, leading to higher use of the group’s hospitals and complementary services, with paid patient day (PPD) growth of 2.3%. Revenue for Southern Africa grew 5.9%.

The normalised earnings before interest, tax, depreciation and amortisation (ebitda) margin was affected by lower-than-expected occupancies in the first quarter, increased costs associated with running the business and a negative case mix towards more medical cases at a lower revenue per PPD compared with surgical cases.

Networks

Its full-year results are expected to show an increase of more than 20% on continued activity growth in its Southern African operations, driven by growth in volumes from network deals and through the impact of acquisitions concluded in the past 12 months, it said. 

Its acute hospitals delivered strong revenue growth in the current period, with PPDs growing by 2.7%, benefiting from the network deals that started in January 2023. The robust PPD growth translated into higher occupancy across its acute hospital facilities, with a weighted average occupancy of 66.6% compared with 65.5% in the previous period. Acute hospital revenue grew 5.5% year on year.

Complementary services reported revenue growth of 7.9% year on year and healthcare services’ revenue increased by 9.6%.

For the full financial year, the group expects continued activity growth in its Southern African operations, driven by growth in volumes from network deals and through the effect of acquisitions concluded in the past year.

It expects annual Southern African PPD growth of about 2% for the full year, which, with CPI-related tariff increases and continued growth in the SA imaging business, could result in 2024 revenue growth of 6%-7%, it said.

mackenziej@arena.africa
kahnt@businesslive.co.za