LENMED AIR 2019.pdf

“The Group has delivered an impressive operational performance, proving the resilience of Lenmed’s business model once more.” Despite extremely trying trading conditions, overall growth in Paid Patient Days (PPDs) of 8% was achieved. PPD growth in our South African facilities was 8.7% higher than the prior year, reducing to 3.4% excluding the effect of our new Royal Hospital and Heart Centre in Kimberley. Revenue per PPD increased by 6.1% across the Group, with increased theatre utilisation and better case mix noted, offset by stricter managed care interventions and reduced neonatal admissions in South Africa. The Group’s normalised EBITDA margin decreased marginally to 17.5% from 17.7% in the prior year, mainly as a result of the Kimberley facility not reaching optimal utilisation. On a segmental basis, the EBITDA margin for South African hospitals was 17.4% (FY2018: 18.3%), while the EBITDA margin achieved for the rest of Africa operations increased to 18% (FY2018: 15.9%), on the back of stronger performances at both units, coupled with the full year effect of the rental reduction in Botswana. Despite these solid results, change is upon us. The results of a challenging macroeconomic environment over the last decade are becoming increasingly evident in both our industry and the private sector at large. Medical scheme growth is stagnant, with increased cost pressures driving consolidation in this market segment. The proliferation of new Efficiency Discount Options requiring material discounts continues. The competitive environment is fierce, with many of our competitors refocusing their efforts back on their South African operations. These factors, together with annual increases below actual sector inflation, is a real threat to sustaining profit margins and market share over time. While there are shoots of optimism emanating from Government’s focus to grow the economy and address rampant corruption, the reality is that a full economic recovery will take many years to achieve. Now is the time to act. In difficult times, there aremanyopportunities that present themselves. Lenmed has a clear strategy in place to mitigate the risks present in the current market, while identifying and capitalising on areas for future growth. This will be achieved through the following: + Emphasis on placing our patients and specialists at the centre of everything we do. + Driving consolidation of the independent hospital market, acquiring hospitals at market-related valuations to build critical mass and enhance the size and stature of the Group. + Creation of a healthcare platform where investments will be sought in a broad range of higher margin complementary businesses outside the traditional acute care space. + Focus on less capital-intensive organic growth by moving up the case mix ‘value chain’ driving greater volumes of high-margin admissions into our facilities through a dedicated specialist recruitment process and establishment of Centres of Excellence at key facilities. + Achieving a market leading B-BBEE score. + Strengthening relationships with key stakeholders, medical aid schemes and administrators. + Committing to a digital transformation of our business environment over the next five years, embracing Business Intelligence, Artificial Intelligence and the Internet of Things, to develop truly world-class business systems. + Create an internal culture that is dynamic, innovative, transparent and ethical. Operational highlights The Royal Hospital and Heart Centre completed its first full trading year with positive results noted to date. Bed capacity been increased from 85 to 120 beds to cater for increased demand. The cardiac unit has been disappointing, with the lack of a committed cardiology team being the main challenge. Resolving this, together with further specialist recruitment, remains the highest priority of the management team. The business case for the hospital remains strong, and we are confident of unlocking the full potential of the facility once all specialist gaps have been filled. A brand new four theatre complex costing R35 million at La Verna Private Hospital in Ladysmith was commissioned during May 2019. This state-of-the-art facility offers the latest in operating room technology and will undoubtedly assist in growing specialist confidence and improving patient outcomes at the facility. Ethekwini Hospital and Heart Centre is in the final construction phase of a new 20 bed adult high care unit and a 25 bedded paediatric unit, including five isolation paediatric ICU beds at a total cost of R40 million. This investment will release the current bottleneck around critical care beds at the facility and allow for increased trauma and paediatric caseloads at the hospital. Lenmed has made huge strides in building a strong Emergency Response Service offering in KwaZulu-Natal. Through strategic relationships, we have launched a cardiac response unit, the only pre-response vehicle of its kind in the province capable of administering life-saving drugs for heart attacks and strokes out of hospital, where time is of the essence. Building on the success of this unit, we have recently launched ‘’Lenmed1’, our first LENMED ANNUAL INTEGRATED REPORT 2019 19