LENMED AIR 2019.pdf

Relationships with medical schemes WHY THIS IS IMPORTANT TO LENMED RISKS AND OPPORTUNITIES Medical schemes, also known as medical aids, fund the medical schemes of most private healthcare consumers. Medical scheme claims have risen sharply, while imported medical equipment and medication is becoming more expensive due to South African Rand volatility. Shrinking disposable incomes across the South African population (resulting in members downgrading to more basic schemes), as well as above inflation rate medical scheme increases, are preventing any growth in numbers of medical scheme contributors. Existing members are also choosing to downgrade to cheaper schemes. The South African medical scheme population is statistically ageing, which will naturally push up the number of claims. With the Medical Aid Funders (MAFs) under increasing pressure, stronger approval and authorisation regimes will be imposed by medical schemes. Medical scheme negotiators are pressuring medical practitioners and healthcare providers to reduce their margins, which impacts on Lenmed’s revenue streams. Permissions for hospital admissions are being reduced, along with the length of hospital stays. To maintain our occupancy levels, Lenmed must broaden our appeal to potential patients and medical scheme partners and continue to open more specialised facilities. OUR RESPONSE We are continually reassessing our internal efficiencies and examining means for reducing costs to stay within the parameters of medical scheme cost frameworks. Economy WHY THIS IS IMPORTANT TO LENMED RISKS AND OPPORTUNITIES Stagnant South African economic growth year after year reduces employment, which slows or halts membership growth in medical schemes. Healthcare providers have to compete more vigorously for medically insured lives, often through discounting or other means that reduce margins. In addition, Rand volatility makes imported equipment more expensive. Competition for medical expertise is global, which tempts many healthcare professionals to leave South Africa for higher earnings. However, should recent political shifts stimulate South Africa’s economic growth, Lenmed will benefit from heightened activity and renewed investor interest. South Africa’s current lethargic economy has impacted on Lenmed’s profitability, as the cost of care rises disproportionately with increases from medical aid funders. Even so, Lenmed has a well- managed balance sheet and challenging economic times offer high-value acquisition opportunities. We will continue evaluating acquisitions or management contracts, particularly those offering exceptional value. OUR RESPONSE We are hopeful that South Africa’s economic environment will improve in the foreseeable future under new political leadership. We have adopted a cautiously optimistic approach in seeking robust projects by constantly monitoring the economies of all geographies where we are already present. Lenmed continues striving to improve our internal efficiencies to lower costs and remain sustainably competitive. Scarcity of skills in Southern African healthcare WHY THIS IS IMPORTANT TO LENMED Providing superior private healthcare requires qualified and experienced personnel. Individuals equipped to meet exacting medical standards are presently in short supply across Africa and being targeted by all our competitors. RISKS AND OPPORTUNITIES A shortage of high calibre nurses may result in mediocre clinical outcomes and service levels, resulting in reputational damage and potential litigation. OUR RESPONSE Lenmed continually upgrades or expands its medical facilities to attract experienced nurses, respected doctors and specialists to our hospitals. We offer generous packages to suitable medical professionals. Internal skills development remains a priority and we are currently awaiting Government licensing for our nursing academy which, when licensed, will deliver a much-needed pipeline of nurses into both our facilities and the industry. Our material matters continued 32 CREATING VALUE IN A SUSTAINABLE MANNER THROUGH OUR STRATEGY