Life Healthcare goes holistic
SA hospital group moves into complementary services across multiple territories to position for industry changes
Life Healthcare's transition from a primary hospital group into a diversified international healthcare provider is gaining new momentum under group CEO Shrey Viranna.
The sale of a 49.7% stake in hospital chain Max Healthcare in India for R4.3bn to global investment firm Kohlberg Kravis Roberts was announced this month, seeing SA’S third-largest health firm offload a stake it has held for the past six years.
The move is part of a concerted effort to refocus Life Healthcare into growth areas that include complementary services, diagnostics and analytics.
“The view we’ve taken is that SA is our core, it’s an emerging market, it's a predominantly insured emerging market. India is a very different model,” says Viranna. The predominantly cash-based and regulatory-heavy market in India held little attraction over time.
“A lot of the global trends suggest that an acute hospital in its current model may not have the same growth trajectory — not to suggest that this is not a growth environment, but it does not have the same rate of growth as complementary services, diagnostics, broader healthcare services and analytics.
“For our growth aspirations, we’ve paused and said SA needs to be expanded from a hospital group into a healthcare provider, an integrated system. Beyond that we should look much more at services and diagnostics as opposed to acute beds,” he says.
Johannesburg-based Life Healthcare has acquired a set of diagnostic businesses spanning Western Europe and Eastern Europe through Poland, which Viranna regards as a launchpad for diagnostics into the broader European jurisdiction. “You almost end up with a dual strategy which is integrated healthcare provider in SA and diagnostics or health services business elsewhere.”
Its footprint in Poland and the UK is through Polish hospital chain Scanmed, which it acquired for R2.2bn, and diagnostics group Alliance Medical, for which it paid R13.9bn.
In SA Life Healthcare boasts 65 facilities which include Life Entabeni Hospital (Durban), Life Fourways Hospital (Johannesburg) and Life Vincent Pallotti Hospital (Cape Town). It operates in 14 countries globally. The group has 2,700 specialists and about 20,000 employees (including nurses) in
Viranna says internationally there is “deep investment” into diagnostics. But this is not yet the case in SA. Part of the group’s diversification strategy includes looking into other outpatient models and primary healthcare models.
“Historically we took a view which was not necessarily purist but rather focused on being a hospital group. However, in the past few years there has been a deliberate expansion into other aspects that broaden from being a hospital group to being an international diversified healthcare provider: complementary services, mental health, renal rehabilitation and oncology,” he says.
“When you step back from it and you ask, in a few years, what will we have, it would be a relatively comprehensive set of services that allows us to say for any one of our patients — and not just the patient as we define it today, as we talk about broadening access to new segments of patients — we can provide care to you in a very holistic way.”
In a sense Life Healthcare’s model of the future will dovetail with the broader government objective to provide access to quality healthcare to all citizens, through the National Health Insurance.
“We are in a very sober way quite excited about the opportunities that it presents for us.”
An inquiry into the healthcare market by the Competition Commission, which will also inform the national objectives, has found that the healthcare is concentrated in the hands of a few players.
Viranna says Life Healthcare is not opposed to the emergence of new entrants into the market. “If anything, I think it’s good for the industry. I really do believe that. Even if you take a transformation view. As long as it’s done in a way that allows for good, sustainable economics for those companies, for those new hospital groups. There isn’t a protectionist or a fearbased perspective for us.
“We take a view that says if you think about first and foremost what is right for the country, this is clearly a good thing. If you secondarily take a view around growing as a private hospital group, we think these two are completely aligned. These aren’t competing objectives — actually, this will be the basis of our growth.”
What it means: The group is moving beyond hospital services to become a complete healthcare provider
Shrey Viranna: SA healthcare needs to be expanded into an integrated system