Netcare taps new growth areas
● SA’s biggest hospital group, Netcare, has finalised the sale of two of its hospitals as it shifts focus towards mental health care.
But this is only a part of the growth strategy for the group, which has its eye on an integrated, digitised system as the new frontier.
Health-care companies in SA face a number of challenges, from regulation uncertainty to a tough economic environment, but the search for growth is perhaps the biggest challenge in a mature hospital market.
This week, Netcare announced it had sold its Rand Hospital in Johannesburg and Bell Street Hospital in Krugersdorp to burgeoning hospital group RH Bophelo, for R124m.
The deal is part of Netcare’s agreement linked to its acquisition of mental healthcare facility group Akeso Clinics for R1.3bn.
Akeso has facilities in the Western Cape, Gauteng, Mpumalanga and KwaZulu-Natal and the acquisition presents a growth opportunity in an area where Netcare didn’t have a presence.
“The acquisition of Akeso is a major positive step in enabling Netcare to grow its footprint, operations and services within SA. Additionally, and while Netcare still sees growth opportunities in health care in the local acute and ancillary markets, Netcare has other exciting growth options, which are being pursued,” said Richard Friedland, Netcare’s CEO, on Wednesday.
Mental health facilities have lower running costs and tariffs and they also present an opportunity for private hospitals to grow in a stagnant environment, where insured lives have remained flat since 2014.
Friedland said it was not Netcare’s intention to sell more hospitals in order to grow its mental-health offer.
The group does not see itself moving away from acute care.
Steph Erasmus healthcare and chemicals analyst at Avior Capital Markets said Netcare is likely to stay local for the time being, given the issues competitors such as Life Healthcare and Mediclinic have had in their overseas operations.
Life Healthcare sold its stake in India’s Max Healthcare following regulatory challenges in the country.
Mediclinic is grappling with regulatory changes in Switzerland, which have had an impact on the group’s performance.
One of the growth opportunities Friedland highlighted for Netcare is the digitisation of the group’s business, which means the hospital owner will have an integrated digital system across all its facilities in the country.
Zaid Paruk, a portfolio manager and analyst at Aeon Investment, said it would make Netcare a more cost-efficient group.
“What they are trying to do is form a universal digital network through all their hospitals as well as their trauma units. So every hospital will be linked to each other, from the Akesos to the Trauma 911s. Any Netcareowned business will be integrated from a digitisation process,” said Paruk.
This will enable the group to focus on quality, tailor-made care and give it an edge in the market, he said.