SA’s third-biggest private hospital Netcare says it is concerned about a potential second wave of coronavirus cases, which could place fresh strain on a sector slowly recovering from the devastating effect of the pandemic.
Though Covid-19 cases fell gradually overall since the July peak, there was a steady uptick in recorded cases and hospital admissions in the Eastern Cape and the Western Cape in recent weeks. Nelson Mandela Bay was hit particularly hard.
“It’s a sober reminder we could face a second wave,” Netcare CEO Richard Friedland said on Monday as the company released its annual results for the year to September 30.
Netcare reported performance in line with expectations for the first five months of the year. But it felt the force of Covid-19 after that as patient volume for nonemergency and elective surgery plunged on fear of transmission in hospitals. Emergency and trauma-related admissions fell during the lockdown curfew and ban on liquor sales. Patient volume plummeted at Netcare’s primary health-care business, Medicross, and its Akeso Clinics, focused on mental-health care.
Netcare reported a headline loss of 3.6c per share, compared with a positive 165.9c last year. This was attributed largely to Covid-19 and in part to a change in accounting standards affecting lease agreements and the one-off R348m cost of a BEE transaction.
“Covid-19 had a devastating financial impact on Netcare,” said CFO Keith Gibson. The pandemic cost Netcare about R3.7bn in revenue and R78m in rental concessions and lost parking fees, while pushing operating costs up R300m and requiring extra capital spending of R156m, he said.
Revenue fell 12.7% to R18.84bn, compared with R21.6bn the year before, while earnings before interest, tax, depreciation and amortisation fell 41.7% to R2.56bn, down from R4.39bn last year.
Describing the company’s financial year to September 30 as a “year of two very different halves”, Friedland said patient volume in all parts of the business plunged after Covid-19 struck SA in March, with the full force felt in April, when occupancies were at their lowest.
Volumes had slowly improved since then, but had yet to fully recover, he said. For example, weekday acute hospital occupancy fell to 48.1% in the last seven months of the financial year, compared with 67.7% in the first part of the year, and 73.2% in the corresponding seven months of last year.
In line with peers Life Healthcare and Mediclinic International, Netcare scrapped its dividend to preserve cash in an uncertain trading environment created by the pandemic. It also postponed R800m of capital spending and secured a waiver of its debt covenants. By year’s end, the group had cash resources and committed undrawn banking facilities of R5.6bn. Disposal of UK General Healthcare Group’s Propco 2 properties boosted the group’s overall cash position by R778m.
During the financial year, the group treated 28,016 Covid-19 patients, about half of them admitted to hospital. A quarter of those admitted were treated in high-care or intensive-care units. Thirteen percent of Netcare’s staff, or 2,781, tested positive for Covid-19, said Friedland. Twenty people working at Netcare, including nine nurses and nine doctors had died of Covid-19, he said.
Netcare was concerned about the macroeconomic outlook for SA and the effect on employment. This was a critical issue for all private health-care providers as most of their patients were funded by medical schemes. Economic pressure could lead to a decrease in medical scheme membership, it said.
“Our performance may be tempered by a weak macroeconomic outlook and the threat of a second wave. But we are better placed to deal with a second wave, and expect volumes to recover in [the second half] of the new financial year,” said Friedland.
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