Private hospital group Life Healthcare says it sees a strong business case for expanding its business despite SA’s weak economy and constrained medical scheme market.
Medical scheme membership has hovered around the 9-million mark for more than a decade despite SA’s growing population, as unemployment remains stubbornly high and leaves cover out of reach for most people.
About 15% of the population currently has medical scheme cover for private healthcare services, including hospital care.
“We think there is unfulfilled demand in certain regions and we think we are the provider of choice. The economic climate is constrained and is impacting the number of lives insured, but the population that is insured is getting older and sicker,” Life Healthcare CEO Peter Wharton-Hood said shortly after the company released its interim results for the six months to March 31.
Revenue rose 8.1% to R12.1bn for the period under review, while normalised earnings per share from continuing operations were 9% higher at 49c. The improvement was driven by robust activity growth and benefits from acquisitions concluded in the second half of 2024.
Life Healthcare is one of SA’s three large private hospital groups, rivalling Netcare and Mediclinic, which is owned by Remgro. It operates 42 acute hospitals, with 8,055 beds. It also provides mental health, rehabilitation and occupational health services, and has a growing radiopharmaceutical and imaging business.
The group plans R2.3bn in capital expenditure over the course of the financial year, and will add 58 acute beds, 24 acute rehabilitation beds, a cath lab and a vascular laboratory, it said.
It will also start building a new 140-bed hospital near Paarl in the Western Cape, and will expand its diagnostic business with two new PET-CT sites that are due to be completed in the second half of the year, along with two imaging transactions.
Life Healthcare’s expansion strategy was undeterred by the policy uncertainty created by the government’s push for National Health Insurance (NHI), said Wharton-Hood.
“The demand is there, the payback is swift, and if we hang around and wait for regulatory certainty, [we] could wait another 10 years,” he said.
Life Healthcare reported normalised earnings per share, which excludes nontrading related items, saying the metric provided the best measure of its underlying business.
It excludes discontinued operations and the adjustments to the Life Molecular Imaging (LMI)-associated liabilities included as part of continuing operations.
Life Healthcare signed a R13.9bn deal to sell LMI to Lantheus Radiopharmaceuticals UK in January, with the proceeds set to be returned to shareholders. The conclusion of the LMI disposal is expected in the second half.
Continuing operations consist of the hospitals segment (acute hospitals), the complementary services segment (mental health, acute rehabilitation, renal dialysis, oncology and diagnostics) and the healthcare services segment (Life Nkanyisa and Life Health Solutions).
Normalised earnings before interest, tax, depreciation and amortisation increased 5.9% year on year to R1.86bn.
Life Healthcare declared an interim dividend of 21c per share, up 10.5% from the corresponding period last year.
The group reported strong activity growth due to the benefits from the network arrangements concluded with medical schemes in prior years, and increased demand for services. Paid patient days (PPDs) grew by 2% on a like-for-like basis and the weighted average occupancy was 68.6% compared with 66.6% in the prior period.
Wharton Hood said he was optimistic the group’s acute hospitals would soon reach occupancy levels of 70%.
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