The worst of the pandemic’s acute phase is possibly over but Netcare, SA’s largest listed private hospital group, is cautious, saying uncertainty still remains about the potential virulence of future variants and the long-term effects of long Covid.
CEO Richard Friedland says the fact that the latest wave of infections is showing similar characteristics to the fourth wave with far lower hospital admissions is cause for optimism but the emergence of a virulent new strain in the future cannot be ruled out.
“We’ve got to be humble about this. We’ve had tens of thousands of actuarial models around the world on how the various waves would progress and none of them have been correct,” said Friedland, who was speaking this week after the release of results for the six months ended March 31.
“We have seen the first wave, we were then hit very suddenly by a very severe second wave and then we had an even worse third wave. Then we had a milder but larger fourth wave that surprised everyone. We are still maybe surprised on the downside, although one hopes we are seeing a more extenuated or weaker virus.”
But he said the more critical issue for the health-care sector and its recovery to pre-pandemic levels was whether “we are going to see a continuation of subvariants, in other words weaker variations of the same variant, what we call serial mutation”.
“Thus far the substrains have been milder and we have seen less hospitalisations and much lower mortality and that has allowed us to return to normal, or rather to a new normal.
If we do see a new variant which is highly virulent, that would give rise to the same levels of disruption and instability we saw with the first three waves
— Netcare CEO Richard Friedland
“However, if we do see a new strain, which is possible, or a new variant which is highly virulent and against which we had little immunity, that would give rise to the same levels of disruption and instability we saw with the first three waves,” said Friedland.
This is why Netcare had adopted a “cautious view”, as there was still also a lot of uncertainty about the effects of long Covid. Medical experts have so far noted more than 200 conditions and long-term effects of long Covid.
Friedland said it was not known how many South Africans were suffering from the protracted effects of long Covid, “but we are certainly seeing a rise of it”.
He said there were potential cost implications for the broader health system but that “hopefully a lot of this can be treated at a primary health care level or mental health care level”.
Ronnie van der Merwe, CEO of Mediclinic International, whose subsidiary, Mediclinic Southern Africa, is the third largest private hospital group in SA, said after the release of full-year results this week that while indications were that subsequent Covid variants will be relatively mild, there was always the possibility of a more virulent strain emerging.
“We understand very well scientifically that a new, very virulent strain can reoccur, but at the moment it hasn’t happened and we haven’t seen any identification of such an occurrence, so what we have currently is Omicron and there are substrains of that Omicron going around, but [they] don’t really differ from the one in December.”
Van der Merwe said there will probably be successive waves of Omicron over the year, with variants getting weaker, and that the group did not expect a repeat of anything like the virulent Delta third wave.
The number of conditions associated with the long-term effects of long Covid.
— IN NUMBERS: 200+The number of conditions associated with the long-term effects of long Covid
Overall, prospects are improving for the health-care sector.
Netcare reported that full week occupancy levels within acute hospitals increased to 55.5% in the six months ended March 31 from 53.8% in the comparative period, with average occupancy across February and March of 62.4%.
Friedland said the February and March occupancy figures were “the kind of levels we were achieving pre-Covid”.
Netcare's profit for the period was 19.5% higher at R448m, with headline earnings per share (EPS) up 19.9% to 31.9c, while group revenue increased 2.3% to R10.3bn.
Mediclinic International said the improved outlook it had flagged at its half-year results yielded a rise in group revenue for the year ended March of 8% to £3.2bn (about R63bn), which was 5% up on pre-pandemic levels. Adjusted earnings before interest, tax, depreciation and amortisation were 22% higher at £552m.
Life Healthcare, in its results release for the six months to end March, said the “diminishing disruptions from recent Covid-19 waves and signs of normality returning, have driven an encouraging recovery in healthcare demand".
This was reflected in group revenue from continuing operations increasing 4.2% to R13.5bn and growth of 7.5% to R1.6bn in normalised earnings before interest, tax, depreciation and amortisation at its southern African operations.
FNB portfolio manager Wayne McCurrie said even though Netcare’s “turnover growth wasn’t too great”, because it had cut costs, it had a “very healthy increase in margins and profits”.
McCurrie said Mediclinic had reported good turnover growth with all its businesses back to pre-Covid levels.
He was bullish about private health-care stocks such as Netcare and Mediclinic because people were returning to have elective surgeries.
Casparus Treurnicht, portfolio manager and research analyst at Gryphon Asset Management, said there was value in listed hospital groups as hospitals were “getting back to normal” and people who may have postponed elective surgeries were returning to have them done.
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