The CEO of private healthcare major Life Healthcare has warned that companies are increasingly opting for lower prices over quality when choosing wellness services for their employees, flagging a flurry of new entrants who have caused this structural shift.
The group’s unit Life Health Solutions is one of South Africa’s leading occupational health, wellness and health risk management outfits, which partners with businesses countrywide to provide employee wellness programmes, primary healthcare and emergency medical services.
Life Healthcare CEO Peter Wharton-Hood told Business Day that healthcare services operations are under continued pressure from a more challenging operating environment.
“Life Health Solutions is, in the main, an occupational health services company. What we have found is that demand for those services remains because it is a statutory obligation on companies. However, the price companies are willing to pay is constantly under pressure.
“We have also found a lot of new market entrants who have made companies be prepared to pay less. A number of these new entrants have little to no experience in delivering the services required or the infrastructure to support the delivery of those services. Some of the corporates have opted to go for price over quality.”
Occupational health in South Africa is the multidisciplinary field dedicated to protecting workers’ physical, mental and social well-being. It focuses on preventing workplace injuries and occupational diseases, managing workplace hazards and ensuring environments are physically and mentally adapted to employees.
Life Healthcare impaired R29m in the Life Health Solutions business in the six months ended March, the group announced as it released its interim results on Thursday.
The group, worth R16bn on the JSE, is planning to spend about R2.4bn in capital expenditure (capex) by the end of the financial year.
In the six months under review, the group spent R525m on replacement and infrastructure capex and R350m to acquire a hospital property it previously leased.
This is in furtherance of the company’s strategic pivot to own its own properties rather than lease its hospital infrastructure.
Wharton-Hood shed more light on the business case for ownership of its hospitals rather than renting them.
“We have figured out that the cost of borrowing for us as a corporation is significantly lower than that of landlords. We can fund the cost of properties cheaper than landlords. Strategically, we want to be in control of the destiny of all our hospital properties,” he said.
“This is as important as the financial outcomes. We don’t have to be in a position where we renegotiate leases.”
The group reported marginal growth in revenue, from R12.1bn in the comparable period to R12.4bn in the period under review.
The group’s Southern Africa hospital raked in R10.45bn in the period, a marginal growth of 1.1%.
The company’s Southern Africa operations comprise segments for hospitals (acute hospitals), complementary services (mental health, acute rehabilitation, renal dialysis, oncology and diagnostics), and healthcare services, which includes Life Health Solutions.
The market took a dislike to the group’s interim results, shedding 5% off its value on the JSE.
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