Hospital group Life Healthcare is mulling its options on where to invest some of the proceeds from the sale of its stake in Max Health. One potential area for investment is diagnostic imaging.
Like many companies in the health-care industry, Life Healthcare has borne the brunt of an increasingly challenging environment marked by regulations that are becoming more stringent. Such changes led to the hospital group selling its 49.7% stake in India-based Max Health to Radiant Life Care, a health-care facility operator also in India, for about R3.9bn in December last year.
On Tuesday, Life Healthcare group CEO Shrey Viranna said he anticipated between R2.9bn and R3bn of the proceeds would be used to pay debt linked to Max Health. The balance may go towards growth opportunities.
"Formally right now we haven't explicitly said 'here's what it's earmarked for' but I'm comfortable in saying that, as a management team, our sense is that we are quite excited about our growth opportunities," said Viranna.
One of these opportunities would be in SA, where the group is looking to build its radiology business. This would be in addition to its operations in western Europe, where it already owns interests in a diagnostic imaging business through its 93.78% stake in Alliance Medical Group, which it bought for R13.9bn in 2016.
The group also owns Scanmed, a private health-care and medical services provider in Poland, which it acquired for R2.2bn in 2016.
"Radiology in SA is something that the South African team, in conjunction with their international colleagues, are looking at. We believe that it is an important area for us to make a difference but also at the same time unlock growth for us," he said.
Life Healthcare also plans to provide health-care services to people who are employed but uninsured and need access to quality care outside of acute hospital care. This will help to counter the stagnant growth in insured lives, which has remained at about 8.8-million since 2014.
As part of its plan to tap into the employed uninsured market, Life Healthcare has piloted MyLife, a primary-health clinic in Auckland Park, Johannesburg, where patients get to see a nurse in 30 minutes, for R300, which also covers medication.
Alec Abraham, a senior equity analyst at Sasfin Wealth, said hospital groups are experiencing pressures such as limited funds, a growing ageing population and an increasing burden of disease - at a time when schemes are becoming more aggressive about case management.
These pressures mean that Life Healthcare and SA's other big private hospital groups - Netcare and Mediclinic - have to diversify beyond acute care into related services in order to grow.
Abraham said Life Healthcare is managing to do what founder and former CEO of Netcare Jackie Shevel set out to achieve by including pathology and radiology services under the hospital group in SA. Shevel, however, failed to clear regulatory hurdles.
Viranna said: "There is also a lot of conversation about regulation around radiology in SA. We are very comfortable that we will find a model that allows us to work with the radiologists and very comfortably within the current regulatory environment."
Said Abraham: "You are seeing companies like Life Healthcare starting to invest offshore, where they are not limited in that way. You see them doing exactly what Jackie would have wanted to do, in the case of Life Healthcare, holding quite a substantial diagnostic business and so diversifying away from acute hospital care."..