Netcare beams in on cancer treatment to boost revenue
Private hospital group Netcare has set its sights on offering the only full cancer treatment facility in SA as it searches for growth in a stagnant market.
"Once complete, Netcare Milpark Hospital will be the only hospital in SA with a full cancer-care service offering," said Jacques du Plessis, MD of the Netcare hospital division.
Cindy Aitton, head of Netcare Cancer Care, said the facility would have the only Gamma Knife unit in the country.
The Leksell Gamma Knife Icon is a noninvasive radiation device used to treat brain, head and neck tumours.
Aitton said the unit may in future offer external beam radiation therapy, a dedicated oncology ward, a chemotherapy unit, surgery for different types of cancer and other services.
"No other hospital is offering this suite of oncology services," she said.
The hospital group began the expansion of its cancer treatment facility in 2016 and is set to complete it next year with an additional 100 beds. Once completed it will be the biggest facility of its kind in SA.
Cancer claims rising
Cancer treatment is a growth area given the rising number of cancer claims.
In SA there has been an increase in cancer claims and the number of Discovery Health members with cancer has doubled since 2010, according to the scheme's 2019 medical inflation index. Discovery Health is SA's largest open medical scheme.
Cancer treatment is expensive. For example, one course of chemotherapy for melanoma, a skin cancer, was historically R6,500. More recently, an immunotherapy treatment called Yervoy has been used to treat metastatic melanoma, but one treatment cycle costs about R880,000.
Discovery says high-priced treatments such as this have led to a threefold increase in the number of claimants who have cost the scheme more than R1m each in the past five years.
Netcare began the expansion of its cancer-care facilities with a 14-bed Gamma Knife ICU chemotherapy unit and consulting rooms in 2016.
Like other private hospital groups in SA, including competitors Life Healthcare and Mediclinic Southern Africa, Netcare has had to look to other areas beyond acute care for growth.
On Monday, at the presentation of Netcare's results for the six months ended March 2019, group CEO Richard Friedland said the constrained health-care environment has been made more challenging by stagnant growth in insured lives and an increase in the number of hospital networks introduced by medical schemes.
"These funder networks are coming at significantly discounted rates, so that has an impact on margin and if you want to participate in these networks you have to offer a significant discount," he said.
In addition to expanding its cancer treatment facility at Milpark, Netcare will add six beds to its Akeso mental health-care facilities in the second half of this year. It has added 28 beds to the 51 at its Akeso facility in Parktown, Johannesburg. Netcare, which acquired Akeso last year, reopened the 23-bed Akeso George centre in March.
Philip Short, an analyst at Old Mutual Equities, said oncology could be an area of growth for the group and the focus on mental health care was a good strategy since treatment demand in this area was strong.
Zaid Paruk, a portfolio manager and analyst at Aeon Investment, said: "Netcare has been forced to find innovative ways of growth. An example of this was the move to more occupational health care and day clinics.
"While this resulted in good revenue growth and increased market share, this came at the expense of margin."
Paruk said the fight for market share was likely to increase if SA's economic growth rate continued to lag over the next few years.
"The challenge is for hospital operators to become more 'lean' while still maintaining above-average standards," he said.
"The problem hospitals face, however, is a global movement to lower health-care costs. Given that Netcare is almost entirely a South Africa-based business, this presents a poor outlook for Netcare."
André Bekker, an equity analyst at Arqaam Capital, said economic growth and higher employment rates were key to growth for groups such as Netcare.
He said psychiatric treatment was an attractive market but was unlikely to expand much over the next five years.