sa operations review€¦ · in 2017, the netcare milpark breast care centre of excellence became...

76NETCARE LIMITED Annual integrated report 2017

HOW WE PERFORMED SA operations review

FINANCIAL PERFORMANCE

Normalised operating profit1

down 5.6% to

R3 331 million (2016: R3 528 million)

Adjusted HEPS3

down 8.2% to

170.6 cents (2016: 185.9 cents)

Revenue

up 1.2% to


Normalised EBITDA1,2

down 3.7% to


1 Normalised to exclude profit on the sale of the old Netcare Christiaan Barnard Memorial Hospital land and buildings.

2 Earnings before interest, tax, depreciation and amortisation.

3 Headline earnings per share.

Macroeconomic and regulatory factors impacting the Group’s operations are discussed in

the Chairman’s review on page 18; our strategic responses to key trends in our operating

environments are discussed in the CEO’s review on page 71; and financial and operational

performance is analysed in the CFO’s review on page 110.

2017 2016 2015

HOSPITAL AND EMERGENCY SERVICES

Revenue (Rm) 18 403 17 7131 16 119

EBITDA margin 21.1% 22.6%1 23.8%

PRIMARY CARE

Revenue (Rm) 711 1 178 1 170

EBITDA margin 15.2% 10.0% 9.5%

1 Restated for discontinued operation – Emergency services business in Mozambique.



Physician Advisory boards and

sub-committees

Ethics committees

Sentinel Event Committee

NETCARE LIMITED BOARD

EXECUTIVE COMMITTEE

DIVISIONAL

EXECUTIVE COMMITTEES

SA GOVERNANCE STRUCTURE

UNIT MANAGEMENT &

HEADS OF DEPARTMENT

COMMITTEE

Departmental forums

Capital Expenditure and Working Capital

meetings

CORPORATE

GOVERNANCE

Occupational Health & Safety Committee

Waste Control Committee

Transformation Committee

Risk Committee

Procurement Committee

Sustainability Committee

CLINICAL

GOVERNANCE

Mortality & Morbidity meetings

Clinical Practice Committee

Clinical Ethics Committee

Quality Leadership Review Committee


Consistency of care BEST AND SAFEST PATIENT CARE

Our strategic priority to deliver a consistent level of care across all Netcare facilities is

underpinned by the Quadruple Aim. All our divisions focus on the three strategic

elements of our quality scorecard, outlined below, supported by our passionate

people and partnerships in the healthcare value chain. Where required, elements are

added to address each division’s specific risk profile and business strategies.

Strategic elements Scorecard weighting Quality measures

Quality management systemEnsuring a world-class quality

management system

20% > ISO 9001:2015 standard.

> Overall Core Standards score.

> Overall Netcare quality review audit

score.

Patient experience Ensuring the best patient

experience

38% High five outcomes

> Responsiveness.

> Environment: clean and quiet.

> Nursing communication.

> Discharge information.

> Medication information.

Clinical outcomes and patient safetyEnsuring patients are in safe

hands

42% Zero tolerance for infections

Infection risk management:

> Multi-dimensional evidence-based

superbug bundle to address:

– Hand hygiene.

– Environmental cleaning and

disinfection programmes.

– Outbreak management.

> Antibiotic stewardship.

> Reduce surgical site inflections (SSIs).

Adverse events

Clinical improvement and safety

management:

> Venous Thrombo Embolism prevention.

> Acute Coronary Syndrome care.

> Cerebrovascular Accident care.

> Maternity and Neonatal care.

> Medication safety.

> Operating theatre safety care.



Quality leadership governance structure

Netcare 911 quality

governance structure

National Renal Care quality governance structure

Primary Care quality


Oncology quality governance structure

Hospital division regional quality


Netcare Clinical Practice

Committee

National Quality

Leadership Review

Committee

Netcare Clinical

Ethics Committee

Quality Leadership Committee

(sub-committee of the Board)

Initiatives to ensure quality outcomes: material matters starting on page 48.

Quality management system Our standardised programme for quality measurement and improvement drives our progress towards a world-class quality

management system. Implemented across all our divisions, the integrated system is supported by:

> A strong grounding of quality assurance that aims to achieve a comprehensive set of process and outcome measures.

> Standard operating procedures.

> The proficiency of engaged and passionate healthcare professionals and frontline employees.

Internal quality audits (overall scores)

2017 2016 2015

CORE STANDARDS

Hospital division1 88.8% 86.4% 88.0%

Primary Care1 89.3% 83.5% 86.5%

National Renal Care2 93.9% 94.8% 91.1%

NETCARE INTERNAL QUALITY AUDITS

Hospital division 89.3% 88.7% 88.2%

Primary Care 80.4% 74.7% 73.3%

Netcare 911 94.0% – –

1 National Department of Health (DOH) Core Standards, including all extreme and vital criteria and a sample of essential and development criteria.

2 National Department of Health Core Standards, including all extreme and vital criteria.



Well-established internal quality audits identify areas of

non-compliance, and direct corrective actions and other

improvement initiatives. All Netcare hospitals, and Primary

Care and National Renal Care facilities complete annual

self-assessments against the Department of Health’s Core

Standards and the Netcare quality review tool, which goes

beyond the Core Standards to include specific operational

requirements, as well as legal requirements. Self-assessments

are audited by independent subject matter experts. Internal

audits are a key requirement of the ISO 9001:2015 standard.

In Netcare 911, an audit tool is applied to the Emergency

Operations Centre’s IT platform, measuring quality and

ensuring that our services adhere to emergency services

regulations.

External certification

All divisions have continued to prepare for the independent

review of our quality management system in SA by the

British Standards Institute. We have completed phase one of

the five main phases of ISO 9001:2015 accreditation and

Group certification is expected in May 2018. External

assurance will strengthen our quality governance framework.

In 2017, the Netcare Milpark Breast Care Centre of

Excellence became the first facility in Africa to receive a

three-year, full accreditation by the National Accreditation

Programme for Breast Centres, administered by the

American College of Surgeons. The accreditation of the

Netcare Christiaan Barnard Memorial Breast Care Centre

is in progress.

Patient experience In the Hospital division, we measure patient satisfaction

using the United States Hospital Consumer Assessment of

Healthcare Providers and Systems (US HCAHPS) and the

Netcare patient feedback system.

Our independently measured Discovery MESH scores for

patient satisfaction showed a general improvement in the

year, although not sufficient to increase the number of

hospitals in the top 20.

Patient-centric interventions to improve the care experience

include electronic discharge information, a patient

information video and increasing ward rounds over and

above the standard rounds to administer medicine, attend to

calls or deliver meals.

RECOGNITIONNetcare Christiaan Barnard Memorial, Netcare Pholoso and Netcare St Augustine’s hospitals received PMR Africa Diamond Arrow awardsin the private hospitals category in their respective regions.

Netcare Ferncrest and Netcare Parklands hospitals received Golden Arrow awards, and Netcare Umhlanga Hospital received a Silver Arrow Award.

Clinical outcomes and patient safetyFocused clinical improvement projects and risk mitigation

strategies target the best and safest clinical outcomes for

every care event.

Zero tolerance for infection

In the Hospital division, addressing the increased risk and

intensity of multidrug-resistant infections remains a focus.

We continue to strengthen our infection risk management

systems and achieved a high uptake of the Netcare Hand

Hygiene application, which monitors hand hygiene

compliance. The Netcare Antibiotic Stewardship Programme

promotes the responsible use of antibiotics and is fully

operational across the Hospital division. The programme

focuses on the hospitals with the highest potential for

improvement and in 2017, SSIs consistently decreased,

mostly due to a focus on strengthening surgical prophylaxis

in hospitals with higher rates of SSIs. A number of new

initiatives are planned in collaboration with international

and local specialists.

New ultraviolet robot technology has been tested at the

Netcare Pretoria East Hospital, which has shown positive

results in reducing hospital-acquired infections. In 2018,

11 robots will be deployed in hospitals to combat

Carbapenem-resistant Enterobacteriaceae (CRE) incidence.

We will also investigate other uses for the robots, for

example, to address infection risk in Netcare 911’s

ambulances, helicopters and air ambulances.



Clinical improvement projects

A number of projects are in place to strengthen clinical

excellence in circulatory care across all divisions. Our

objectives are to:

> Prevent hospital-acquired Venous Thrombo Emboli by

improving risk assessment and management through

prophylaxis and the streamlining of systems and

processes.

> Improve the care processes for patients who have

suffered from acute coronary events through formal

collaboration with the South African Heart Association

and the South African Society of Cardiovascular

Intervention.

> Optimise the management of strokes from the hyper

acute to rehabilitation phases and secure Group-wide

external accreditation for stroke care.

In Primary Care, we focused on strengthening cardio

pulmonary resuscitation (CPR) capability and operating

theatre technical standards. Netcare 911 identified six

clinical and safety focus areas and has sustained its

response time, despite increased call volumes.

National Renal Care participates in Discovery’s Kidney Care

Programme, which aims to identify specific clinical

processes and outcome measures to improve the quality

of care. A secondary objective is to use this data to award

values-based contracts intended to recognise, incentivise

and reward quality and efficiency gains. In the 2017 data

review, National Renal Care achieved an above industry

average score of 74.9%, a 6.9% improvement over two

years, strengthening our position as a leader in quality care

with this major funder.

Adverse events

In 2014, we implemented a system of ‘Never Event’

reporting, which monitors and reports devastating and

potentially preventable adverse events that are a concern for

healthcare organisations globally. Organisations are

accountable for conducting root cause analyses, correcting

systematic problems that contribute to adverse events, and

reporting results. The system has improved vigilance and

compliance across our facilities, resulting in an increase in

the number of events identified, reported and managed.

The severity and frequency of occurrence determine

governance interventions and improvement work. We have

prioritised the strengthening of medication safety and

security, reducing potential adverse obstetric outcomes and

improving compliance with peri-operative safety measures.



Training and development

For skills period 1 April to 31 March (aligned to HWSETA¹ measurement year)

2017 2016 2015

EMPLOYEES TRAINED2

Paramedics 39 5 25

Nurses attending formal nursing programmes3 1 894 735 719

In-service programmes for nurses 229 169 191

Other 12 173 13 282 10 207

Total employees trained 14 335 14 191 11 142

% of employees trained that were women 84.4% 85.7% 83.0%

Number of training interventions delivered 37 122 43 230 27 607

TRAINING SPEND2

Skills development spend R54 million R51 million R41 million

NETCARE EDUCATION2

Students registered at Netcare Education 3 622 3 496 4 482

NATIONAL RENAL CARE

Postgraduate nephrology nurses 12 10 6

Clinic technology students 13 10 16

Postgraduate clinical technologists 8 14 14

1 Health and Welfare Sector Education and Training Authority.

2 Excludes National Renal Care and PPPs.

3 Accredited by the South African Nursing Council (SANC) and registered on the National Qualifications Framework.

PASSIONATE PEOPLE

2017 2016 2015

Number of employees 19 934 19 760 20 094

Employee turnover 13.3% 15.7% 18.7%

Union membership 51.3% 51.2%1 51.2%

Note: excludes National Renal Care and PPPs.

1 Restated.

Employee engagementAn employee engagement survey is undertaken every two

years, with interventions implemented in interim years to

respond to feedback. We added two new aspects in the

2017 survey to understand how employees perceive change

management, and reward and recognition. Overall, 80.2% of

employees responded to the survey and we achieved an

employee engagement index score of 63.1 (2015: 65.1).

Areas of improvement raised by the survey include:

> Communication at all levels within the organisation.

> Eradicating racism.

> Change management.

> Care and fairness at work and trust in the workplace.

Around 63% of respondents felt that we manage and

communicate change effectively. Our change management

workshops help to build resilience and in 2017 we engaged

with managers in nursing, pharmacy and human resources

to help them implement business process efficiency

projects.

We have introduced a decentralised, site-owned reward and

recognition programme to foster a high-performance culture

in which individuals and teams are recognised and

rewarded for outstanding contributions to the business.

Enhancements in 2018 will include the centralisation of

certain incentives, and implementing standardised operating

procedures and a reporting mechanism.



We provide learning programmes and continuous

professional development to our employees, to advance

their careers and support succession planning. Some 77%

of our training spend was invested in developing a pipeline

of skills in nursing and emergency services (2016: 74%).

Netcare 911 aims to upskill its ambulance assistants from

basic to intermediate level by 2019.

Given the shortage of radiation skills in SA, our bursary

programme for radiation therapists and physicists helps to

address this challenge and ensure the delivery of Netcare

Cancer Care’s strategic objectives. The Netcare Parklands

and Netcare Clinton hospitals are accredited by the Health

Professions Council of South Africa (HPCSA) to train

radiation therapists.

We recognise the need for and are developing a multi-skilled

workforce able to meet the demands of a changing

healthcare landscape. A total of 628 (2016: 621) employees

with the potential to be supervisors, managers and leaders

participated in developmental interventions during the year. Of

these employees, 59% are black and 51% are black women.

The Leading the Netcare Way programme, an in-depth

intrapersonal and interpersonal development programme,

was expanded to include the executive teams of each

division. During the year, 103 managers were registered on

the programme (2016: 63). The programme is achieving

demonstrative improvement in levels of emotional

intelligence and resilience. Feedback from participants on

this course, and on the #WeCare programme, which provides

support and skills to ward nurses, has been positive.

Significant progress has been made with regulatory

authorities on training interventions, and in 2018 we look

forward to delivering new accredited nursing programmes.

We continue to be involved in a number of HWSETA

interventions to provide development and employment

opportunities for learners not employed by Netcare.

Through this partnership, we trained 1 328 learners in 2017

(2016: 1 345).

Employee wellnessOur Managerial Support Programme supports managers in

their professional roles, and CareCall provides all employees

with support and guidance in dealing with everyday

situations. Relationship issues continue to be the most

common category requiring support, accounting for 20.0%

(2016: 19.3%1) of all interactions.

Employee relationsWe are aligning our employment relations policy and

procedures to amendments in labour legislation and best

practice. In addition to the annual wage negotiations, we

engage regularly and proactively with unions on various

operational issues, including the management of poor

performance, incapacity due to ill health and the related

income protection benefit, and the nursing staffing model.

LOOKING FORWARDWe will prioritise the key concerns raised in the employeeengagement survey, and continue to drive change management interventions. These will be supported by a Leading the Netcare Way refresher course.y

1 Restated from 19.1% in 2016 due to ongoing case management and quality

management processes embedded at Independent Counselling and Advisory

Services, which can result in slight differences in comparative numbers;

however macro-level trends remain stable.



LOOKING FORWARDIn 2018, we will enhance our diversity initiatives to equip workplace transformation committees with the skills to lead dialogues around diversity, inclusion and theelimination of racism and discrimination.

We have also committed to investing R45 million in our enterprise and supplier development programme.

Our aim is to transform our workforce to reflect SA’s

demographics. Black people represent 75.3% of the

workforce (2016: 73.3%), against a national economically

active population where black representation is 88%.

Women represent 82.8% (2016: 82.4%) of the workforce

and 55.2% (2016: 53.0%) of Netcare’s leadership. The

representation of black women has increased to 61.9%

(2016: 60.0%). Employees with disabilities comprise 3.0%

of the workforce, with 1.8% being black employees and

1.1% being black women.

Aligned to our seventh Netcare Way behaviour of embracing

diversity, the University of the Witwatersrand’s Centre for

Diversity Studies facilitates dialogues on race, diversity and

social cohesion with site management teams. Sessions

started in October 2017 and we have already reached

around 235 leaders.

EMPLOYEE

CATEGORIES

BLACK REPRESENTATION AS A % OF THE WORKFORCE EMPLOYMENT EQUITY PLAN

2013 2014 2015 2016 2017

Target % for

2017

Target % for

2020

Senior

management 22.2 23.1 25.9 26.9 28.0 26.0 37.0

Middle

management 33.7 32.7 34.3 35.0 36.1 36.8 48.2

Junior

management and

skilled workers 56.6 57.6 61.0 60.9 65.0 62.0 66.4

Employees with Overall 2.3 2.4 2.6 2.6 3.1 3.0 4.0

disabilities Black 0.9 1.0 1.5 1.4 1.8 2.0 3.0

Note: excludes National Renal Care and PPPs.

ACCELERATING TRANSFORMATION



OPERATIONAL EXCELLENCE PROJECTS

Our strategic emphasis on digitising and automating our

front-end services aims to:

> Lessen administrative work for our nurses, giving them

more time to provide care to patients.

> Deliver an enhanced patient value proposition by

providing patients with electronic medical records, and

facilitating their access to and use of our facilities,

doctors and services.

> Move Netcare to a ‘paper light’ environment and reduce

operating costs.

The medium-term project to introduce electronic medical

records across all our divisions will enable better interaction

with all our key stakeholders. A pilot is underway in Primary

Care to roll out electronic patient records to all Medicross

clinics in 2018. We have strengthened our leadership and

resource base in our IT function to ensure we can deliver this

strategic initiative.

Medicross launched an online doctor appointment system

during the year, which is driving increased volumes by

providing patients with the convenience of making

appointments after hours.

In the Hospital division, the roll out of MOBILL and MOBIT,

the real-time stock billing solutions in wards and theatres

respectively, is mostly complete. These electronic tools

replace the paper-based charging system, interface with

SAP and use multi-touch technology. Around 65% of the

billing process is now automated, with improved billing

accuracy and stock management, lower stationery costs and

reduced levels of administration required from nurses. We

expect to meet our savings target in 2019, and, to date,

MOBILL and MOBIT have achieved a reduction in stock

losses of over R32 million. In 2018, further integration of

these processes will take place.

Netcare 911’s IT platform has the capability to geo-locate

callers and emergency vehicles to ensure a quick response

time, and our vehicles are fitted with technology that

identifies the shortest, most appropriate route. The platform

is integrated with our administrative and billing system.

The electronic bill presentation project, which is due for

implementation in early 2018, will improve revenue collection

capability through a portable e-wallet.

Continuous business improvement is an integral part of daily

operational thinking and new ideas and suggestions are

encouraged at all levels of the organisation. Improvements

serve to tighten cost structures, reduce duplication and

potential human error, while providing better information

management to support quality healthcare delivery.

Progress was accelerated during the year with 199 initiatives

proposed, 161 completed and 121 in progress at year end.

In 2018, we will increase our IT investment in digitisation

and automation projects to around R55 million, compared to

R10 million in 2017.

Breakdown of IT projects (number of projects)

34

27 Analytics

Application support

Business services

Cyber security

Development

Management

Service delivery

4

13

5

19

6

Initiatives to ensure cyber security: page 54 of material

matters and CEO’s review on page 73.

LOOKING FORWARDMajor IT projects scheduled to commence in 2018 includethe development of clinical systems and electronic medical records for the Hospital division and Primary Care, and a modernised and centralised practice management solution for Primary Care. Phase II of our asset management improvement project will runduring 2018.

Over the medium term, we will continue to implement technology-based solutions to drive improved patient and doctor experience, and to position Netcare for growth.

Physician partnerships and preferred provider to funders

are covered in the CEO’s review, on pages 73 and 74,

respectively.



Sustainable financial returns

As part of their balanced scorecards, our management teams understand and react to the market dynamics and demand trends

associated with each facility. As we digitise the business, more accurate data will support these analyses. In response to changes

in the market in the past 18 months, we have assessed the revenue streams at each operational entity and put in place

interventions to achieve targeted bed occupancy at individual site level.

ORGANISATIONAL GROWTH

2017 2016 2015

HOSPITAL DIVISION1

Patient day growth/(decline) (1.0%) 4.7% 0.2%

Occupancy 65.5% 67.2% 67.8%

Owned and managed hospitals 582 57 56

Registered beds2 10 181 10 088 9 996

Intensive care unit (ICU) and high-care beds 1 804 1 717 1 711

Theatres 364 358 352

Emergency departments 43 43 43

Hybrid theatres, catheterisation and electrophysiology laboratories 34 33 32

PRIMARY CARE

Medicross centres and Netcare Occupational Health clinics 83 82 85

Sub-acute facilities 3 2 –

Medicross day clinics 15 14 13

Visits to Primary Care facilities 3.0 million 3.1 million 3.2 million

NETCARE 911

Emergency bases 86 85 85

Vehicles 199 209 214

Helicopter ambulances 2 2 2

Jet ambulance 1 1 1

Paramedics and support staff 1 096 1 143 1 084

Average time to answer calls (seconds) 2 2 2

Average response time (minutes)3 21 21 21

NATIONAL RENAL CARE

National Renal Care facilities 63 62 59

Dialysis stations 843 796 740

1 Excluding Lesotho.

2 Includes the Lakeview Hospital acquisition.

3 Includes all response trips from city and suburban to rural and remote destinations.



Hospital division

In our core business of high-acuity

hospitals, we are optimising our

capacity and implementing wide-

reaching efficiency programmes, in

balance with our investment in the

highly qualified people, advanced

technology and new ways of working

that are deepening our value

proposition. Our focus on growth is

selective, expanding our service

lines in high-demand disciplines

such as mental health and cancer

care.

Demand management by funders resulted in a

1.0% decline in patient days, which together with

the increase in number of beds, resulted in full

week occupancy levels for the Hospital division

closing the year at 65.5%. This is lower than the

67.2% in 2016 but up from 63.2% reported at

half-year. Week day occupancies for the same

period were 71.3%, compared to 72.9% in 2016

and 69.0% at half-year. The declining patient day

trend was driven by funder initiatives to contain

hospital expenditure, with their main areas of focus

on enforcing the prohibition of GPs in urban areas

from admitting patients to hospitals directly, and

placing limits on physician, paediatric and

maternity admissions.

The improvement in revenue per patient day during

the year is predominantly due to an increase in the

mix of higher complexity cases, which has an

increased average length of time for procedures

and occupancy in intensive and high-care units.

The average length of hospital stay has increased

marginally.

The reclassification of bed types and changes to

services offered will be undertaken at hospitals

that have experienced lower than targeted

occupancy levels in the year. In the past, the

reclassification of bed types was confined to within

a hospital. Going forward, and with the support of

the DOH, bed licences will be transferred between

facilities within geographic areas to address

specific demand.

Our hospitals have historically offered limited mental

health services. As the demand for and incidence

of mental illness continues to rise in SA, Netcare

made an offer to acquire Akeso Clinics, a portfolio of

12 mental health facilities, which will add specialised

services to our mental health offering.

Another strategic priority is to build on our national

footprint. We will extend our recognised Netcare

Cancer Care brand by further investing in the latest

treatments and establishing our facilities as centres of

preferred patient choice. These facilities will

specialise in chemotherapy and radiotherapy

treatment to enable our oncologists to provide best

practice services to patients.

An integral aspect of our Cancer Care programme

will be intraoperative treatment, where radiation

treatment is delivered during surgery. This is the first

offering of its kind in SA and will initially be used for

breast cancer treatment at Netcare Milpark Hospital;

however it has the potential to treat other cancer

diagnoses.

Further investment and development in oncology

services provides us with the opportunity to better

plan for the latest treatments, and efficiencies can be

achieved in terms of people and equipment costs.

Software-based machine quality assurance processes

are in the planning stages. These initiatives will

improve the productivity of physicists in their time on

the machine and access to quality data.

We are also installing advanced electronic planning

hubs to service multiple radiology sites.

We have the capacity to enter into PPPs to provide

cancer treatment for state patients and relieve the

burden on state facilities where patients are

experiencing delays in treatment.

We experienced lower activity in conventional cancer

therapy during the year, mostly attributed to increasing

competition. However, stereotactic activity grew,

including for the Gamma Knife at Netcare Milpark

Hospital, which delivers precision radiotherapy for

brain lesions and commenced operation in May 2017.

Unfortunately, due to HPCSA advising against global

fees, we were unable to meet the objective to

introduce an alternative reimbursement model for

breast cancer, as mentioned in last year’s report.

CO

RE B

US

INES

SHOW WE PERFORMED SA operations review

89

2017 P

RO

JEC

TS Converted 52 under-utilised beds

to higher-demand disciplines,

including the transfer of 10 under-

utilised beds to Netcare Milpark

Hospital.

Upgraded the theatre complexes at

Netcare’s Akasia, Cuyler, Greenacres

and Jakaranda hospitals.

Upgraded wards, converted beds

and replaced infrastructure at

Netcare’s Jakaranda, Kingsway,

Krugersdorp, Linksfield, Olivedale,

Margate and St Augustine’s

hospitals.

Completed oncology installations

at Netcare’s Pinehaven and

Christiaan Barnard Memorial

hospitals.

Opened a Gamma Knife facility at

Netcare Milpark Hospital.

Installed the intraoperative

treatment machine at Netcare

Milpark Hospital.

Upgraded radiology treatment

equipment at Netcare Olivedale

Hospital.

PROJECT PIPELINE

Transfer 100 beds from Netcare Rand

Clinic to Netcare Milpark Hospital.

Convert Netcare Bell Street Hospital to a

dedicated psychiatric facility.

Transfer 98 under-utilised beds to:

> Netcare Pinehaven Hospital: 31 beds.

> Netcare Pretoria East Hospital:

29 ICU beds.

> Netcare Umhlanga Hospital:

26 haematology beds.

> Netcare Vaalpark Hospital:

12 paediatric beds.

Replace the catheterisation laboratories at

Netcare’s N1 City, Olivedale, St Anne’s,

Sunninghill and Unitas hospitals.

Refurbish Netcare St Augustine’s Hospital.

Open new chemotherapy centres at

Netcare’s Park Lane, Greenacres, Montana

and Waterfall hospitals.

Transfer the oncology centre at Netcare

Rand Hospital to Netcare Milpark Hospital.

Upgrade radiology treatment equipment at

Netcare N1 City Hospital.

NETCARE LIMITED Annual integrated report 2017



Given our development of

specialised medical precincts and

expanding core services, our

ancillary services play an important

role in the Group’s overall strategic

offering.

Primary CareAs funders look to optimise costs, they will drive

the increased use of and demand for day theatres

and sub-acute facilities. Developing a more

competitive sub-acute and day theatre offering,

therefore, remains a key focus. Day theatre activity

has grown, mostly from the new Kimberley and

Upington day theatres, which are performing well.

The timeframes for some of our expansion plans

have been extended as we work to bring the new

facilities to profitability. By the end of 2018, we will

have a network of 17 day theatres and three

sub-acute facilities, which we believe will position

us well to extend our partnership with doctors and

medical schemes. Bed transfers, reclassification

and utilisation in our core acute facilities considers

this alternative capacity in our network.

We continue to position the division for the

introduction of National Health Insurance, given its

importance as a provider of preventative care and

its intermediary role between primary and acute

care, with GPs being the gate keepers for

specialist referrals. We will facilitate initial

screening for breast and prostate cancer and

deliver cancer awareness through the Medicross

practices.

Many Medicross practices are well established,

resulting in some stagnation in growth. To address

this concern, enhance patient experience and

increase the number of facilities regarded as

premier practices by funders, a project to refurbish

and rebrand Medicross is underway. Our

refurbishments will increase our capacity to

accommodate more doctors and dentists where

necessary, and in 2018, we will start a long-term

project to modernise the physical appearance of

these facilities.

Our upgraded administration systems will improve

our services to meet the needs of both patients

and healthcare practitioners.

Netcare Occupational Health typically services the

public, mining and industrial sectors, and we

tender for quality contracts when they arise. Two

new contracts were secured during the year.

AN

CIL

LA

RY

SER

VIC

ES


91

2017 P

RO

JEC

TS Opened day theatres in Kimberley and

Upington in the Northern Cape, primarily

servicing ophthalmic and dentistry cases.

Opened the Highway Sub-acute and

Rehabilitation Hospital in Hillcrest,

KwaZulu-Natal.

Medicross practices were opened in East

London (Eastern Cape) and Wellington

(Western Cape).

PROJECT PIPELINE

Open the Richards Bay Day Hospital.

Open the Link Day Hospital and Medicross practice in

Cape Town as part of the Netcare Christiaan Barnard

Memorial medical precinct.

Open new Medicross practices in Ballito (KwaZulu-

Natal) and Lyttelton and Moot (Gauteng).

Launch an innovative dentistry offering.

Refurbish seven Medicross practices.




Emergency servicesWe have undertaken an in-depth operational review of

Netcare 911, and 2018 will be a transitional year as the new

strategy is bedded down. The operations in Mozambique will

be discontinued, after the economic and political situation

impacted our contracts with mining clients. The road and air

operations in SA will re-negotiate or terminate ineffective

capitation1 arrangements, and only sustainable industrial

and mining emergency care contracts will be continued.

Our intention has always been to provide emergency

services to preserve the sanctity of life. This supports our

vision to be a valued corporate citizen to the societies in

which we operate. However, increasing requests to attend to

numerous non-critical, non-remunerative calls impairs our

ability to respond to life-threatening calls and negatively

impacts on our operational performance. Going forward,

Netcare 911 will respond to all life-threatening situations and

other responses will be better managed around advanced

care cases. We will also better align our Netcare 911 bases

and reduce our reliance on external service providers

through better utilisation of our own fleet. We are committed

to carefully balancing our services to people requiring

emergency care with operating a long-term sustainable

business. During the year, we extended the ICU ambulance

service to KwaZulu-Natal.

To improve our capitation business we have developed a

more innovative menu of service offerings.

The aeromedical emergency services performed well during

the year and we will restructure this offering for some

corporate clients in line with the changes we make to their

capitation contracts. These are specialised services and we

do not expect this need to change in the coming year.

Our industrial contracts, which provide on-site medical care

services at 28 mining, construction and energy sites, enable

employers to meet their occupational health and safety

requirements. Industrial contracts make up approximately

18% of our emergency care business, and our active sites

performed well in 2017. Two new contracts were acquired

during the year, and three inefficient bases were closed. We

view the industrial contracts business as a growth area for

Emergency services.

1 Capitated contracts are contracts where a client is charged a fixed fee

calculated per member per month for a suite of services.


93

Dialysis servicesWe have expanded National Renal Care facilities where there

is sustainable demand supported by local nephrologists,

bringing the total number of dialysis stations in the network

to 843. New renal care facilities were opened in Berea

(KwaZulu-Natal) and Randfontein (Gauteng), and we

relocated the Kimberley facility. The new clinics are

performing in line with expectations and no renal care

facilities were closed during the year. Opportunities to gain

access to new geographies are being explored.

We have acquired the minority shareholding of Melomed

Renal Care, which increases our ability to deliver quality care

to more patients.

Based on their benchmarking of service provider offerings

and tariffs, funders constantly review their funding models

and criteria when negotiating tariffs. The long-term impact of

these changes requires careful consideration, and with the

guidance of the Tariff Committee we will implement an

appropriate strategy to remain sustainable. We are well

placed to engage appropriately with funders as we have a

good understanding of our costs and break-even points for

each treatment modality.

National Renal Care’s shared-care renal centres offer

patients the freedom to dialyse at their convenience and at a

centre of their choice. However, the timeframe for

implementation is influenced by the need to engage with and

gain nephrologist support and to familiarise patients with the

new approach. In the past, we investigated home

haemodialysis; however, this alternative delivery method is

not readily supported. We will continue to explore other

flexible and efficient delivery processes.

In 2016, we appointed a National Acute Manager to focus on

our key relationships and to promote our acute treatment

service. In 2017, this role matured and our acute teams have

benefitted from this leadership with acute volumes showing

good growth. National Renal Care also expanded its

technical team by insourcing technicians, who are skilled to

deal with minor technical issues, and move equipment

between facilities.




OPERATIONAL EXCELLENCE

Our operational excellence projects are designed to support

our profitability. This is necessary in an environment where

healthcare tariff increases are typically lower than

inflationary cost pressures and funder efficiency discounted

options (EDOs) are necessary to grow market share, albeit

at lower tariffs. Innovation around the funding of clinical

procedure pathways, such as arthroplasty, may also impact

pricing in the future.

Across the Group, upward pressure on the cost base is

particularly related to wages, consumables, equipment and

maintenance, and utilities. Cost containment and efficiency

programmes have been a focus for a number of years to

support our effort to absorb tariff pressures and retain

preferred provider status. Overhead expenses increased by

4.7% compared to 2016.

Staff costsOur business model requires that we continuously balance

payroll costs with the quality of our skills and levels of care

to deliver on our business imperatives, while ensuring

sustainable financial returns. Over the past three years we

have implemented electronic workforce planning tools in

our hospital wards and theatres to enable us to plan staff

requirements by shift. We also use an optimum mix of

permanent, agency and student nurses to provide the

appropriate level of acuity in each ward. These initiatives

have resulted in substantial savings in payroll costs while

still meeting ward acuity targets in all regions, supporting

our achievement of the Quadruple Aim. We are investigating

the feasibility of implementing electronic day theatre and

sub-acute planning tools in Primary Care; however, due

to the limited scope to flex staff in these facilities, our

focus will be on gaining efficiencies through better

allocation of resources.

While the annual salary negotiations with four unions were

successfully concluded in 2017, the scarcity of specialised

nurses and paramedics in SA, together with above

Consumer Price Index (CPI) expectations created by wage

settlements in government and other industries, has meant

that negotiated wage increases exceeded tariff growth.

With the payroll comprising 66.8% of our operating cost

base, this has a material impact on our margins. We see little

in the current economic climate to suggest that wage

negotiations in 2018 will be any easier.

ConsumablesOur green procurement project is an automated inventory

procurement tool, which has been running since July 2016.

It is designed to optimise stock levels, by ensuring that we

utilise spare stock within the Group before generating an

external order. It has been successfully rolled out in the

Hospital division and has decreased overall stock days from

24.8 to 22.2 without impacting day-to-day operations,

realising cost savings and working capital benefits.

Equipment and maintenance Specialists within the centralised procurement function keep

abreast of advances in medical technology, and balance

new medical developments and physician demand for the

most advanced medical equipment with bulk pricing

negotiations and capital allocation. Capital expenditure on

equipment amounted to R809 million (2016: R1 110 million),

including investment in the relocated Netcare Christiaan

Barnard Memorial Hospital, radiology installations and

expansion projects at a number of hospitals, and

R321 million (2016: R280 million) was spent on maintenance.

Technical teams based at each Netcare hospital are

responsible for the maintenance and refurbishment of

facilities, taking into account fluctuating demand for bed

types and theatre usage.

A Group-wide project to enhance the integration and

reporting of asset maintenance across all maintenance

systems was launched during the year. The first phase of the

project entailed the standardisation of asset and

maintenance information and the development of

dashboards.


95

Utilities

Unit 2017

% change

on 2016 2016 2015

Baseline

(2013)

ENERGY USE

Total energy consumed gigajoules 1 052 635 (7.8%) 1 141 465 1 091 125 1 038 540

CO2 EMISSIONS

Scope 1 emissions1 tonnes CO2e2 33 339 (27.6%) 46 034 38 056 38 337

Scope 2 emissions tonnes CO2e 218 252 (7.5%) 235 975 231 036 231 467

Total Scope 1 and 2 emissions tonnes CO2e 251 591 (10.8%) 282 009 269 092 269 804

Total emissions, including Scope 3 tonnes CO2e 281 632 (10.2%) 313 552 300 829 311 765

CO2 INTENSITY RATIOS

Ratio of Scope 1 and 2 emissions

to revenue

tonnes

CO2e/Rm 13.16 (11.5%) 14.88 15.56 20.09

Ratio of Scope 1 and 2 emissions

to registered beds

tonnes

CO2e/bed3 23.72 (11.6%) 26.82 26.92 33.56

WATER CONSUMPTION

Total water consumption kilolitres (kl) 2 015 752 (6.1%) 2 147 653 2 148 554 1 803 026

Ratio of total water to registered beds kl/bed3 190 (6.8%) 204 215 194

Ratio of total water to revenue kl/Rm 105 (7.1%) 113 124 116

WASTE

Healthcare risk waste incinerated tonnes 72 (8.9%) 79 70 68

Healthcare risk waste treated and

landfilled tonnes 4 630 (10.7%) 5 187 4 756 4 110

Landfill waste tonnes 4 692 38.8% 3 380 3 213 6 860

Recycled waste tonnes 1 791 (39.3%) 2 949 1 074 517

Ratio of total waste generated to

registered beds kilograms/bed3 886 7.8% 822 804 1 188

Ratio of total waste generated to revenue kilograms/Rm 491 (7.7%) 456 465 729

1 Scope 1 emissions are driven by external factors such as supply interruptions requiring the use of generators, patient needs driving medical gases and road and air

ambulances.

2 Carbon dioxide equivalent.

3 Registered beds.




In 2013, we implemented a five-year strategy to achieve a

35% reduction in energy intensity over 10 years. To date, 66

energy efficiency and renewable energy projects have been

completed, with 58 underway and 254 proposed or in

development.

Over the past five years, the Sustainability Committee has

approved energy, water and waste projects to the value of

R507 million, including projects scheduled for

implementation in the next two years. Of this amount,

R473 million is funded by the Nedbank Corporate Bank

loan in association with the French Development Agency.

The Hospital division accounts for 92.2% of our energy

usage which totalled 233 gigawatt hours (GWh) for the year.

Our targets are to reduce energy use to 224 GWh by 2018

and to 183 GWh by 2023 based on zero activity or floor

area growth.

This year, for the first time, we have achieved savings on our

electricity costs in monitored sites, despite tariff increases

and additional beds.

Our electricity expense for 2017 was R288 million

(2016: R279 million). Had we not implemented our

sustainability projects, the cost would have been

R348 million for the year. Our solar photovoltaic (PV)

installations generated 7.9 megawatt hours of renewable

energy, contributing more than R15 million to the electricity

saving. Since 2013, we have achieved cumulative savings

on electricity of more than R129 million.

The cost of water per bed increased by 12.3% in 2017.

Over the past five years, we have spent R72 million on

backup water storage to ensure a 48-hour backup supply

in high priority hospitals. Over the next two years, up to

R60 million has been budgeted for water initiatives that will

reduce our demand on municipal sources.

Our healthcare risk waste costs have been reduced

substantially during the year and further savings are

expected from the implementation of an integrated waste

management solution.

Electricity intensity on metered facilities

0

5 000

15 000

20 000

25 000

2013 2016

21 8

42

2017

20 3

51

10 000

kWh per bed in use per year

kWh per patient day

kWh

1/b

ed i

n u

se/y

ear

80

90

100

105

110

95

85

24 0

94

88

85

96

kWh p

er

pati

ent

day

9.3%

6.8%

1 Kilowatt hours.

Financial impact due to optimisation (R million)

230

250

270

290

370

2013 2014 2015 2016 2017

310

235

– Cost of electricity without optimisation

– Actual cost of electricity

330

350 348

288


972017 P

RO

JEC

TS Completed the national lighting upgrade in the

Hospital division and Primary Care, replacing

over 129 000 luminaires with more efficient units

across a number of hospitals and Medicross

facilities. The annual energy reduction is

estimated at over 15 GWh for the Hospital

division and 900 000 kWh for Primary Care,

with a combined financial impact of around

R20 million.

Installed 11 solar PV systems in the Hospital

division and one in Primary Care, bringing the

total network of installations to 38. Together

these systems will generate 14 GWh of energy

and provide an annual electricity saving of

around R18 million.

Follow-up audits were undertaken in certain

facilities to understand building and operational

changes that have taken place since 2013 and

to identify further energy efficiency

opportunities.

Extended the electricity metering platform,

which covers more than 90% of all registered

beds for the Hospital division, to include certain

Primary Care sites, which together account for

50% of Primary Care’s electricity expense. We

also started installing water meters, and have

completed installations in 50% of the hospital

network, with 100% coverage expected in 2018.

Started installing boreholes and water filtration

plants at four hospitals in the Western Cape.

13 bulk potable water facilities were installed in

the Hospital division, and a schedule of

implementation is in place for remaining

hospitals.

Completed the investigation of the reverse

osmosis process used by National Renal Care.

Based on the results, this process will be used

to feed potable water facilities where National

Renal Care is co-located with our hospitals.

Put out a tender for an integrated waste

management solution to convert waste streams

to value-generating streams and support our

zero waste to landfill goal.

Introduced waste dashboards to communicate

with facilities on their performance against set

targets. The dashboards give facilities the

opportunity to benchmark themselves against

other facilities in the network and poor

performance is managed centrally. Pleasingly,

the initial results indicate an 11% reduction in

healthcare risk waste.

Focused drive to improve awareness and

management of waste segregation to reduce

the environmental impact of medical waste.

LOOKING FORWARDNetcare has committed to Science Based Targets (SBT) in line with the Paris Agreement and the COP21 Sustainable Development Goals to keep global warmingbelow two degrees celsius, and is one of the first seven African companies to do so. We are working with the World Wide Fund for Nature to develop a final target for the healthcare sector in SA, although it is expected that the final target for SA will be qualified due to the country’sspecific electricity generation trajectory, which does notsupport the global trajectory which aims to have 1% of allelectricity in 2050 being generated from fossil fuels.

To meet SBTs and lower our electricity costs, we will:

> Continue to expand our solar PV network, invest in solar domestic hot water projects and recover waste heat from our heating, ventilation and air-conditioning systems.

> Investigate fuel cell technology as an alternative energy source for Netcare Milpark Hospital.

> Develop a Grid Isolated Energy Transfer programme to export electricity from our renewable sources to thegrid during high-generation periods and import from the grid during low-generation periods.

Based on the outcome of water feasibility studies, we will consider the implementation of wastewater treatment plants, which are supported by the Department of Water and Sanitation in the Western Cape and the City of Cape Town.

We also plan to install a desalination plant at Netcare Christiaan Barnard Memorial Hospital.

To support new buildings and refurbishment projects, wewill develop a Consultant and Facility Sustainability Guideline, which will ensure that green design principles are considered and that optimum efficiencies, such as standard design principles, become part of the way in which we tackle these projects.

Global Reporting Initiative (GRI) G4 report.

Netcare’s response to the Carbon Disclosure Project:

http://www.netcare.co.za/Netcare-Investor-Relations/

Governance/SRI-FTSE.




Centralised servicesDuring the year, the centralisation of the Hospital

division’s credit control function at the Shared

Service Centre in Sunninghill, Johannesburg, was

completed. We expect to improve our collection

processes and cultivate a single improved

relationship with funders as a result of this project.

Of the 194 employees impacted by the

centralisation of credit control, 58 were relocated

to the central office, 101 were placed in alternative

or retained positions in their business unit,

23 employees resigned and 12 accepted voluntary

severance or early retirement packages.

The benefits of centralising the non-patient facing

functions include staff optimisation through

standardised workflows, better use of specialist

roles, consistent application of policy, automated

processing and use of vacant office space. Other

services that have been centralised include IT,

human resources and payroll management,

procurement, creditor and payment management,

treasury, credit control, property management,

environmental sustainability and the Netcare 911

call centre.

LOOKING FORWARDWe will continue to review head office and regional support structures across all divisions. Our aim will be to achieve business process changes and efficiency measures, and ensure that our organisational structures are appropriately resourced to achieve the Group’s strategic objectives. We expect to realise thenext level of efficiencies from revised business processes and the acceleration of the digitisation and automation journey discussed on page 85. In 2018, more administration and financial functions will be centralised in the Hospital division, Primary Care and Netcare 911.


sa operations review€¦ · in 2017, the netcare milpark breast care centre of excellence became...

Documents