Industry News

SA’s hospitals not making excessive returns – PWC study

12 June 2008

In Categories: Industry News

South Africa’s private hospitals do not make as much profit or enjoy the same return on investment as other healthcare sectors according to research findings presented at the annual Hospital Association of SA (Hasa) conference in Somerset West today.

In his return on investment presentation, Jan Groenewald of PriceWaterhouseCoopers showed that when compared with international health stocks or companies on the JSE’s All-Share Index (Alsi), local hospital groups do not make excessive returns on average capital employed (ROACE) or excessive profits.

On a comparative US dollar basis and using a methodology that compared like with like, Groenewald said the listed South African private hospitals reflected lower ROACE than both the international averages and the Alsi.

“The listed South African hospital sector also reflected lower economic profits than its international counterparts and the Alsi40 companies,” he said.

In terms of the methodology employed to arrive at these conclusions, Groenewald explained that the calculators could be independently verified; could be used to draw comparisons across sectors and industries; and was intuitive and easy to understand.

In a second major study on private hospitals conducted and presented by Ashleigh Theophanides, head of actuarial and insurance solutions at Deloitte & Touche, more South Africans are not only getting sick but are also getting sicker.

The Deloitte research sample comprised 83% of private multi-disciplinary hospital beds, namely surgical, medical, paediatric, day, ICU, neonatal, high care and maternity.

Adding that a lot more patients occupy hospital beds on week days than over week-ends, Theophanides was able to show that bed occupancy had increased from 62,09% to 64.52% between 2006 and 2007. “On analysing this change in occupancy, we established that 1,91% could be attributed to increased utilisation and 0,52% to length of stay,” Theophanides said, explaining that this had been driven largely by an increase in chronically ill patients.

The nursing situation in private hospitals was also cause for concern said Theophanides, who established that the number of registered nurses – as opposed to enrolled nurses – had dropped from 35% in 1998 to 13% in 2007. “Taking this further, our research also found that the ratio of nurses per 100 000 population at 410 during the period under review was below the international norm of just under 1000. Here again, there was a slight increase in enrolled nurses and enrolled nurse assistants over registered nurses.

A potential further aggravator to this situation, the research found, was that 39% of registered nurses were over 50 years of age while 13% were over 60.