INTR IN TROD ODUC UCTION TION OF M OF MEDIC EDICLINIC LINIC REPRESENT REPRES ENTATIVES TIVES • Koert Pretorius Chief Executive Officer • Braam Joubert Chief Financial Officer • Roly Buys Strategy Development Executive • Schalk Burger SC 2
PURPOSE PURPOSE OF THE OF THE PRES PRESENT ENTATION TION • To inform the public • To provide insight on the interaction between Mediclinic and various stakeholders in the private healthcare sector • To provide regulatory context 3
SCOPE SCOPE OF THE OF THE PRES PRESENT ENTATION TION • Provide a broad outline of Mediclinic's business • Setting the scene for further engagements • Await outcome of data, information and profitability analyses 4
OUTL OU TLIN INE 1. Introduction to Mediclinic 2. Regulatory Context 3. Mediclinic Business Model 4. Patients 5. Healthcare Professionals 6. Medical Schemes, Administrators, and Managed Care Organisations 7. Suppliers and Support Services 8. Expenditure on Private Hospital Services Price and Input Cost Increases at Mediclinic’s Hospitals 9. 10. Concluding Remarks 5
INTR INTRODUCTION ODUCTION TO M O MEDICLINIC EDICLINIC 6
INTR IN TROD ODUC UCTION TION TO O MEDIC MEDICLINIC LINIC HIST HI STOR ORY FY2015 1986 1995 1996 1998 2002 2006 2015 SA HOSP SPITAL ALS Acquired Medicor Acquired Hydromed Acquired Hospiplan Acquired Curamed Acquired the Mediclinic listed on Group Group Group Group Protector Group 73 JSE NA (+11 Hospitals) (+4 Hospitals) (+12 Hospitals) (+6 Hospitals) (+4 Hospitals) CLINICS 2007 2010 2014 35 2014 COUNTRIES CH Acquired Hirslanden Acquired Klinik Acquired Clinique La Acquired Swissana Group Stephanshorn Colline Clinic Meggen 5 (+13 Hospitals) (+85 beds) (+62 Beds) (+22 Beds) 2007 2008 2011 2012 2015 2015/16 Acquisition of controlling Opening of flagship Acquired 3 clinics with Buyout of GE Healthcare Acquired land to build UAE Acquisition of interest in Mediclinic hospital, Mediclinic City acquisition of Emaar and Varkey Group stake Mediclinic Parkview Al Noor Middle East Hospital in Dubai clinics in Emirates Healthcare Hospital Source : Company information 7
IN INTR TROD ODUC UCTION TION TO O MEDIC MEDICLINIC LINIC MEDICLINIC MEDIC LINIC SOUTHERN SOUTHERN A AFRICA FRICA LISTED PRIVATE HOSPITALS MARKET SHARE • The South African private hospital market has three SOUTH AFRICA PRIVATE HOSPITAL BED MARKET listed players; Netcare, Life Healthcare and Mediclinic SHARE - Together they account for c. 73% of the private hospital market Independent 16% SA REVENUES Mediclinic # OF BEDS (ZAR MM) (2) 22% (1) 9,444 (2) NHN 15,738 11% 8,647 (3) 13,749 Life Netcare 23% 28% 7,885 (2) 12,323 Source: Company information, National Hospital Network, Broker estimates Source : Company information Notes 1. The National Hospital Network (NHN) is an association of 165 independent private hospitals, day clinics and other facilities 2. As of 31 March 2015 8 3. As of 30 September 2015
IN INTR TROD ODUC UCTION TION TO O MEDIC MEDICLINIC LINIC GEOG GEOGRA RAPHIC PHIC FOO FOOTP TPRIN RINT SOUTHERN AFRICA GEOGRAPHIC OVERVIEW Region Number of Hospitals Western Cape 17 Pretoria Hospitals Otjiwarongo • Mediclinic Gynaecological Mediclinic Hospital Otjiwarongo • Mediclinic Heart Hospital • Mediclinic Kloof Northern Cape 2 • Mediclinic Medforum Windhoek • Mediclinic Midstream Mediclinic • Swakopmund Mediclinic Muelmed Windhoek Mediclinic Swakopmund Johannesburg Hospitals Limpopo • Mediclinic Morningside Mediclinic Gauteng 12 • Mediclinic Sandton Polokwane Lephalale • Tzaneen Wits University Donald Mediclinic Mediclinic Gordon Medical Centre Limpopo Tzaneen Mediclinic Namibia Thabazimbi Kwazulu-Natal 4 Mediclinic Nelspruit Brits Legae Mpumalanga Mediclinic Nelspruit Mediclinic Brits Pretoria Mediclinic Barberton Gauteng Potchefstroom Highveld Mediclinic Barberton Mediclinic Potchefstroom Mediclinic Vereeniging Limpopo 4 Mediclinic Mediclinic North West Mediclinic Secunda Ermelo Emfuleni Upington Gariep Newcastle Mediclinic Mediclinic Gariep Free State Mediclinic Newcastle Upington Mediclinic Welkom Hoogland Mpumalanga 5 Kwazulu-Natal Kimberly Mediclinic Mediclinic Welkom Mediclinic Kimberly Howick Bloemfontein Mediclinic Mediclinic Victoria Pietermartizburg Bloemfontein North West 2 Peninsula Hospitals Mediclinic Northern Cape • Mediclinic Cape Gate Pietermartizburg • Mediclinic Cape Town • Mediclinic Constantiaberg South Africa • Mediclinic Durbanville • Mediclinic Louis Leipoldt • Free State 3 Mediclinic Milnerton Eastern Cape • Mediclinic Panorama Western Cape Paarl Mediclinic Paarl Oudtshoorn Mediclinic Klein Karoo Namibia 3 Worcester Vergelegen Plettenberg Bay Mediclinic Mediclinic Vergelegen Worcester Mediclinic Plettenberg Bay George Hermanus Mediclinic George Strand Mediclinic Mediclinic Strand Hermanus Mediclinic Geneva Total 52 Stellenbosch Mediclinic Stellenbosch Source : Company information 9
IN INTR TROD ODUC UCTION TION TO O MEDIC MEDICLINIC LINIC OPERA OPERATION TIONAL O AL OVER VERVIEW VIEW SOUTHERN AFRICA OPERATIONAL OVERVIEW SERVICE OFFERING SPECTRUM OF SERVICES (2014) HOSPI HO SPITALS BED EDS Oral and Maxillofacial 52 7,983 2% Other Neurology 1% 5% Cardiac and Internal Vascular Medicine 7% 26% ADMITTIN TTING EMPL EM PLOY OYEES EES ENT and DOCTO TORS Opthalmology 16,576 7% 2,451 Urogenital 7% DAY CLINI NICS 2 General Orthopaedics Surgery 13% 17% Obstetrics and Gynaecology 15% Source : Company information Source : Company information 10
IN INTR TROD ODUC UCTION TION TO O MEDIC MEDICLINIC LINIC WHA WHAT WE DO T WE DO • Acute care, specialist orientated, multi- disciplinary hospital services and related service offerings o ER24 o Medical Human Resources (MHR) o Medical Innovations • 6 higher education accredited nurse training centres Source : Company information 11
REGULA REGULATOR ORY Y CONTEXT CONTEXT 12
THE THE HEAL HEALTH M TH MAR ARKET KET IN INQU QUIR IRY REGU REGULA LATOR ORY Y CO CONTEXT NTEXT • The Constitution • The National Health Act o OHSC • Competition Act • Medical Schemes Act • Regulatory Authorities o HPCSA; SANC; SAPC; Competition Authorities • Provincial Departments of Health Licensing Regulations 13
MEDICLINIC MEDICLINIC BUSIN USINESS ESS MODEL MODEL 14
MEDIC MEDICLINIC LINIC BUSIN USINES ESS S MO MODEL DEL PR PROVID VIDER ER ENVIR ENVIRON ONMENT MENT HOSPITAL: • Infrastructure (Land, Buildings, Equipment) • Clinical Services (Nursing, Pharmacy) • Support Services (Technical, Admin, Other) • Separate Account DOCTORS: • Admission of Patients • Management of Clinical Process • Separate Account RADIOLOGISTS, PATHOLOGISTS, AND ALLIED HEALTHCARE PROFESSIONALS: • Act on instruction from referring doctor • Separate Account 15 Source : Company information
MEDIC MEDICLINIC LINIC BUSIN USINES ESS S MO MODEL DEL CO COMPOSITION MPOSITION OF HOSP OF HOSPIT ITAL AL ACC CCOU OUNT NT ILLUSTRATIVE EXAMPLE: COMPOSITION OF A TYPICAL HOSPITAL ACCOUNT (INCL. VAT) Fee Income Accommodation tariff code(price) x quantity (volume) xxx (General Ward) Accommodation tariff code(price) x quantity (volume) xxx (ICU) Total Accommodation XXX Theatre tariff code(price) x quantity (volume) xxx Equipment tariff code(price) x quantity (volume) xxx Total Fee Income XXX Pharmaceutical Ethicals tariff code(price) x quantity (volume) xxx Items Surgicals tariff code(price) x quantity (volume) xxx Total Pharmacy XXX TOTAL ACCOUNT (INCL. VAT) XXX 16
MEDIC MEDICLINIC LINIC BUSIN USINES ESS S MO MODEL DEL CO COMPOSITION MPOSITION OF HOSP OF HOSPIT ITAL AL ACC CCOU OUNT NT OVERVIEW OF A TYPICAL HOSPITAL ACCOUNT Ethicals/Medicines Pharmacy 27% 9% 18% Surgicals/Medical Devices Fee Income: Ward, Theatre and Equipment 73% Source : Company information 17
MEDIC MEDICLINIC LINIC BUSIN USINES ESS S MO MODEL DEL CO COMPOSITION MPOSITION OF HOSP OF HOSPIT ITAL AL ACC CCOU OUNT NT OVERVIEW OF THE PHARMACEUTICAL COMPONENTS Pharmacy Component Ethicals/Medicines Surgicals/Medical Devices Regulated by SEP SEP does not apply (No dispensing fee charged) Billed at cost (Net Acquisition Price) Source : Company information 18
MEDIC MEDICLINIC LINIC BUSIN USINES ESS S MO MODEL DEL INPUT IN PUT CO COST STS • Hospitals are highly labour and capital intensive facilities • Capital costs are not directly factored into the tariff escalation calculations • Tariffs should be sufficient for: o the replacement of capital items and; o the opportunity cost of the capital employed 19
MEDICLINIC MEDIC LINIC BUSIN USINES ESS S MO MODEL DEL BR BREAKD EAKDOWN WN OF OF OPERA PERATIN TING CO COSTS STS INPUT COST AS % OF OPERATING COST (EXCL. PHARMACY) Input Weights Nursing Salaries Between 47% and 51% Other Salaries (Admin, Pharmacy, Technical) Between 14% and 18% Repairs and Maintenance Between 4% and 6% Electricity and Water Between 2% and 4% Rates and Taxes Between 1% and 2% Between 7% and 9% Catering, Laundry and Cleaning Between 16% and 20% Other (ICT, Audit Fees, Insurance, etc) 20 Source : Company information
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