Growth Efficiency Sustainability Year end results presentation 2011
www.lifehealthcare.co.za Year End Results Presentation For 12 months ended 30 September 2011 Notes LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011
Agenda 1 Group Review Michael Flemming CEO 2 Financial Review Roger Hogarth CFO Future Guidance 3 Michael Flemming CEO 2 Notes 1 LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011
Highlights: Solid organic growth Growth � � Strong SA growth: � � PPD volume growth : 5.4% � � ALOS (Average length of stay): : 2.2% � � Theatre Cases: : 3.6% Efficiency � � Occupancy : 71.0% � � Normalised EBITDA margin : 25.97% � � Hospital DSO (excl COID) : 26 Days Sustainability � � Net promoter score : 94.8% � � Introduction of new clinical measures � � Nurses trained : 1,300 � � 6 year program for the training of specialists : R78m 3 Notes 2 LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011
Strategic Priorities Sustainability Growth Efficiency � � Develop the breadth and � � Continue to enhance � � Maintain LHC’s commitment to world class depth of Life’s existing operational efficiencies: hospital network – � occupancy healthcare � � Expand our coverage and – � cost of sales � � Implement sustainable penetration of the SA – � IT human capital strategies market – � administrative � � Ongoing partnership and � � Leverage off aspirational efficiencies engagement with consumerism – � overhead productivity government on healthcare reform � � Position Life for international expansion – focus on India 4 Notes 3 LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011
Growth SA : Paid patient days (PPDs) PPDs 2,000 5.4% 5.4% 1,900 2.5% 1,800 4.4% 4.7% 4.7% 1,700 1,600 7.5% 1,500 1,400 2006 2007 2008 2009 2010 2011 PPDs PPD CAGR of 4.9% 5 Notes 4 LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011
Growth SA : PPDs � � 2011 PPD growth of 5.4% driven by: Category Sub-category of the 5.40% � � Life Bay View New beds � � Life Glynnview 1.84% � � Additional Organic growth 1.35% Existing beds � � Preferred networks � � LOS, disease burden, ageing, 2.21% Existing beds technology Total 5.40% 6 Notes 5 LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011
Growth SA: Beds Additional beds 2011 Capacity pipeline 2012 Capacity expansion 142 122 � � Expansion at 11 hospitals at existing facilities � � Mental Health beds: 92 137 New lines of business � � Life St Josephs: Durban – open in Nov 2011 � � Life Poortview: JHB – open in May 2012 0 45 New facilities � � Piet Retief – open in November 2011 234 304 Total � � May 2011 our bed forecast was 290 beds for 2011 (excl acquisitions) � � Difference is Piet Retief and 11 capacity expansion beds which are coming in 2012 7 Notes 6 LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011
Growth SA: Associates � � Continued our strategy of increasing our shareholding in our associates: – � Life Midmed Hospital: � � 159 beds in Middleburg � � Increased shareholding from 45% to 57% � � Effective date – 1 August 2011 – � JMH: � � 5 Hospitals in Durban with 478 beds � � Made offer to existing shareholders � � Aim to increase shareholding from 49% to between 60% and 70% � � Subject to; – � Shareholder agreement – � Regulatory approval � � Aim to complete transaction by end January 2012 8 Notes 7 LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011
Growth SA: New Lines of Business � � New lines of Business: – � Renal: � � Increase in stations to 78 � � Chronic renal facility in each major centre � � Focus on acute renal – � Mental Health / Acute Rehabilitation : � � Number one private market share � � 21.3% revenue growth 2011 (2.5% of overall revenue) � � Under -supply of beds Life Poortview � � High demand: – � Mental illnesses in top 5 of medical schemes disease profiles – � WHO Global Burden of Disease Report: The leading cause of Dalys (Disability Adjusted Life Year) in 2030 is projected to be Unipolar depressive disorders – � Stroke results in the highest admissions to acute rehabilitation » � CAGR of 14.7% over the last 5 years of stroke cases in acute hospitals Business Sept 2011 Sept 2012 Areas Mental health 223 beds 360 beds JHB, DBN, PE, EL Acute rehabilitation 255 beds 255 beds JHB, PTA, BLM, DBN, EL, CT 9 Notes 8 LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011
Strategic Priorities Sustainability Growth Efficiency � � Develop the breadth and � � Continue to enhance � � Maintain LHC’s commitment to world class depth of Life’s existing operational efficiencies: hospital network – � occupancy healthcare � � Expand our coverage and – � cost of sales � � Implement sustainable penetration of the SA – � IT human capital strategies market – � administrative � � Ongoing partnership and � � Leverage off aspirational efficiencies engagement with consumerism – � overhead productivity government on healthcare reform � � Position Life for international expansion – focus on India 10 Notes 9 LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011
Efficiency � � Efficiency strategy requires putting all EBITDA Margin % the pieces of the jigsaw into place: 1. � ARM pricing strategy which creates % 27 the right incentives 26 2. � Focus on cost of sales management and efficiency 25 3. � Leveraging our fixed cost base 24 through increasing occupancies and brownfield expansion 23 4. � Driving efficiency programs across 22 the group utilising improved systems and work processes 21 5. � Gaining the support, input and buy- 20 in of the doctors 2006 2007 2008 2009 2010 2011 EBITDA Margin % 11 Notes 10 LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011
Efficiency 1: ARM � � Pricing strategy which drives: – � the right behaviours – � sets the correct incentives � � 65% of our revenue is on our ARM: – � Combination of fixed fees and per diems: � � Assume risk on: – � Surgical pricing and utilisation – � Ethical utilisation � � Models continuously reviewed and updated � � All hospital data run through our DRG model to enable comparisons and benchmarking across hospitals, disciplines, doctors 12 Notes 11 LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011
Efficiency 2: Cost of Sales (COS) Management � � Significant investment in information systems, data warehouses, structures and models � � Detailed analysis of complex utilisation data � � Production of timeous, detailed reports for the business � � Stock Classification: – � Surgical Consumables and Medicines are continuously being analysed and categorised into a “functional classification” in order to enable cost comparisons and identify savings opportunities � � Formulary Management: – � Individual hospital compliance to our formulary is reported on – � Formulary changes are managed closely � � Favourable procurement environment: – � Low CPI and a strong currency � � COS management and the favourable environment contributed 0.47% to the increase in the Ebitda margin 13 Notes 12 LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011
Efficiency 3: Increase in occupancies � � Occupancy improvement: Occupancy % – � Increased from 69.5% to 71.0% 73 – � Demand driven by: 72 71 � � Aging 70 � � Disease burden/technology 69 � � Preferred networks 68 � � Growth of medical scheme members 67 – � Impacted by capacity expansion: 2006 2007 2008 2009 2010 2011 � � Over 1,200 beds added since 2006 Occupancy % % PPDs per Age Category ALOS (Average length of stay) 10.0% 3.4 8.0% PPDs (%) 6.0% 3.3 4.0% 3.2 2.0% 0.0% Under 1 1 - 4 5 - 9 10 - 14 15 - 19 20 - 24 25 - 29 30 - 34 35 - 39 40 - 44 45 - 49 50 - 54 55 - 59 60 - 64 65 - 69 70 - 74 75 - 79 80 - 84 85+ 3.1 3 Age 2006 2007 2008 2009 2010 2011 2006 2011 14 Notes 13 LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011
Efficiency 4: Efficiency Programs 60 55 54 55 52 51 � � Good improvement in our DSO: 49 48 50 – � Hospital DSO at 29 days 45 – � Excluding COID hospital DSO at 26 days 40 37 37 36 � � Stock cover: 34 33 35 31 – � 9% below budget 27.6 27.6 30 25.8 – � Rigorous processes in place to ensure 24.6 24.3 23.7 continuity of supply 25 20 2006 2007 2008 2009 2010 2011 Stock cover DSO Days payables outstanding 15 Notes 14 LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011
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