Netcare shares suffer after warning on prescriptive medical aids


SA’s largest listed hospital group, Netcare, was hit on Monday by the biggest one-day drop in its share price in almost two months after it said profits will be squeezed by increasingly prescriptive medical aids.
The schemes restrict members to specific hospitals, allowing them to "shift market share in return for price discounts", Netcare said.
SA’s medical aid schemes were "going to put more and more pressure on the hospital groups to be more selective in admitting patients", said Sentio Capital portfolio manager Imtiaz Suliman.
Netcare warned investors that margins in its hospitals and emergency-services divisions would shrink between 50 and 80 basis points in the second half of the financial year.

"I think it’s a new fact of life," said Netcare CEO Richard Friedland, describing the squeeze as the result of medical schemes offering cheaper options to members.
"So patients are paying less... and at the end of the day we’re providing the same services at a lower price point. In a market that isn’t growing at the moment there are going to be certain constraints, at least for the next year or two."
Friedland said that contrary to perception, "there are loads of competitors out there, despite what the health market inquiry and others tell you.
"In fact, the largest network today is the national hospital network. So it’s no longer simply about three large players. There are a good five or six out there, all competing for the same pie."
The problem for the listed hospital group is that the number of members covered by private medical schemes has remained stagnant as economic growth in SA has stalled.
Netcare, which owns emergency-services division Netcare 911 and medical centre Medicross, posted an 8.5% rise in paid patient days for the six months ended March, but analysts said this was due almost entirely to psychiatric-care group Akeso, which it bought in 2018.
Akeso’s paid patient days were more than 20% higher than in the prior period, but Netcare did not say what it contributed to first-half overall operating profit, which edged up 0.9% to R1.748bn. Revenue rose 5.6% to R10.52bn...

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