care HOW WE CREATE VALUE 04 Our business model 08 Creating measurable value 14 Creating value for our stakeholders

Transcription

1 02 HOW WE CREATE VALUE 04 Our business model 08 Creating measurable value 14 Creating value for our stakeholders care

2 03 Netcare s ability to create and protect value is premised on our purpose to provide the best and safest patient care. Our investment over the last number of years in our capacity and capability to deliver on this aspiration the facilities that are the backbone of our operations, and the people, brands and reputation at the heart of our contribution to the healthcare systems we serve is supporting our resilience in extremely difficult conditions. Our operational, strategic and financial performance is contingent on the balanced management of capital inputs to our business model, and ensuring that the interests of our stakeholders as the providers of these capitals are served in the outcomes we achieve. This requires that we make carefully considered trade-offs over time, particularly given the funding, competitive and regulatory constraints in healthcare. We create value by providing the most effective, efficient and highest quality healthcare.

3 04 Our business model Our business model We create value by providing the most effective, efficient and highest quality healthcare. We achieve this by developing our people, improving our systems and processes, and eliminating harm and waste in every area of operation. We balance our approach to growth, profitability and value creation for all stakeholders, with generating competitive returns for our shareholders, over the long term. INPUTS ACTIVITIES STRATEGIC PRIORITIES Creating measurable value: page 08. What we do: page 06. Our strategy: page 66. Our relationships Quality, trusted relationships with all key stakeholders, particularly those in the healthcare value chain. Our people and culture Skilled and caring staff, and experienced leadership teams, supported by a valuesbased culture and drive to innovate. Our systems and processes The right people, in the right roles, supported by effective and evolving management systems, with an emphasis on digitisation and improved ways of working. Manufactured assets The purchase, development and maintenance of specialised healthcare facilities and plant, and technologically advanced medical equipment. Natural resources National utilities required to operate, particularly energy and water, with efforts to self-provide. Financial resources Equity capital from shareholders, debt capital from banks and other investors. HOSPITALS PRIMARY CARE EMERGENCY SERVICES DIALYSIS SERVICES PUBLIC PRIVATE PARTNERSHIPS TRAINING Consistency of care Physician partnerships Preferred provider to funders Sustainable financial returns KEY OPERATIONAL MANAGEMENT SYSTEMS Page 07. QUALITY LEADERSHIP PEOPLE MANAGEMENT GOVERNANCE, RISK MANAGEMENT AND COMPLIANCE Governance overview: page 24. How we manage risk: page 34. The Quadruple Aim

4 Our business model 05 Chairman s review on page 17 and Chief Executive Officer s review on page 71. OUR OPERATING CONTEXT OUTPUTS KEY OUTCOMES Operational reviews: pages 76 and 100. Creating measurable value: page 08. PROVIDING THE BEST AND FEST PATIENT CARE The objectives of the Quadruple Aim challenge us to balance the value of our services with their cost to society, recognising that our people and partnerships are fundamental to achieving this balance. WASTE Our activities have unavoidable negative environmental impacts, including carbon emissions and the generation of waste, including medical waste. Utilities: pages 95 and 108. Quality healthcare outcomes Employment Development of national healthcare skills Contribution to healthier societies Sustainable businesses in the supply chain Sustainable financial returns Contribution to the tax base The Quadruple Aim BEST OUTCOMES BEST PATIENT EXPERIENCE DEVELOPMENT AND WELLBEING OF STAFF, LEADERS AND HEALTHCARE PROFESSIONALS MOST COST EFFECTIVE CONTINUOUS BUSINESS IMPROVEMENT ENVIRONMENTAL SUSTAINABILITY Good corporate governance is central to managing the Group in a way that is efficient, accountable, transparent and ethical. We ensure adherence to all applicable laws, regulations, standards and codes. This is achieved through a well-developed governance and risk management framework and policies. The Quadruple Aim is the foundational principle of Netcare s strategic approach. Its objectives cut across all activities in our business, from governance and management systems that ensure oversight, control and delivery against strategy, to the healthcare services we provide, which form an essential part of the national health systems in which we operate.

5 06 Our business model What we do (activities in our value chain) CORE BUSINESS HIGH-ACUITY HOSPITALS Footprint: and > Multi-disciplinary acute medical institutions, centres of excellence, and same-day surgical units. > Emergency and trauma departments. > Specialised cancer treatment through chemotherapy, radiotherapy and brachytherapy. > Psychiatric, rehabilitation and bariatric treatment and services. > Optimised medical pathways for elective procedures such as hip and knee replacements. > The latest medical technology and treatment protocols. > Institutional pharmacies for direct supply, management and dispensing of drugs. > Rape crisis centres. Serious about health. Passionate about care. 59 hospitals with beds, including Lesotho. 56 hospitals with beds. ANCILLARY SERVICES PRIMARY CARE FACILITIES Footprint: and > Family medical and dental centres enable general practitioners (GPs) and dentists to perform initial diagnosis, treatment, specialist referral and advice on disease prevention and management, supported by radiology, pathology, pharmacy and physiotherapy practitioners. > Day theatres and sub-acute facilities support appropriate clinical delivery of non-acute procedures and care. > Netcare Occupational Health provides employee health and wellness services to a contracted corporate client base. EMERGENCY SERVICES Serious about health. Passionate about care primary healthcare centres, 15 day theatres and 66 sub-acute beds. 3 primary care clinics. 1 Including Lesotho. Footprint: Southern Africa > Pre-hospital emergency services. > Specialised helicopter ambulances available 24/7. > Intensive care unit (ICU) ambulance services for the transfer of high-risk, critical patients between medical facilities. > ICU-configured jet ambulance service staffed by doctors, paramedics and nurses for national and international patient transfer. > National emergency operations centre with the capability to geo-locate callers and allocate resources according to urgency. > Contracted services to complex industries for health, safety and risk management. 84 Netcare 911 emergency bases. DIALYSIS SERVICES Footprint: > Netcare has a 50% interest in National Renal Care. > Dialysis services to patients with compromised kidney function, improving their quality of life and life expectancy. 63 renal dialysis facilities.

6 Our business model 07 PUBLIC PRIVATE PARTNERSHIPS SOUTH AFRICA LESOTHO UNITED KINGDOM > PPPs with provincial governments, including facilities management in four public hospitals and co-located private hospitals. > National Renal Care has 13 PPPs, ensuring that dialysis services are accessible to many public-sector patients. TRAINING FACILITIES > Partnership with government to provide public healthcare through the 425-bed Queen Mamohato Memorial Hospital in Maseru and four primary care clinics. > Fifteen-year track record of providing publicly funded healthcare to citizens. > NHS-funded patients can access treatment from private healthcare providers as long as these providers meet set quality standards and NHS pricing. 5 nursing education colleges. 2 emergency and critical care colleges. 4 renal care training academies run by National Renal Care. 13 and 18 National Renal Care facilities accredited to train clinical technology and nephrology nursing students respectively. QUALITY LEADERSHIP OUR KEY OPERATIONAL MANAGEMENT SYSTEMS The Quadruple Aim, an international framework developed by the Institute for Healthcare Improvement, aims to optimise the performance of healthcare systems to create more value in relation to total resources expended. The Quadruple Aim is embedded in our operations through our pervasive quality leadership programmes and organisational culture initiative, the Netcare Way, which underpin our drive to deliver excellent clinical outcomes and consistently high-quality care. PEOPLE MANAGEMENT The Quadruple Aim emphasises the importance of building a culture of collaboration that creates a collective impact on quality and care. Skilled and caring staff are central to our value proposition; therefore we provide them and healthcare professionals with ongoing development, training and support. CONTINUOUS BUSINESS IMPROVEMENT The Quadruple Aim informs the continual optimisation of operational processes to drive efficiencies. Accelerating digitisation improves the quality of time spent with patients, enhances cost management and supports our green procurement initiative. We invest in cutting-edge medical technology and maintain and refurbish our facilities, as they are key components of our value proposition to patients and doctors. ENVIRONMENTAL SUSTAINABILITY Our environmental sustainability strategy aims to secure critical utilities such as water and energy, while containing costs and reducing our environmental impact. and operational reviews on pages 76 and 100 respectively.

7 08 Creating measurable value Creating measurable value INPUTS VALUE CREATED FOR NETCARE (within our value chain) OUR PEOPLE AND CULTURE employees (2016: ). Employee salary-related expenditure: R million (2016: R million). Training spend: : R54 million (2016: R51 million). : 1.9 million ( 2.2 million). Institutional knowledge held by a leadership team experienced in hospital management and the healthcare industry. GROUP employees trained (2016: ). 80.2% of employees participated in the employee engagement survey; communication, eradicating racism, change management, and care, fairness at work and trust in the workplace were cited as areas requiring improvement employees received induction training on Caring the Netcare Way (2016: 3 914). 84.6% of employees participated in performance and career development reviews. 50.0% of employee performance evaluation is based on the Netcare Way behaviours e-learning modules completed (2016: ). 57.6% of employees participated in the BMiSay staff engagement survey (2016: 67.3%), with the communication of change requiring improvement. OUR SYSTEMS AND PROCESSES Re-engineering patient care pathways. Continued refinement of our integrated quality management system. 282 continuous business improvement initiatives implemented with 161 completed. PATIENT CARE The Netcare Hospital division achieved a score of 88.8%, against a balanced scorecard target of 88.0%, for compliance with the DOH s National Core Standards. Working towards ISO 9001:2015 accreditation in % increase in antibiotics consumed by in-hospital patients, a remarkable achievement given the increased prevalence of multidrug-resistant organisms. 97.7% of BMI Healthcare patients agreed that their expectations had been met or exceeded (2016: 98.0%). Continuous development of IT systems and automating front-end processes increasingly freeing up employees to focus on delivering care. Optimised organisational structures for greater efficiency, supporting margins in low tariff environments. Real-time stock billing in using MOBILL and MOBIT achieved a reduction in stock losses of over R32 million. Efficiencies in pharmacy stock management in reduced stock days from 24.8 to 22.2 without impacting day-to-day operations.

8 Creating measurable value 09 VALUE CREATED FOR SOCIETY (outside our value chain) A skilled workforce able to deliver the highest quality care every day (2016: 735) employees enrolled on formal nursing qualifications and 229 in our in-service nursing programmes (2016: 169). Nurses and paramedics trained in excess of our needs, contributing to s national healthcare development. Knowledge sharing with healthcare professionals, funders and regulators, contributing to quality healthcare outcomes. Consistency in care supports best outcomes and cost-effective treatment. KEY TRADE-OFFS LINKED TO DIGITITION Technology is revolutionising the way healthcare is managed and delivered. As we focus on becoming a digitally enabled enterprise, our capital investment in secure, reliable and effective IT systems is expected to grow in the short to medium term. Together with the implementation and upgrading of IT systems, our business improvement programmes include centralising and streamlining processes. These advancements strengthen our relationships with patients, healthcare specialists and funders as they realise mutually beneficial outcomes in enhanced quality of care, reduced risk and greater cost effectiveness. However, the change management required and the cost to train employees to adhere to new systems and processes needs to be carefully managed, to mitigate potential disruption to our operations and ensure our IT investments achieve their intended objectives. We are committed to responsibly handling redundant positions arising from automation and process re-engineering and the impact on people, and society. We actively seek opportunities for reskilling and redeploying people wherever possible, and headcount reduction is achieved largely through natural attrition. Where changes in the conditions of employment or retrenchments as a last resort are necessary, we ensure due process and close engagement with unions. The digitisation of our processes also increases our exposure to IT risks and cybercrime, requiring ongoing investment to ensure that systems are resilient and sensitive data is protected. Our ability to deliver profitable growth, and therefore sustainable value creation, depends on leveraging digitisation and changing the way we do things, to achieve efficiencies in an environment in which tariff growth is lower than the increase in input costs.

9 10 Creating measurable value INPUTS VALUE CREATED FOR NETCARE (within our value chain) MANUFACTURED ASSETS Investment in capital assets: : R1 553 million (2016: R2 054 million) of which R890 million was spent on upgrades and new equipment. : 52.4 million (2016: 40.1 million). Optimised use of medical infrastructure and equipment. Enhanced ability to attract and retain specialists and healthcare professionals. Grow market share and improve occupancy in a competitive environment. OUR RELATIONSHIPS Our key relationships, and how they affect our ability to create value. Patients Employees Specialists Primary healthcare providers and allied healthcare professionals Funders Suppliers Regulators, government and communities Investors DOCTOR ENGAGEMENT More than (2016: 2 400) specialist and (2016: 7 900) GP visits. Over GP and healthcare professional visits (2016: ). PROFESSIONAL DEVELOPMENT INTERVENTIONS More than 35 professional development events delivered (2016: 90). Over professional development events held (2016: 8 000). DIVERSITY AWARENESS AND EMPLOYEE GRIEVANCES (2016: 4 405) employees attended human rights training and 47 (2016: 122) attended diversity training. Five¹ employee grievances reported and, through the anonymous toll-free line, 18¹ alleged incidents of discrimination and harassment. All incidents have been resolved and action plans implemented where needed. PREFERENTIAL PROCUREMENT 67.5% of total procurement spend was measurable under the Department of Trade and Industry s B-BBEE scorecard (2016: 61.4%). 1 Reported for the first time.

10 Creating measurable value 11 VALUE CREATED FOR SOCIETY (outside our value chain) Investment in capabilities and capacity within the private healthcare system, which serves the needs of employed citizens, eases the burden on public healthcare providers and enhances national healthcare infrastructure. 14 doctors assisted with their academic studies (2016: 28). Treated indigent patients needing emergency medical care (2016: 5 323). Ranked 50th in the 2017 Top 100 Most Empowered Companies on the JSE. Won the 2017/18 Ask Afrika Orange Index Award for service excellence in the private hospitals category. Trained learners not employed by Netcare (2016: 1 345). KEY TRADE-OFFS LINKED TO REGULATION Most of our medical purchases (medicines, consumables and equipment) are procured from international suppliers, which limits our ability to direct services to black businesses and impacts negatively on our B-BBEE score. We are investigating opportunities to direct more of Netcare s procurement to companies and have revised our enterprise and supplier development framework to achieve this objective. Our participation in the Healthcare Market Inquiry (HMI) and input to the National Health Insurance (NHI) process in, both directly and through the Hospital Association of South Africa (HA), entails significant cost and management time. This includes the commissioning of independent research to analyse a number of issues, including hospital concentration, bargaining power and profitability; international quality benchmarking; and the contribution of the private hospital sector to the economy. However, although the implications of the HMI and NHI remain unclear, our contribution is aimed firstly at protecting the interests of our stakeholders. We hope that the HMI will promote evidence-based and workable ways to ensure the wider delivery of quality healthcare. R26 million spent on corporate social investment (CSI) initiatives with approximately 91.7% of beneficiaries being black (African, Coloured and Indian) people (2016: R37 million). R13 million of CSI spend was invested in entities that train and develop doctors and in 14 registrar and fellowship posts.

11 12 Creating measurable value INPUTS VALUE CREATED FOR NETCARE (within our value chain) Energy consumption: : 1.05 million gigajoules (GJ) (2016: 1.14 million GJ). : megawatt hours (MWh) (2016: MWh). Water consumption: : 2.02 million kilolitres (2016: 2.15 million kilolitres). Approximately R60 million saved on electricity costs through environmental sustainability initiatives (2016: R30 million). 15.5% reduction in electricity used per patient day, compared to 2013 baseline (metered facilities). 6.2% reduction in water consumption against 2015 baseline. 7.1% reduction in gas and electricity consumption. NATURAL RESOURCES R132 million invested in environmental sustainability in (2016: R167 million). FINANCIAL RESOURCES Net revenue: R million (2016: R million 1 ). Equity: R8 862 million (2016: R million). Net debt: R6 385 million (2016: R5 543 million). Capital expenditure to replace and expand assets: R2 447 million (2016: R2 822 million). 1 Restated for discontinued operation. A strong balance sheet. Total dividend: 95.0 cents per share (2016: 95.0 cents). Ranked 22nd in s Top 50 Most Valuable Brands for 2017 (an analysis conducted by Brand South Africa in partnership with Brand Finance). R49 million distributed to beneficiaries in through the B-BBEE Health Partners for Life trusts (2016: R74 million). 1 Restated for discontinued operation. Key performance indicators linked to strategy: page 66.

12 Creating measurable value 13 VALUE CREATED FOR SOCIETY (outside our value chain) Reduced reliance on municipal electricity and water eases the burden on national utility supplies. Recycling reduces the waste diverted to landfill, and responsible treatment of medical waste prevents public and employee health risks. WASTE tonnes (2016: tonnes) of waste generated, with 72 tonnes (2016: 79 tonnes) of healthcare risk waste incinerated. 512 tonnes of infectious medical waste generated (2016: tonnes). CARBON FOOTPRINT tonnes of carbon dioxide equivalent (CO 2 e) (2016: tonnes of CO 2 e) tonnes of CO 2 (2016: tonnes of CO 2 ). R million total wealth created (2016: R million 1 ). R874 million taxes paid to governments (2016: R950 million). Economic contribution of the private hospital sector (HA members) in : > Contributed 1.3% of s GDP. > Paid R26 billion in salaries. > Sustained up to jobs with another five jobs supported for every person employed by a HA member. > For every R100 of HA members value added, another R123 are supported in the economy. > R28.9 billion in profits for local partners and suppliers. 1 Restated. 2 Per the Econex review commissioned by HA. Value-added statement: page 127.

13 14 Creating value for our stakeholders Our purpose, to deliver the best and safest patient care, requires that we manage a complex range of critical relationships. To support relationships that are mutually beneficial in the long term, we must ensure that we: > Clearly communicate our strategic priorities. > Have well-defined roles and expectations, especially in relation to our partners in the healthcare value chain. > Consistently engage in relevant interaction and support, underpinned by appropriate measurement tools. > Implement best practice governance and reporting. Value for EMPLOYEES is created by: > A work environment that fosters a caring and high-performance culture Living the Netcare Way that encourages, recognises and rewards outstanding contributions to the business. > Investing in their training, and professional and career development. > Providing a safe clinical environment that enables them to deliver the highest standards of care. > Maintaining proactive and constructive relationships with unions that contribute towards a committed workforce. > Comprehensive employee wellness programmes, including developing resilience to change. EMPLOYEES Nurses, paramedics, pharmacists, management and administration teams, information technology (IT) specialists, facilities management teams and contract staff. PATIENTS Medically insured, public, self-pay, foreign government-funded and indigent patients. Value for PATIENTS is created by: > Access to world-class healthcare and medical technology, and specialised centres that provide holistic treatment for specific conditions. > Aspiring to deliver the highest clinical quality outcomes and best practice models of care. > Focusing on the quality of their experience. > Asking, listening, understanding, and responding to their concerns. > Attracting and retaining experienced and dedicated doctors. Creating value for our stakeholders REGULATORS, GOVERNMENT AND COMMUNITIES Authorities that regulate providers and funders in the healthcare system, public sector partners, communities, sponsorship partners and non-profit organisations. The key concerns raised by our stakeholders and how we are responding are reported on page 48 as part of our responses to material matters. The Chairman s review on page 19 provides a response to concerns raised by shareholders at the annual general meeting. A more comprehensive discussion on our key relationships, including our engagement channels, is available in the stakeholder engagement report. Value for REGULATORS, GOVERNMENT AND COMMUNITIES is created by: > Informing health policy through independent research and engagement with policymakers. > Collaboration with government to find solutions to extending access to quality healthcare in. > CSI programmes that promote access to healthcare for disadvantaged communities.

14 Creating value for our stakeholders 15 Value for SPECIALISTS is created by: > Ensuring the best clinical outcomes through: A world-class quality management system. Collaboration to achieve targeted clinical outcomes. Business process alignment with the Quadruple Aim. Quality nursing support and the most clinically advanced and appropriate medical equipment, consumables and medicine, as well as optimal facility infrastructure. > Training sessions and forums that facilitate their continuous professional development. SPECIALISTS Specialists across all clinical disciplines. PRIMARY HEALTHCARE PROVIDERS AND ALLIED HEALTHCARE PROFESSIONALS ( only) GPs, dentists, radiologists, pathologists and therapists. FUNDERS Private medical funders, the Compensation for Occupational Injuries and Diseases in, and the NHS in the. Value for HEALTHCARE PROFESSIONALS is created by: > Providing facilities that offer access to clinically appropriate medical equipment with practice management, administration and support services enabled by effective IT systems. > Managing and monitoring the clinical practise of our nurses and pharmacists. > Training sessions and forums that facilitate their continuous professional development. Value for FUNDERS is created by: > Healthy, satisfied patients and their families. > Optimised clinical pathways that manage utilisation and improve outcomes. > Sharing of quality data and collaboration on focus areas. > Efficiencies realised from automated processes. INVESTORS Shareholders and the investment community. Value for INVESTORS is created by: > Competitive financial performance and responsible investment in managing and growing our business for sustainable returns and capital growth. This creates long-term shareholder value and attracts continued investment in the business. SUPPLIERS Companies that provide medicines, equipment and consumables, IT systems, and professional and outsourced services. Value for SUPPLIERS is created by: > Fair and transparent tender processes, and negotiated contractual terms that support suppliers businesses. > Preferential procurement practices and enterprise and supplier development initiatives in, that aim to advance black businesses and drive better performance against B-BBEE scorecard requirements.