how we create value - netcare · we create value by providing the most effective, efficient and...

02NETCARE LIMITED Annual integrated report 2017

HOW WE CREATE VALUE

HOW WECREATE VALUE04 Our business model

08 Creating measurable value

14 Creating value for our

stakeholders

care


HOW WE CREATE VALUE

We create value by providing the most effective, efficient and highest quality healthcare.

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.


Our relationshipsQuality, trusted relationships with all key

stakeholders, particularly those in the

healthcare value chain.

Our people and cultureSkilled and caring staff, and experienced

leadership teams, supported by a values-

based 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 assetsThe purchase, development and maintenance

of specialised healthcare facilities and plant,

and technologically advanced medical

equipment.

Natural resourcesNational utilities required to operate,

particularly energy and water, with efforts

to self-provide.

Financial resourcesEquity capital from shareholders, debt capital

from banks and other investors.

Creating measurable value: page 08. What we do: page 06. Our strategy: page 66.

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.

The Quadruple Aim

ACTIVITIES STRATEGIC PRIORITIES

HOSPITALS

PRIMARY CARE

EMERGENCY SERVICES

DIALYSIS SERVICES

PUBLIC PRIVATE PARTNERSHIPS

TRAINING

QUALITY

LEADERSHIP

PEOPLE

MANAGEMENT

Our business model

Physician partnerships

Preferred provider to funders

Sustainable financial returns

Consistency of care

Page 07.KEY OPERATIONAL

MANAGEMENT SYSTEMS

GOVERNANCE, RISK MANAGEMENT AND COMPLIANCEGovernance overview: page 24.

How we manage risk: page 34.

INPUTS

HOW WE CREATE VALUE Our business model

05

Operational reviews:

pages 76 and 100.

Creating measurable

value: page 08.

Chairman’s review on page 17 and

Chief Executive Officer’s review on

page 71.

PROVIDING THE BEST AND SAFEST 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.

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.

KEY OUTCOMES

OUR OPERATING CONTEXT

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

CONTINUOUS BUSINESS

IMPROVEMENT

ENVIRONMENTAL

SUSTAINABILITY

The

Qua

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BESTPATIENT

EXPERIENCE

BESTOUTCOMES

MOST COSTEFFECTIVE

DEVELOPMENT AND WELLBEING OF STAFF, LEADERS

AND HEALTHCARE PROFESSIONALS

OUTPUTS

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.

NETCARE LIMITED Annual integrated report 2017



What we do (activities in our value chain)

CORE BUSINESS

84 Netcare 911 emergency

bases.

SA

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.

EMERGENCY SERVICES

63 renal dialysis facilities.

SAFootprint: SA

> 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.

DIALYSIS SERVICES

1 Including Lesotho.

Footprint: SA and UK

> 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.

56 hospitals with

2 797 beds.

UK

59 hospitals with

10 606 beds, including Lesotho.

SAHIGH-ACUITY HOSPITALS

ANCILLARY SERVICES

Footprint: SA and UK

> 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.

3 primary care clinics.

UK

931 primary

healthcare centres,

15 day theatres and 66 sub-acute beds.

SAPRIMARY CARE FACILITIES

Serious about health.Passionate about care.


07

> 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.

SOUTH AFRICA

> Partnership with

government to provide

public healthcare through

the 425-bed Queen

‘Mamohato Memorial

Hospital in Maseru and

four primary care clinics.

LESOTHO

> Fifteen-year track record of

providing publicly funded healthcare

to UK citizens.

> NHS-funded patients can access

treatment from private healthcare

providers as long as these providers

meet set quality standards and NHS

pricing.

UNITED KINGDOM

PUBLIC PRIVATE PARTNERSHIPS

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.

TRAINING FACILITIES

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.

QUALITY LEADERSHIP

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.

PEOPLE MANAGEMENT

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.

CONTINUOUS BUSINESS IMPROVEMENT

Our environmental sustainability strategy aims to secure critical utilities such as water and

energy, while containing costs and reducing our environmental impact.

ENVIRONMENTAL SUSTAINABILITY

SA and UK operational reviews on pages 76 and 100 respectively.

NETCARE LIMITED Annual integrated report 2017



HOW WE CREATE VALUE Creating measurable value

INPUTS VALUE CREATED FOR NETCARE (within our value chain)

30 056 employees

(2016: 30 086).

Employee salary-related expenditure:

R11 763 million

(2016: R12 901 million).

Training spend:

SA: R54 million

(2016: R51 million).

UK: £1.9 million

(£2.2 million).

Institutional knowledge held by a leadership team experienced in hospital management and the healthcare industry.

GROUP

23 219 employees trained (2016: 23 292).

SA80.2% 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.

2 196 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.

UK213 911 e-Learning modules completed (2016: 374 386).

57.6% of employees participated in the BMiSay staff engagement survey

(2016: 67.3%), with the communication of change requiring improvement.

Re-engineering patient care

pathways.

Continued refinement of our

integrated quality

management system.

282 continuous business

improvement initiatives

implemented with 161

completed.

PATIENT CARE

SAThe 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 2018.

2.4% increase in antibiotics consumed by in-hospital patients, a remarkable

achievement given the increased prevalence of multidrug-resistant organisms.

UK 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 SA using MOBILL and MOBIT achieved a reduction in

stock losses of over R32 million.

Efficiencies in pharmacy stock management in SA reduced stock days from

24.8 to 22.2 without impacting day-to-day operations.

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Creating measurable value



VALUE CREATED FOR SOCIETY (outside our value chain)KEY TRADE-OFFS LINKED TO DIGITISATION 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.

A skilled workforce able to deliver the highest quality care every day.

1 028 (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 SA’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.




Investment in capital assets: SA: R1 553 million

(2016: R2 054 million) of

which R890 million was spent

on upgrades and new

equipment.

UK: £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 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

SAMore than 2 600 (2016: 2 400) specialist and 3 600 (2016: 7 900) GP visits.

UKOver 16 000 GP and healthcare professional visits (2016: 14 000).

PROFESSIONAL DEVELOPMENT INTERVENTIONS

SAMore than 35 professional development events delivered (2016: 90).

UKOver 6 900 professional development events held (2016: 8 000).

DIVERSITY AWARENESS AND EMPLOYEE GRIEVANCES

2 196 (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%).

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1 Reported for the first time.



VALUE CREATED FOR SOCIETY (outside our value chain)

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 SA 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 SA, both directly and through

the Hospital Association of South Africa (HASA),

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 SA 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.

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.

SA

14 doctors assisted with their academic studies

(2016: 28).

Treated 2 397 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 1 328 learners not employed by Netcare

(2016: 1 345).

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.



1 Restated for discontinued operation.

1 Restated for discontinued operation.

Key performance indicators linked to strategy: page 66.


Energy consumption: SA: 1.05 million gigajoules

(GJ) (2016: 1.14 million GJ).

UK: 135 740 megawatt hours

(MWh)

(2016: 146 174 MWh).

Water consumption: SA: 2.02 million kilolitres

(2016: 2.15 million kilolitres).

R132 million invested in

environmental sustainability in

SA (2016: R167 million).

SAApproximately 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.

UK7.1% reduction in gas and electricity consumption.

Net revenue: R34 125 million

(2016: R37 729 million1).

Equity:R8 862 million

(2016: R13 009 million).

Net debt: R6 385 million

(2016: R5 543 million).

Capital expenditure to replace and expand assets:

R2 447 million

(2016: R2 822 million).

A strong balance sheet.

Total dividend: 95.0 cents per share (2016: 95.0 cents).

Ranked 22nd in SA’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 SA through the B-BBEE Health

Partners for Life trusts (2016: R74 million).

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1 Restated.

2 Per the Econex review commissioned by HASA.

Value-added statement: page 127.

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

SA9 394 tonnes (2016: 8 646 tonnes) of waste generated, with

72 tonnes (2016: 79 tonnes) of healthcare risk waste

incinerated.

UK512 tonnes of infectious medical waste generated

(2016: 1 178 tonnes).

CARBON FOOTPRINT

SA281 632 tonnes of carbon dioxide equivalent (CO2e)

(2016: 313 552 tonnes of CO2e).

UK41 840 tonnes of CO2 (2016: 46 480 tonnes of CO2).

R15 397 million total wealth created

(2016: R19 280 million1).

R874 million taxes paid to governments

(2016: R950 million).

Economic contribution of the private hospital sector

(HASA members) in 20162:

> Contributed 1.3% of SA’s GDP.

> Paid R26 billion in salaries.

> Sustained up to 248 504 jobs with another five jobs

supported for every person employed by a HASA

member.

> For every R100 of HASA members’ value added, another

R123 are supported in the SA economy.

> R28.9 billion in profits for local partners and suppliers.


HOW WE CREATE VALUE Creating value for our stakeholders

Creating value for our stakeholders

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.

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.

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.

PATIENTS

Medically insured, public, self-pay, foreign government-funded and indigent patients.

EMPLOYEES

Nurses, paramedics, pharmacists, management and administration teams, information technology (IT) specialists, facilities management teams and contract staff.

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 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 SA.

> CSI programmes that promote access to

healthcare for disadvantaged communities.

REGULATORS, GOVERNMENT AND COMMUNITIES

Authorities that regulate providers and funders in the healthcare system, public sector partners, communities, sponsorship partners and non-profit organisations.


HOW WE CREATE VALUE Creating value for our stakeholders

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.

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.

INVESTORS

Shareholders and the investment community.

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 SA, that aim to

advance black businesses and drive better performance

against B-BBEE scorecard requirements.

SUPPLIERS

Companies that provide medicines, equipment and consumables, IT systems, and professional and outsourced services.

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.

FUNDERS

Private medical funders, the Compensation for Occupational Injuries and Diseases in SA, and the NHS in the UK.

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.

PRIMARY HEALTHCARE PROVIDERS AND ALLIED HEALTHCARE PROFESSIONALS (SA only)

GPs, dentists, radiologists, pathologists and therapists.

how we create value - netcare · we create value by providing the most effective, efficient and...

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