Group CEO's
REPORT

Introduction

The Group's strategy was well-executed, and we continued to empower greater access to sustainable quality healthcare. We acquired and retained client schemes, optimised the value chain, intensified our diversification streams and introduced disruptive models. Consolidation and integration are key imperatives to the sustainability of the healthcare industry.

The number of consumers who find private healthcare unaffordable is increasing. Although our schemes have been able to attract new members, it has been difficult to retain them due to these cost constraints. These increased costs coupled with the prevalence of chronic illnesses and an ageing population have resulted in medical inflation.

South Africa's new president affirmed his commitment to improving healthcare through the NHI. AfroCentric remains committed, well-positioned and prepared to support the Department of Health in this endeavour. Public private partnerships play a key role in decreasing costs and empowering greater access to healthcare. On 13 August 2018, Pharmacy Direct opened a new warehouse that currently processes 1.2 million scripts and has the capacity to issue seven million scripts per month. This ensures that long queues at government health facilities are reduced and that patients can still receive their medication on time at a place of convenience.

The Group embraces disruptive technologies such as robotics process automation (RPA). By staying abreast of technological innovations, we will remain relevant, work efficiently and maintain our competitive advantage in the long term.

 

 

 

Digitalisation drives us to be leaner and operate at a lower cost. However, our reliance on various IT systems exposes our Group to cyber-related incidents such as data breaches and hacking, which disrupt the business. In response, AfroCentric is strengthening the Group's cybersecurity through increased awareness and technology such as IBM QRadar.

Reduce the cost of healthcare

We are shifting from a hospital-centric model to a primary care focus. As part of the value chain optimisation process, our ICCM assists us to manage diseases in a coordinated way.This integrated approach has decreased our hospital admission rate by 1.6% and reduced our average scheme contribution increases. This has also improved our clients' solvency.

Medscheme Forensics has performed 943 (2017: 575) forensic interventions, which have resulted in direct savings and recoveries of R408 million for our schemes. We currently have 92 active Health Professions Council of South Africa (HPCSA) complaints and 47 criminal cases we are managing while we continue to raise awareness among all stakeholders in the industry.

Number of schemes 2006 – 2016

Maximise growth opportunities

The Group acquired Essential Med, Tendahealth, MMed and Scriptpharm. Although these acquisitions have not yet significantly contributed to our performance, AfroCentric is optimistic that they have the potential to play a pivotal role in our ability to optimise the value chain in the future.

AfroCentric holds a 26% stake in Activo Health, and its rapid organic growth has seen a significant rise in its investment value. AfroCentric has sought to exercise the call option to acquire the remaining shareholding earlier than stipulated in the original acquisition agreement.

By consolidating schemes and absorbing smaller medical schemes through mergers and acquisitions, the Group is able to lower the cost of healthcare. Most notably, Hosmed's 24 000 members joined the Group. The Community Medical Scheme was liquidated, which migrated 5 500 lives into Bonitas. Over the years, the number of schemes and administrators has been decreasing due to smaller schemes' limited risk pools being unable to absorb claims cost escalation. Additionally, smaller managed care organisations have been unable to manage their benefits as effectively due to their limited scale.

Diversify our revenue sources

Non-health administration and health risk management products and services provide us with access to a unique dimension of healthcare products. AfroCentric acquired Essential Med to provide medical insurance and primary care products that decrease the cost and widen the range of products available to schemes' members. This assists in retaining members who would otherwise not have been able to afford medical aid.

In collaboration with Sanlam and other providers, ADS through AfroCentric Financial Services (AFS) has started offering financial services products to Bonitas members as part of the member retention strategy. These financial services products range from loans, funeral plans, gap cover and an electronic voucher system. The Group is helping in preventing lifestyle diseases through various rewards and incentives for healthier behaviour.

Improve efficiencies through cost consciousness

We are re-evaluating the amount of resources we deploy on non-value-adding activities and are working to increase the effectiveness of our meetings, reduce service failure and to increase integration in the Group.

Deliver exceptional client service

Enhancing our service level and overall customer experience is key to retain our clients and facilitate their growth. We retained Nedgroup following a re-tender process. Our compelling value proposition that included additional savings from a competitive range of services was a key differentiator.

Uplift our people

In line with our aim to infuse a new culture and values within the Group, we introduced a new leadership competency model for greater leadership accountability. This programme was launched at our senior management forum in Cape Town and Johannesburg.

Outlook

AfroCentric's Investment Committee will continue searching for opportunities to grow and diversify revenue sources, while contributing to the sustainability and welfare of South African communities. We aim to become more competitive and sustainable in the increasingly digitalised environment. Seamlessly integrating new acquisitions in to the Group will be pivotal to our success going forward.

We are rolling out our digital transformation programme, and it should be embedded by 2020. This will increase integration by providing opportunities to cross sell products and services and, enhance our clients' and their members' experience. We also expect the Fusion project to yield great benefits once completed.

We are shifting from rules-based care to outcomes-based care. This approach dictates that the amount paid by schemes will be determined by healthcare providers' outcomes in terms of predetermined clinical protocols, codes and rules. It also aims to reduce possible instances of overcharging and wastage.

Appreciation

I thank all the members of the Board for their valuable contributions, guidance and oversight. The management teams and employees consistently play an enormous role; together we provide sustainable healthcare.

The Group is grateful for the ongoing support from our operating subsidiaries, our schemes, and other stakeholders. We are committed to delivering on their expectations.

Antoine van Buuren
Group Chief Executive Officer