Cluster performance
Related SDG
Related material matters
- Access to healthcare and medicine
- Employee wellbeing, acquisition, talent management and retention
- Member satisfaction for clients
- Business continuity and business model adaptation
- Legal, regulatory and compliance management
- Economic, transformation, political and societal risk
- Digital transformation and resilience
AFROCENTRIC PRIMARILY OPERATES IN ADMINISTRATION AND HEALTH RISK MANAGEMENT THROUGH MEDSCHEME. LEADING MEDICAL SCHEMES IN SOUTHERN AFRICA RELY ON THE GROUP FOR EFFECTIVE, CLIENT-FOCUSED ADMINISTRATION SERVICES. FURTHERMORE, BY RECOGNISING AND MANAGING CLINICAL AND FINANCIAL RISKS FOR OUR CLIENT SCHEMES, WE LOWER HEALTHCARE COSTS, REDUCE SCHEME CONTRIBUTIONS AND IMPROVE THE QUALITY OF TREATMENT.
Focus on value-based care to optimise healthcare outcomes and cost efficiency.
Despite challenging economic conditions, commendable results were achieved, especially in medical scheme administration, focusing on member retention and cost reduction through increased efficiency and an enhanced operating model.
Focused on enhancing digital capabilities and operational efficiency, we have transformed challenges faced in our digital offerings into opportunities for growth and client-centric improvements.
Medscheme won the Diamond Arrow Award for its outstanding contribution in Disease Management – Asthma, Hospital Utilisation Management and Counselling of High Claimers at the PMR Africa Awards. Medscheme also won the Golden Arrow Awards across multiple categories, including Alternative Fee Structure/Reimbursement, Chronic Medication Management, Disease Management – Cardiovascular, Health Risk Assessment, Management of Specialists and GPs and Wellness Programme.
Aid for AIDS once more secured the prestigious Diamond Arrow Award in the Disease Management HIV/AIDS category at the PMR Africa Awards.
Our businesses
Medscheme provides its established clients with a full spectrum of health administration and health risk management services.
Through its subsidiaries and associated businesses in several African countries, including Namibia, Mauritius and Botswana, Medscheme delivers exceptional, affordable health risk management, medical scheme administration and information technology solutions to leading medical schemes and corporate clients outside South Africa.
AfroCentric Technologies offers technology-based products and services. Its systems connect millions of scheme members, schemes, doctors and hospitals internationally.
AfroCentric Distribution Services (ADS) is a specialised marketing and sales company offering complete marketing services and comprehensive distribution channel management.
Klinikka is licensed to offer the DBC programme, an evidence-based, multi-disciplinary treatment approach to managing musculoskeletal disorders. Klinikka provides DBC equipment and administration services to 31 musculoskeletal treatment centres in Southern Africa.
DENIS has 27 years of experience as a managed care company, focusing entirely on dental management. DENIS adds to the Group's diversity as focused dental managed care is now a product to offer to all its medical scheme clients.
Aid for AIDS has been the industry leader in HIV/AIDS management since 1998. The business coordinates care between funders, doctors, pathology labs, pharmacies and patients. This includes designing, developing and delivering unique and encompassing programmes that help businesses and medical schemes care for individuals with HIV/AIDS. The business seeks to design programmes that understand patients' needs and equip them with the treatment and tools to lead fulfilled lives.
Revenue
Operating costs
Operating profit
Overview
In line with our commitment to continuous improvement, we leverage our diversified business model and enhanced client-centricity to drive superior long-term sustainability.
Our performance
Despite a persistently challenging macroeconomic climate, the medical scheme administration, risk management and technology cluster achieved commendable results. The cluster, substantially comprising the medical scheme administration business, has focused on member retention initiatives for the open schemes. To support this focus, additional resources were employed to increase the net retention rate as part of our client commitment. We remained focused on cost reduction through increased efficiency and an enhanced operating model, seeking to maintain the operating margins while addressing member needs for affordable, quality care. Our unwavering commitment to optimising operations through digital transformation, leveraging technological advancements, data utilisation, and business engineering capabilities has started yielding greater efficiencies.
Operations
Placing our clients at the centre of everything we do, we prioritise excellence in service and quality health outcomes. In line with this focus, the cluster's management structure was enhanced with the appointment of a new executive leadership team, including our CEO, Andrew Schwulst, COO, Mujeeb Bray, and Dr Numaan Mohamood as Chief Health Commercial Officer. Our commitment to delivering an exceptional customer experience is also driven by a high-performance culture. We use innovative performance management techniques and have cascaded accountability through all levels of leadership down to staff. Additionally, we continue to leverage the relationship with Sanlam, sharing best practices in technology and data, which has accelerated our transformational strategy. Notably, in the last quarter of the period under review, we made significant gains in our service levels, meeting and exceeding client expectations and reflecting a substantial improvement in stability and client satisfaction.
Our deployment of Nexidia, an innovative speech analytics tool, is a prime example of our clientcentric approach and commitment to service excellence.
Nexidia is a pioneering speech analytics tool developed and used by Medscheme to analyse phone calls between employees and scheme members, brokers, and service providers. This innovative solution offers insights into key metrics such as average handle time, non-talk time, and sentiment.
Sentiment analysis is a transformative feature. By examining the spoken words in a phone call, Nexidia assigns a numerical score to gauge how happy a customer is with the service received. This real-time feedback allows Medscheme to better understand customer experiences and promptly address issues.
Nexidia’s impact extends beyond metrics. It has empowered team leaders and managers to pinpoint areas for improvement in phone calls. By improving the efficiency and effectiveness of communication between Medscheme and its stakeholders, Nexidia ensures that members receive timely and satisfactory responses, ultimately enhancing their overall experience and access to essential healthcare services.
While we celebrate our achievements, we also recognise that the challenges faced during the year provided valuable opportunities for growth and learning. In response to a medical scheme's concerns on service delivery due to identified areas for improvement in our digital and managed care offerings, we honed our focus on client-centricity – enhancing our digital capability, improving operational efficiency and outcomes, refining managed care delivery, and leveraging actuarial insights and data capabilities. Initiatives included establishing a Project Management Office, upgrading systems, and leveraging support from Sanlam. These efforts demonstrate our commitment to strengthening our operational foundations and ensuring long-term financial health, positioning us favourably for sustained growth and stability. We are pleased to report that these projects are progressing well, and engagements with our client have been positive, reflecting our dedication to continuous improvement and client satisfaction.
Additionally, we received notification of changes in our service provision to another medical scheme. Although this resulted in the loss of certain contracts, the financial impact is minimal, affecting only specific business units related to onboarding new members and key accounts management.
Membership
The overall membership under administration has shown a marginal increase despite challenging economic conditions. This was mainly driven by continued growth in the open schemes (GEMS and Bonitas) amid successful member retention endeavours. Our market share therefore remained stable at approximately 39.3%. While we experienced member buy-downs due to economic circumstances, impacting the higher fees we accrue for these options, we see opportunity to expand our market share in the lower-cost options following the growth in this segment achieved this year.
Weighted scheme solvency is 49.2%, which is good news for our clients' sustainability. We are seeing a recovery in discretionary and elective healthcare utilisation, and our care products are aligned with the new post-pandemic healthcare landscape.
Health risk management
Our deep understanding of sustainable healthcare enables us to devise bespoke programmes that generate superior solutions and deliver added value in healthcare. Our approach is grounded in informed decision-making, emphasising the utilisation of sustainable healthcare resources.
Key health risk interventions include:
- Hospital event management: We use collective bargaining and alternative reimbursement models to achieve financial savings and enhance patient experiences. By negotiating better rates with providers and using bundled payments and value-based care agreements (see the discussion on innovation paragraph for more information), we reduce costs and ensure high-quality, necessary care. These strategies align provider incentives with patient outcomes, fostering a more efficient, patient-centric healthcare system and resulting in better financial management, improved patient satisfaction, and enhanced clinical outcomes. In 2023, we saved our schemes almost R1 billion on collective bargaining and hospital networks alone.
- Alternatives to hospitalisation: Our hospital-at-home initiative enables patients to receive acute care in the comfort of their homes, leading to faster recovery, lower infection rates, and higher patient satisfaction. By integrating remote patient monitoring and telemedicine, we ensure continuous, high-quality care that is both effective and cost-efficient.
- Disease management: Our outcomes-based disease management initiatives focus on preventing and managing chronic conditions and aim to improve clinical outcomes. These initiatives include comprehensive screening programmes to detect diseases early, allowing for timely intervention and management. Focusing on prevention and early detection reduces the burden of chronic diseases and enhances patient quality of life.
- HIV management: Aiming to meet the 95-95-95 targets set by the Joint United Nations Programme on HIV/AIDS (UNAIDS) to help end the HIV epidemic – where 95% of people living with HIV know their status, 95% of those diagnosed are on antiretroviral therapy, and 95% of those on therapy achieve viral suppression – we enhance clinical outcomes through our HIV management initiatives (please see the case study below for more details). For all our schemes combined, where Viral Load results are available, we are achieving the third target (95% of those on therapy have achieved viral suppression).
- Oncology management: By securing access to advanced and often expensive treatments, we enable patients to receive the most effective therapies. This approach improves clinical outcomes, supports providers with more treatment options, and reduces the financial burden on patients. It also enhances adherence to treatment plans and fosters a collaborative environment between patients and providers, leading to better survival rates, quality of life, and satisfaction.
- Wellness programmes: Through increased engagement driven by our wellness programmes, we achieve better risk factor management, improved patient experiences, and enhanced clinical outcomes.
- Mental health management: The partnership between AfroCentric and October Health (formerly known as Panda) seeks to leverage October Health's digital mental health platform to provide comprehensive mental health support for employees and clients. The platform’s rebranding signifies a commitment to improving access to care and offering comprehensive mental health support, incorporating assessments, group sessions, and AI-driven personal care.
- Provider management: Through our multiple value-based care initiatives in the family practitioner (FP), specialist space and coding space, we improve cost efficiency, enhance the quality of care provided, contribute to scheme financial sustainability and ensure that member and provider experience is enhanced. Through various global fees and value-based programmes, we saved Medscheme schemes R226 million in 2023 in specialist costs. The relaunch of our FP Integrated Chronic Care Model, with alternative reimbursement models, is vital to ensuring that providers are equipped to provide a better quality of care for members with chronic disease.
This strategic focus drives financial savings and enhances the overall quality and experience of care for members.
Innovation
During the year, Medscheme launched its Healthcare Professional (HCP) portal, a digital tool designed to enhance healthcare administration. Administrative inefficiencies can hinder quality care and increase operational costs. Medscheme’s HCP portal addresses these challenges by simplifying and expediting tasks for healthcare professionals by providing instant access to critical information.
The portal improves customer experience by catering to doctors, reception staff, practice administration staff, and medical bureaus. Real-time service and reduced turnaround times enable quick, informed decisions, enhancing healthcare delivery efficiency.
Instant access to member, medical scheme, and administration information empowers healthcare professionals and patients, reducing payment issues and focusing on recovery. Outcomes include enhanced healthcare delivery, operational efficiency, and patient empowerment. This initiative showcases the importance of digital solutions in driving sustainable healthcare outcomes.
We also advocate for an innovative shift towards value-based care, believing it is at the heart of healthcare system reform and fostering a more sustainable healthcare landscape. Value-based care optimises healthcare outcomes for patients while ensuring cost efficiency and sustainability. Unlike the traditional fee-for-service model, value-based care focuses on broader outcomes such as patient clinical results, enhanced patient experience, accessibility, cost-effectiveness, and provider satisfaction.
Outlook
Our collaboration with Sanlam continues to unlock synergies, enhancing our ability to deliver comprehensive and integrated healthcare solutions. This partnership, which combines AfroCentric’s expertise in healthcare management with Sanlam’s robust financial services infrastructure, is expected to drive significant value.
We are excited about our integrated operating model’s potential and continued growth opportunities. Moreover, we are confident that our strategic focus on value-based care, digital innovation, and clientcentricity will position us favourably for sustained growth and stability, ultimately delivering greater value and benefits to our stakeholders.
PURPOSE IN ACTION – PIONEERING VALUE-BASED CARE IN HIV DISEASE MANAGEMENT
South Africa’s private healthcare system faces significant sustainability challenges, including rising non-communicable diseases such as diabetes and hypertension and mental health issues like depression and anxiety. Moreover, an ageing population requires long-term, comprehensive, and expensive care. The country also continues to battle the HIV/AIDS epidemic, which imposes a heavy burden on the healthcare system. These trends, combined with the inefficiencies of the fee-for-service model, exacerbate medical inflation, making healthcare increasingly unaffordable. The fee-for-service model encourages overutilisation and fragmented care and does not empower patients with their healthcare data, relegating them to a passive role in managing their health.
Aid for AIDS (AfA), a subsidiary of AfroCentric, has pioneered HIV disease management for over 25 years. AfA’s unique value proposition revolves around a fully integrated and highly confidential disease management programme focusing on patient-centric interventions. The objective is to improve the quality of life and extend the lifespan of individuals living with HIV. AfA’s approach has always aligned with value-based care principles, even before the formal adoption of such frameworks. Today, our quintuple aim framework underpins AfA’s value-based contracting.
OUR RESEARCH-INFORMED, VALUE-BASED CARE QUINTUPLE AIM
We recognise that there are often trade-offs between these dimensions of care; for example, removing a co-payment improves access to care but may add to unnecessary healthcare costs. Our approach in applying this framework is to put our members at the centre and implement initiatives that place them in a better position overall.
To achieve this, our contracting with schemes is based on measurable and achievable targets, adjusted yearly to increase the programme's effectiveness while managing costs. Currently, we measure clinical outcomes through viral load suppression, medicine adherence, and hospital readmission rates. For example, research shows that individuals with suppressed viral loads live longer, healthier lives and have a lower risk of transmitting HIV.
AfA also employs geo-mapping to optimise the provider network and actively works to reduce out-of-pocket payments for beneficiaries, ensuring all members can access necessary care without financial barriers. Member and provider experiences are critical, measured through surveys, and factored into contracting. Initial results show reduced hospital readmissions, indicating improved clinical outcomes for beneficiaries. Additionally, improvements in viral load suppression are promising, with our schemes collectively reaching the 95% target, pointing to the effectiveness of AfA's value-based care approach and its potential for broader application across the healthcare system.
These efforts contribute directly to SDG 3.3, which aims to end the epidemics of AIDS, tuberculosis,
malaria, neglected tropical diseases, combat hepatitis, water-borne diseases, and other communicable
diseases by 2030.
WE SEEK TO PARTICIPATE THROUGHOUT THE PHARMACEUTICAL VALUE CHAIN TO REDUCE MEDICINE AND RELATED COSTS AND IMPROVE ACCESS TO AFFORDABLE, QUALITY HEALTHCARE.
Initiatives such as changing couriers, consolidating deliveries, and self-drive have resulted in significant savings and increased delivery efficiency.
Positioning ourselves as a key partner for the government in the NHI environment and recently honoured at the BHF Titanium Awards, AfroCentric, through Pharmacy Direct, has demonstrated significant success in driving access to care with 17% growth in NDoH script volumes despite challenges, such as a decline in price per script over the period.
Activo Health has experienced significant margin erosion despite continued growth in the external pharmaceutical market.
Scriptpharm’s strategic initiatives have led to substantial savings for client schemes, with R36.6 million saved in the chronic and HIV space through a capitation agreement in the 2023 benefit year and an additional R26.8 million saved on out-of-hospital oncology medicines. The pharmacy network has also expanded to 3 241 pharmacies this year, up from 3 034 in the previous year.
Our businesses
Pharmacy Direct distributes and delivers medicine to urban and rural areas for private and public patients.
Activo Health is a pharmaceutical manufacturer specialising in importing, marketing and distributing pharmaceutical products and trading in all pharmaceutical industry sectors.
Curasana is a speciality pharmaceutical wholesaler and distributor that procures and supplies pharmaceutical products to Pharmacy Direct and other major wholesalers in Gauteng and distributes on behalf of Activo Health.
Scriptpharm is a registered managed care organisation that manages chronic, oncology and HIV medicine through various arrangements, such as capitation and savings share models. Scriptpharm is a collaborative partner in the broader AfroCentric Group to ensure that all parts of the medicine journey are managed effectively and efficiently to mitigate cost risks. This management includes contracting, overseeing, and maintaining a vast network of pharmacies.
Revenue
Operating costs
Operating profit
DoH script growth
Private script movement
Overview
AfroCentric has a presence across the entire pharmaceutical value chain, which provides risk mitigation due to revenue diversification and enables the Group to deliver on its ambition to reduce the cost of healthcare.
Our performance
The pharmaceutical cluster's trading environment remains highly competitive, building on the challenging conditions experienced in 2023. The strategies and projects initiated in the prior year, focusing on increasing revenue, such as projects to return non-adherent patients and introducing new products, have yielded positive results. However, the overall revenue for the cluster has declined by 13%. This was mainly impacted by the reduction in revenue due to the Group’s decision to close its operations in procuring hospital surgical consumables through its subsidiary, MMed.
Despite implementing cost-reduction strategies, such as savings on clinical costs by digitising various processes and projects to optimise courier costs, the cluster’s operating profit has declined by 2%. This decline was negatively affected by reduced profitability on the NDoH contract due to the reduced price per script for the renewed contract.
We continue to focus on improving our overall financial performance by implementing strategies relating to new business development, introducing new products, implementing cost-reduction initiatives and enhancing efficient working capital management practices to address overstock and understock challenges.
Importing and marketing pharmaceutical products
Activo Health specialises in importing and marketing pharmaceutical products across all sectors of the pharmaceutical industry. The company has faced typical challenges in the generic pharmaceutical market, including intense competition and the resulting difficulty in price reductions, which has led to margin compression. We have maintained tight control over expenses and working capital management. However, we experienced stock write-offs, particularly in our oncology product line, and are carefully evaluating this therapeutic area to identify opportunities for improved stock management in the future.
In terms of the private market, we have seen significant sales growth year on year, reflecting continued growth faster than the market. The company has successfully diversified its customer base, balancing courier pharmacy sales within the AfroCentric Group with a strong presence in the private market. This diversification, along with a healthy product pipeline, positions Activo Health for continued growth.
Product launches are crucial for the company’s growth strategy, helping to offset the challenges of price competition in the generic pharmaceutical market. Activo Health launched 15 new products this year, showcasing its commitment to continued growth.
The strategic focus of the business will remain on enhancing overall performance, introducing new products, and implementing effective working capital management practices. Activo continually reviews its business structures to ensure it is optimally positioned to achieve expected future returns on investment.
Buying and distributing pharmaceutical products
Positioning itself as a key partner in the NHI environment, AfroCentric is committed to enhancing access to quality healthcare. The Group's strategic initiatives aim to streamline healthcare delivery and reduce costs, aligning with the government's objectives under the NHI framework. This alignment is evidenced by our involvement in government’s CCMDD programme through Pharmacy Direct. By being the majority service provider, working across five provinces, AfroCentric demonstrates its capability and commitment to supporting government initiatives and ensuring the provision of affordable, quality healthcare to all South Africans. In this regard, Pharmacy Direct was recently honoured at the ninth annual BHF Titanium Awards, an award for excellence in creating access to quality healthcare.
As we build on this success, we continually seek ways to optimise efficiencies through e-scripting, especially given the steady growth in prescriptions amid a decline in the price per script. Additionally, the increase in three-month supply scripts has presented challenges. The NDoH permitted this change to enhance medication access for vulnerable patients, aiming for more efficient and patient-friendly distribution while saving patients on transportation fees. While beneficial for patients, this transition has resulted in fewer repeat scripts to be serviced, resulting in fewer deliveries and, consequently, reduced fees, as we receive a fee per parcel. To ensure sustained profitability, we have implemented various strategies to manage costs effectively. Through these measures, we aim to maintain optimal profit levels while continuing to provide high-quality service to patients.
Pharmacy Direct and Curasana – the private business – have focused on increasing script volumes and containing costs. Changing couriers and consolidating deliveries in the scheduling department in the prior year has revealed significant savings in courier expenses. The self-drive initiatives have enhanced delivery sequences, increasing daily deliveries. The business has achieved a 99% success rate in real-time deliveries. The private business is also undertaking new initiatives to enhance the member experience, improve member adherence, and increase affordability.
Managing medicine
Scriptpharm manages chronic, oncology, and HIV medicine through arrangements with specific schemes, whereby Scriptpharm incentivises efficiency, cost control, and preventative care. The business has delivered a strong financial performance, demonstrating resilience and growth despite lower-than-expected membership numbers from some of our client schemes. We have executed effectively and efficiently across all our clients, maintaining our underwriting margin and generating revenue from oncology contracts. With the continued growth experienced this year, Scriptpharm maintains the largest pharmacy network in South Africa.
Outlook
We will focus on ensuring Activo is optimally positioned for a promising return on investment in the foreseeable future. Pharmacy Direct and Curasana will focus on strategic co-branding efforts to solidify their position in the market and foster stronger connections with their stakeholders, with an additional emphasis on new business development.
Scriptpharm's primary focus will remain on identifying opportunities that enable us to provide our client schemes with the most cost-effective medicine solutions. We are dedicated to minimising the impact of out-of-pocket expenses for all categories of medicine on our members.
Through proactive strategies and a customer-centric approach, we are determined to overcome challenges, improve our offerings, and ensure our clients receive the best pharmaceutical solutions. We aim to continue building strong relationships with our partners and customers while delivering exceptional value and service in the industry.
PURPOSE IN ACTION – ADVANCING HEALTHCARE THROUGH INNOVATION
Pharmacy Direct’s mission aligns with AfroCentric’s purpose of enhancing the quality of life for all stakeholders. By transforming healthcare to be more affordable and accessible, the business is actively contributing to achieving the indicators under SDG 3 and South Africa’s Health Goal 8 of the NDP: Universal healthcare coverage.
Pharmacy Direct is pioneering the implementation of a combination of robotic systems in South Africa, setting a new standard in medication management. In 2021, the business introduced state-of-the-art robots that utilise advanced algorithms and precision engineering to dispense medications accurately and efficiently. This revolutionary approach significantly reduces the risk of medication errors, optimises medication storage, and enhances productivity. Consequently, the time from script receipt to medication delivery has been drastically reduced, ensuring patients receive their medications promptly. This initiative directly supports SDG 3.8 by improving access to safe, effective, quality, and affordable essential medicines.
Additionally, through a partnership with the DoH, the public division has played a pivotal role in the CCMDD programme, providing care for up to 2.3 million patients and increasing ease and access to essential medicines – again, aligning with SDG 3.8.
Moreover, adherence to therapeutic regimes is crucial for positive patient outcomes, and Pharmacy Direct’s innovative approach addresses some of the most significant barriers to medication adherence:
Pharmacy Direct’s innovative approach and strategic partnerships embody AfroCentric’s mission to enhance the quality of life and make healthcare more accessible and affordable, driving positive change in the healthcare landscape. Through their commitment to SDG 3 indicators and South Africa’s NDP Health Goal 8, Pharmacy Direct ensures that healthcare services are more efficient and accessible.
