02 NETCARE LIMITED Annual integrated report 2017 HOW WE CREATE VALUE HOW WE CREATE VALUE 04 Our business model 08 Creating measurable value 14 Creating value for our stakeholders care
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
03NETCARE LIMITED Annual integrated report 2017
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.
04NETCARE LIMITED Annual integrated report 2017
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
drup
le A
im
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
HOW WE CREATE VALUE Our business model
06NETCARE 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.
HOW WE CREATE VALUE Our business model
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 Our business model
08NETCARE 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.
OU
R P
EO
PLE A
ND
CU
LTU
RE
OU
R S
YS
TEM
S A
ND
PR
OC
ES
SES
Creating measurable value
09NETCARE LIMITED Annual integrated report 2017
HOW WE CREATE VALUE 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.
10NETCARE LIMITED Annual integrated report 2017
HOW WE CREATE VALUE Creating measurable value
INPUTS VALUE CREATED FOR NETCARE (within our value chain)
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%).
MA
NU
FAC
TU
RED
AS
SETS
OU
R R
EL
ATIO
NS
HIP
S
1 Reported for the first time.
11NETCARE LIMITED Annual integrated report 2017
HOW WE CREATE VALUE Creating measurable value
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.
12NETCARE LIMITED Annual integrated report 2017
HOW WE CREATE VALUE Creating measurable value
1 Restated for discontinued operation.
1 Restated for discontinued operation.
Key performance indicators linked to strategy: page 66.
INPUTS VALUE CREATED FOR NETCARE (within our value chain)
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).
NATU
RA
L R
ES
OU
RC
ES
FIN
AN
CIA
L R
ES
OU
RC
ES
13NETCARE LIMITED Annual integrated report 2017
HOW WE CREATE VALUE Creating measurable value
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.
14NETCARE LIMITED Annual integrated report 2017
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.
15NETCARE LIMITED Annual integrated report 2017
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.