Healthcare's perfect storm: NHI, court ruling, and executive exodus

"There are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns—the ones we don't know we don't know" Donald Rumsfeld

Mr. Rumsfeld might have been referring to his infamous war on terror, but he could just as easily have been describing South Africa’s National Health Insurance (NHI). Consider the events of the past few weeks:

• The President announced that they are open to further discussions on the National Health Insurance (NHI) program.
• The High Court in Pretoria has declared sections 36 to 40 of the National Health Act (NHA) unconstitutional, ruling that they should be struck down. These sections require healthcare professionals and facilities to obtain a Certificate of Need from the Director-General of Health and criminalize the provision of health services or the operation of a facility without this authorization. While Minister Motsoaledi has argued that this ruling does not pertain to the National Health Insurance (NHI), many experts view it as a significant setback. Solidarity senses an opportunity and is determined to challenge other provisions that facilitate the centralization of healthcare funds. It's gonna be lit!

This is the chaos in which the South African healthcare industry finds itself, yet somehow executives must plan for their business' future. The response from private hospital groups has been, to say the least, interesting.

Here’s a quick catch-up:

• Mediclinic has been delisted from the JSE in a deal led by Remgro.
• Netcare’s CEO has announced his early retirement in September after 18 years with the company.
• Netcare Chairman Mark Bower is also stepping down in September.
• Life Healthcare has new leadership, with Peter Wharton-Hood as the CEO and changes to the executive structure.

Besides changes in the executive, the most significant changes are in business models. This is in anticipation of the NHI, the final form of which is still uncertain.

Most companies are discussing asset-light business models. Corporate rhetoric indicates a reluctance to build new hospitals. Life Healthcare, for instance, is pivoting its hospital management strategy towards diagnostics. Netcare is reportedly expanding its primary and home-care services to broaden its patient base. Since going private, little information has been publicly disclosed about Mediclinic.

One thing is clear: investors are hesitant to invest in a hostile environment. Quoting Mother Teresa won't attract private capital into healthcare. The data is beginning to support this assertion. Perhaps our "analysts" should start justifying their salaries.

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