Slow growth at day hospitals hobbles Advanced Health’s plans

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Advanced Health has shelved plans to bring in an empowerment partner – at least until it breaks even, the day surgery group’s CEO, Carl Grillenberger, is quoted in Business Day as saying. Advanced Health owns day hospitals in Australia and South Africa, and listed on the JSE’s Alt-X in 2014. It has expanded rapidly in South Africa but has battled to attract patients to its 10 facilities in the country, resulting in sustained losses since its listing.

The report says unlike the US, where about 70% of all surgical procedures are done in day clinics, only 12%-15% of operations in South Africa’s private health-care sector take place in these facilities. Day hospitals have generally received a cool reception from doctors, and have struggled to get medical schemes to direct patients to their facilities because they do not have a national footprint.

Only 54 day hospitals in South Africa are not held by the “big three” hospital groups — Netcare, Mediclinic and Life Healthcare — and they are clustered in the Western Cape and Gauteng.

Advanced Health had “a couple of discussions” with potential empowerment partners, but there was no prospective deal in play at the moment, Grillenberger is quoted in the report as saying. “The moment we are closer to break even or profitable, we will look at investors.”

The target for break-even is October 2019, which is when he plans to hand over the reins of the company, he said. “I have agreed with the board of directors that I want to step down by October 2019 (and) leave a profitable business to the person who is going to take over.”

The focus for the future was on improving patient volumes in South Africa, and it was holding talks with medical schemes and administrators to try to encourage them to direct more patients to its facilities, said Grillenberger in the report. “Funders should inform patients about the cost difference (between day hospitals and acute hospitals). If it is cheaper, why not use the day hospital?”

Business Day report

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