Koert Pretorius Roly Buys - The Competition …

1 2 KoertPretoriusChief executive officer Braam JoubertChief Financial officer RolyBuysStrategy Development executive SchalkBurgerSCINTRODUCTION OF MEDICLINICREPRESENTATIVES3 To inform the public To provide insight on the interaction between Mediclinic and various stakeholders in the private healthcare sector To provide regulatory contextPURPOSE OF THE PRESENTATION4 Provide a broad outline of Mediclinic's business Setting the scene for further engagements Await outcome of data, information and profitability analysesSCOPE OF THE to Business Schemes, Administrators, and Managed Care and Support on Private Hospital and Input Cost Increases at Mediclinic s RemarksOUTLINE6 INTRODUCTIONTO MEDICLINIC72014 Acquired Hirslanden Group(+13 Hospitals)Acquired Klinik Stephanshorn(+85 beds)Acquired Swissana Clinic Meggen (+22 Beds)Acquisition of controlling interest in Mediclinic Middle EastOpening of flagship hospital, Mediclinic City Hospital in DubaiAcquisition of Al Noor Acquired 3 clinics with acquisition of Emaar clinicsAcquired Clinique La Colline(+62 Beds)SACHM ediclinic listed on JSE1986 Acquired Medicor Group (+11 Hospitals)1995 Acquired Hydromed Group(+4 Hospitals)1996 Acquired Hospiplan Group(+12 Hospitals)1998 Acquired Curamed Group(+6 Hospitals)2002 Acquired the Protector Group (+4 Hospitals)2006 UAE200720102014200720112015/1620082012 Buyout of GE Healthcare and Varkey Group stake in Emirates HealthcareHOSPITALS73 CLINICS35 COUNTRIES52015FY20152015 Acquired land to build Mediclinic Parkview HospitalNAINTRODUCTION TO MEDICLINICHISTORYS ource.

2 Company National Hospital Network (NHN) is an association of 165 independent private hospitals, day clinics and other of 31 March of 30 September 2015(1) The South African private hospital market has three listed players; Netcare, Life Healthcare and Mediclinic-Together they account for c. 73% of the private hospital marketMediclinic 22%Netcare28%Life23%NHN11%Independent16% LISTED PRIVATE HOSPITALSMARKET SHARE# OF BEDSSA REVENUES (ZAR MM)(2)Source: Company information7,885(2)12,3238,647(3)13,7499 ,444(2)15,738 Source: Company information, National Hospital Network, Broker estimatesSOUTH AFRICA PRIVATE HOSPITAL BED MARKET SHAREINTRODUCTION TO MEDICLINICMEDICLINIC SOUTHERN AFRICA9 INTRODUCTION TO MEDICLINICGEOGRAPHIC FOOTPRINTS ource: Company informationNamibiaNorthern CapeWestern CapeEastern CapeUpingtonMediclinic UpingtonKimberlyMediclinic KimberlyGariepMediclinic GariepBloemfonteinMediclinicBloemfontein WelkomMediclinicWelkomNorth WestSouth AfricaMediclinic VictoriaPietermartizburgMediclinic PietermartizburgMediclinic HowickKwazulu-NatalNewcastleMediclinic NewcastleBarbertonMediclinic BarbertonNelspruitMediclinic NelspruitLimpopoTzaneenMediclinic TzaneenPolokwaneMediclinic LimpopoMediclinicLephalalePretoriaGauten gMediclinic HooglandMediclinic EmfuleniFree StateMediclinic VereenigingMediclinic LegaeBritsMediclinic BritsPotchefstroomMediclinicPotchefstroo mMediclinic SecundaMediclinic ErmeloMediclinic HighveldMpumalangaMediclinicThabazimbiPl ettenberg BayMediclinic Plettenberg BayOudtshoornMediclinic Klein KarooGeorgeMediclinic GeorgeMediclinic GenevaHermanusMediclinic

3 HermanusWorcesterMediclinic WorcesterStellenboschMediclinic StellenboschStrandMediclinic StrandVergelegenMediclinic VergelegenPaarl Mediclinic PaarlPeninsula Hospitals Mediclinic Cape Gate Mediclinic Cape Town Mediclinic Constantiaberg Mediclinic Durbanville Mediclinic Louis Leipoldt Mediclinic Milnerton Mediclinic PanoramaOtjiwarongoMediclinicOtjiwarongo SwakopmundMediclinicSwakopmundWindhoekMe diclinicWindhoekJohannesburg Hospitals Mediclinic Morningside Mediclinic Sandton Wits University Donald Gordon Medical CentrePretoria Hospitals Mediclinic Gynaecological Hospital Mediclinic Heart Hospital Mediclinic Kloof Mediclinic Medforum Mediclinic Midstream Mediclinic MuelmedRegionNumber of HospitalsWestern Cape17 NorthernCape2 Gauteng12 Kwazulu-Natal4 Limpopo4 NorthWest2 Free State3 Namibia3 Total52 Mpumalanga5 SOUTHERN AFRICA GEOGRAPHIC OVERVIEW10 INTRODUCTION TO MEDICLINICOPERATIONAL OVERVIEWI nternal Medicine26%General Surgery17%Obstetrics and Gynaecology15%Orthopaedics13%Urogenital7 %ENT and Opthalmology7%Cardiac and Vascular7%Neurology5%Oral and Maxillofacial2%Other1%Source: Company informationSERVICE OFFERINGSPECTRUM OF SERVICES (2014)SOUTHERN AFRICA OPERATIONAL OVERVIEWHOSPITALS52 ADMITTINGDOCTORS2,451 EMPLOYEES16,576 BEDS7,983 DAY CLINICS2 Source: Company informationINTRODUCTION TO MEDICLINICWHAT WE DO11 Acute care, specialist orientated, multi-disciplinary hospital services and related service offeringsoER24oMedical Human Resources (MHR)oMedical Innovations 6 higher education accredited nurse training centres Source.

4 Company information12 REGULATORY CONTEXTTHE HEALTH MARKET INQUIRYREGULATORY CONTEXT13 The Constitution The National Health ActoOHSC Competition Act Medical Schemes Act Regulatory AuthoritiesoHPCSA; SANC; SAPC; Competition Authorities Provincial Departments of Health Licensing Regulations14 MEDICLINIC BUSINESS MODEL15 MEDICLINIC BUSINESS MODELPROVIDER ENVIRONMENTHOSPITAL: Infrastructure (Land, Buildings, Equipment) Clinical Services (Nursing, Pharmacy) Support Services (Technical, Admin, Other) Separate AccountDOCTORS: AdmissionofPatients ManagementofClinicalProcess SeparateAccountRADIOLOGISTS, PATHOLOGISTS, AND ALLIED HEALTHCARE PROFESSIONALS: Actoninstructionfromreferringdoctor SeparateAccountSource: Company informationMEDICLINIC BUSINESS MODELCOMPOSITION OF HOSPITAL ACCOUNTFee IncomeAccommodation (General Ward)tariff code(price) x quantity (volume) xxxAccommodation(ICU)tariff code(price) x quantity (volume) xxxTotal AccommodationXXXT heatretariff code(price) x quantity (volume) xxxEquipmenttariff code(price) x quantity (volume) xxxTotal Fee IncomeXXXP harmaceutical ItemsEthicalstariff code(price) x quantity (volume) xxxSurgicalstariff code(price) x quantity (volume) xxxTotal PharmacyXXXTOTAL ACCOUNT (INCL.)

5 VAT)XXXILLUSTRATIVE EXAMPLE: COMPOSITION OF A TYPICAL HOSPITAL ACCOUNT (INCL. VAT)16 MEDICLINIC BUSINESS MODELCOMPOSITION OF HOSPITAL ACCOUNT9%18%73%Pharmacy27%Ethicals/Medic ines Surgicals/Medical DevicesFee Income: Ward, Theatre and EquipmentSource: Company informationOVERVIEW OF A TYPICAL HOSPITAL ACCOUNT17 MEDICLINIC BUSINESS MODELCOMPOSITION OF HOSPITAL ACCOUNTP harmacy ComponentEthicals/MedicinesRegulated by SEP (No dispensing fee charged)Surgicals/Medical DevicesSEP does not applyBilled at cost (Net Acquisition Price)Source: Company informationOVERVIEW OF THE PHARMACEUTICAL COMPONENTS1819 MEDICLINIC BUSINESS MODELINPUT COSTS Hospitals are highly labour and capital intensive facilities Capital costs are not directly factored into the tariff escalation calculations Tariffs should be sufficient for:othe replacement of capital items and;othe opportunity cost of the capital employed 20 MEDICLINIC BUSINESS MODELBREAKDOWN OF OPERATING COSTSI nputWeightsNursingSalariesBetween 47% and 51% Other Salaries (Admin, Pharmacy,Technical)Between 14% and 18%Repairs and MaintenanceBetween 4% and 6%Electricity and WaterBetween 2% and 4%Rates and TaxesBetween 1% and 2%Catering, Laundry and CleaningBetween 7% and 9%Other (ICT, Audit Fees, Insurance, etc)Between 16% and 20%INPUT COST AS % OF OPERATING COST (EXCL.

6 PHARMACY)Source: Company information21 MEDICLINIC BUSINESS MODELCAPITAL COSTS Specialised building according to regulations Specialised medical equipment, mainly imported and complying with European and American patient safety and quality standards Technology innovation22 PATIENTS23 Patients First @ Mediclinic Value of care delivered through:oSuperior clinical quality; oMaximising the patient experience; oManaging cost efficienciesSource: The Strategy That Will FixHealth Care , Michael E. Porter, Thomas H. Lee; Company informationVALUE=Clinical Quality X Patient SatisfactionCost per EventPATIENTSTHE VALUE EQUATION24 PATIENTSHOSPITAL COMMUNICATIONS ource: Company information WebsiteoPre-admission formoExplanation of hospital billingoPrivate tariff scheduleoDoctor/hospital search Nurse driven pre-admission clinic Provide information on medical scheme s benefits Communicate with medical scheme on patient s behalf Patient complaint and compliment system25 STRUCTURE PROCESS OUTCOME COHSASA Accreditation Department of Health Inspections National Core Standards Organisational Structure CURA Clinical Risk Register & Audits Best !

7 Compliance IcnetSurveillance Clinical Key Performance Indicators Outcome Databases HEM System/Legal ReportsPATIENTSCLINICAL QUALITY INITIATIVESS ource: Company information26 PATIENTSCLINICAL QUALITY INITIATIVESANTIMICROBIAL UTILISATION INDICATORS MEDICLINIC SOUTHERN AFRICA (2012-2015 (YTD))4,13,311,33,23,42,58,43,23,22,48,6 2,93,12,27,12,80,02,04,06,08,010,012,0 Catheter Associated UrinaryTract InfectionsCentral Line-associatedBloodstream InfectionsVentilator AssociatedPneumoniaSurgical Site Infections (per1,000 Theatre Cases)Rate per 1,000 Device Days2012201320142015 (YTD)13%10%7%6%0%2%4%6%8%10%12%14%Undesi rable Agents Utilised forSurgical ProphylaxisPercentage Undesirable Prophylaxis (%)3,23,02,72,60,00,51,01,52,02,53,03,5 Days on Multi-cover ( 4 Antimicrobials) Antimicrobial Utilisation IndicatorsRate per 1,000 Days(%)6,76,87,27,26,46,56,66,76,86,97,0 7,17,27,3 Prolonged Treatment per 1,000 ExposuresRate per 1,000 ExposuresDEVICE ASSOCIATED INFECTIONS MEDICLINIC SOUTHERN AFRICA (2012-2015 (YTD))Source.

8 Company information27 PATIENTSPATIENT EXPERIENCEPRESS GANEY MEDICLINIC SOUTHERN AFRICA (2014-2016 (JAN))Source: Company information10 improvement opportunities for every hospital: to make the biggest impact on the patient s experience, where it matters most24 897 patient voices heardfrom the survey s inception on 1 September 2014 25 January 2016 Average eSurveyresponse rate: 21%MCSA results bench-marked against more than 1 800 hospitals globally28 PATIENTSPATIENT EXPERIENCES ource: Press GaneyPRESS GANEY INPATIENTS urvey SectionMCSA Average Mean ScorePress GaneyAverage Mean and and SOUTHERN AFRICA PATIENT SATISFACTION SURVEY SECTION SCORES (2015)29 MEDICLINIC INITIATIVESCOST PER EVENT0,70,91,11,31,5201320142015 Observed/Expected (OE) RatioOE Bed DaysOE PharmacyOE ProsthesisOE Theatre MinutesEXAMPLE: HOSPITAL ENGAGEMENT WITH A DOCTOR ON COST PER EVENT (INITIAL KNEE REPLACEMENT)Source: Company information30 HEALTHCAREPROFESSIONALS773,34591,24436,3 7403326,44213,06174,86111,47010020030040 0500600700800900 OECD countriesDeveloping Europe and Central AsiaDeveloping Latin America and CaribbeanSouth Africa (2013) adjustedWorldDeveloping Middle East and North AfricaDeveloping East Asia and PacificDeveloping Sub-Saharan Africa31 HEALTHCARE PROFESSIONALSSHORTAGE OF HEALTHCARE PROFESSIONALSS ource.

9 EconexPresentation, HASA conference 2014272,06260,82197,47154,42152,19142,17 77,6019,95050100150200250300 OECD countriesDeveloping Europe and Central AsiaDeveloping Latin America and CaribbeanDeveloping East Asia and PacificWorldDeveloping Middle East and North AfricaSouth Africa (2013)Developing Sub-Saharan AfricaDOCTORS (GPS AND SPECIALISTS) PER 100,000 PEOPLE NUMBER OF TOTAL NURSES PER 100,000 PEOPLE (2010 OR LATEST YEAR AVAILABLE)32 Clinical and business independenceoAdmit and discharge patients Recruitment Admission privileges Consulting rooms ShareholdingHEALTHCARE PROFESSIONALSRELATIONSHIP WITH SUPPORTING DOCTORSS ource: Company information33 MEDICAL SCHEMES, ADMINISTRATORS AND MANAGED CARE ORGANISATIONS34 National tariff negotiations Robust negotiation process Countervailing power through:oScheme sizeoComprehensive data oNetwork arrangements No distinction between PMB and non-PMB Information sharingMEDICAL SCHEMES, ADMINISTRATORS & MANAGED CARE ORGANISATIONSS ource: Company information35 SUPPLIERSAND SUPPORT SERVICES36 SUPPLIERS AND SUPPORT SERVICES Pharmaceutical and medical equipment suppliers (mainly imported goods) Catering, laundry, cleaning, security, medical waste management, etcSource: Company information37 EXPENDITURE ON PRIVATEHOSPITAL SERVICES38 Increases in healthcare expenditure a function :ohospital medical the medical services usedEXPENDITURE ON PRIVATE HOSPITAL SERVICESDRIVERS OF EXPENDITURES ource.

10 Company information392,8%-0,3%0,9%0,2%0,3%3,0%4, 1%3,3%7,7%6,2%5,8%6,0%-2,0%0,0%2,0%4,0%6 ,0%8,0%10,0%12,0%2010201120122013 PERCENTAGE INCREASE IN REVENUE (%)IntensityPriceQuantityBREAKDOWN OF MEDICLINIC S INCREASE IN REVENUE BY SOURCE (2010 -2013)Source: Company informationEXPENDITURE ON PRIVATE HOSPITAL SERVICESDRIVERS OF EXPENDITURE0%20%40%60%80%100%120%140%Per centage Increase in number of admissions INCREASE IN THE NUMBER OF MEDICLINIC ADMISSIONS BY AGE BAND 2002TO 2013 Source: Company informationEXPENDITURE ON PRIVATE HOSPITAL SERVICESDRIVERS OF EXPENDITURE40 R - R 5 000 R 10 000 R 15 000 R 20 000 R 25 000 R 30 000 R 35 000 R 40 000 COST OF INPATIENT ADMISSIONTHE COST OF A MEDICLINIC INPATIENT ADMISSION BY AGE (2013) Source: Company informationEXPENDITURE ON PRIVATE HOSPITAL SERVICESDRIVERS OF EXPENDITUR