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Bringing quality healthcare to the world

May 03 2018 14:03
Shoks Mzolo

It has been tough going for South Africa’s major JSE-listed hospital groups – Mediclinic, Netcare and Life Healthcare – which face increased pressure on pricing from regulators and medical aids in South Africa and abroad, and uncertainty over the National Health Insurance (NHI) plan and Competition Commission inquiry into pricing in SA.

For Shrey Viranna, the recently appointed CEO of Life Healthcare, more specific challenges also await. 

The group is in talks with Max India, its joint venture partner in India, to buy Life Healthcare’s stake in Max Healthcare Institute – a transaction that, if successful, would mark Life’s exit from India less than seven years after it expanded to the sub-continent. 

In fact, Life paid R428m to acquire an additional 3.75% stake in the business just last year. 

Max contributed an operating loss of R27m to Life’s results for the year to end September 2017. 

As the share is trading under a cautionary, Viranna cannot comment on negotiations. 

The likely exit from India is also part of Life’s strategy to move its focus from building an emerging-markets hospital group to creating a broad healthcare firm with a significant footprint in the developed world.

Life wants to use London-based Alliance Medical, a medical diagnostics firm with operations in 10 countries including the UK, Italy and Ireland, to expand its presence in Western Europe. 

Alliance Medical, which was acquired in 2016, contributed 18% to Life’s revenue and earnings before interest, tax, depreciation and amortisation (ebitda) last year.

More positive news seems to be coming out of Poland, where Life’s Scanmed operations have been under significant pressure in recent years due to enforced price cuts. 

A new four-year contract with NFZ, the Polish national health fund, has allowed for higher prices, while improved efficiencies have helped to boost margins. 

Life said in a pre-close investor presentation, released at the end of March, that it expects revenue from Scanmed to grow by between 4% and 6% in the six months to end March, compared with a 6.7% decline in the September reporting period. 

The normalised earnings before ebitda is expected to improve to between 7.5% and 9%, up from 4% in September. 

For the group as a whole, revenue is expected to grow by between 16.5% and 18.5%, with a normalised ebitda margin expected between 23.3% and 23.9%. 

Headline earnings per share (HEPS) are forecast to increase by more than 20%. The results will be released on 1 June.

Yet investors remain unimpressed. The stock is trading at less than half its 2014 highs. 

Despite a 27% surge in revenues last year, Life’s headline earnings per share tumbled 57%, to hit 77.4c, the lowest since Life relisted in 2010. 

Dividends were halved to 80c/share. 

Viranna, a tough taskmaster who gets satisfaction from learning something new and solving problems, is excited by the “unbelievably challenging” assignment offered by Life.

“I’ve always had a sense of purpose and passion and have always had this professional purpose of helping change healthcare, both in South Africa and, more broadly, other parts of Africa. 

If you look at my career chapters thus far, it’s always been trying to shape healthcare provision in a manner that in some small way makes it matter in the country,” he says. 

Viranna, who as a teen dreamt of becoming a development test driver for Ferrari, started his career as a doctor at a state hospital in Durban in 1998. 

He went on to spend two years in the SA National Defence Force where he managed medical facilities. 

Twelve years at management consultancy McKinsey & Company followed, which saw him working in countries including Kenya, Tanzania and Nigeria. 

Life lured him from Discovery, which he had joined in 2013 and where he served as the head of Vitality.

In South Africa, which remains the main money-spinner for Life, government’s NHI plans have created much uncertainty for private-sector players.

“Many look at something and see opportunity and go: ‘Wow, this is great for our country.’ 

Others look at the same set of facts and get anxious and worry it would bring more harm than good. 

The implementation and the execution, and whether we can afford it, is really the make-or-break there,” Viranna says.

He believes the question isn’t “Why?” but “How?” – what matters is whether the NHI improves outcomes, from mortality rates to life expectancy, and reduces costs. 

“For me, it’s less about which of the models work – from state-led payer and private provision and so on. 

It’s about what’s right for the society; what’s fair,” he asserts. 

“If we pause and think: government is the best provider of good- quality care at the lowest prices, it is a fair question on us as the private sector to ask why we exist. As scary as that might sound, it’s a fair question.”

GETTING TO KNOW SHREY VIRANNA

Describe your leadership style

I’m a big believer in excellence, so I always encourage and support people to strive for that. 

I’m also demanding where staff performance is concerned. 

Exceptional people appreciate a bit of a push and to be given an opportunity to fly. 

I also strongly believe in a safety net – providing safety nets allows the teams around me to take risks, and to be bold and courageous.  

What do you wish you knew back when you started in the boardroom, after leaving the hospital building?

That the hardest part is often not getting to the answer but rather aligning the right people so that delivery happens.  

How often are you out of town and which gadgets are you never without?

Currently I’m travelling almost weekly. 

I never leave behind my headphones, battery pack and Minipresso.  

How do you strike a balance between home and work?

I’ve always been quite mindful of making sure I’m present enough and we do meaningful things as a family. 

I tend to get away with just a few hours of sleep so can catch up with work once everyone is asleep. 

New roles are always demanding, as they have a period of adjustment. 

We’ve had an honest conversation at home about the reality of those demands.   

What does your typical weekend look like?

I train, run, read, write poetry and take long drives in old cars.

Saturdays I usually go for a long drive, and get home in time to make breakfast for the kids before we trek off to school sports. 

Sundays is my early long run and then a pretty mellow day unless there is MotoGP on or Manchester United is playing.   

What are you reading at the moment? 

I’m re-reading Caroline Webb’s How to Have a Good Day and have just started The 48 Laws of Power by Robert Greene.  

What is your favourite destination?

Santa Monica in the US.  

Words to live by?

“Courage is not the absence of fear, but the triumph over it.” 

This article originally appeared in the 26 April edition of finweek. Buy and download the magazine here, or sign up for our weekly newsletter here.

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