| Thu 24 Jul 2003, 11:24 | | Netcare - Announcement and withdrawal of cautionar |
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Network Healthcare Holdings Limited
("Netcare")
(Incorporated in the Republic of South Africa)
Registration number 1996/008242/06
JSE share code: NTC
ISIN code: ZAE000011953
South African Managed Care Co-Operative Ltd
("the SAMCC")
Netpartner Investments Ltd
("Netpartner")
ANNOUNCEMENT
1 Introduction
Further to the cautionary announcement issued by Netcare on 27 May 2003 and
renewed on 10 July 2003, the boards of directors of the South African Managed
Care Co-Operative ("SAMCC") and Netcare are authorised to announce that the
SAMCC, Netcare and one of Netcare"s wholly owned subsidiaries, Medicross
Healthcare Group (Pty) Ltd ("Medicross") (collectively "the parties") have
entered into a memorandum of understanding ("the MOU") with the overall purpose
of creating a comprehensive healthcare provider network. The SAMCC is a
voluntary organisation with 50 Independent Practitioner Associations ("IPA")
affiliated to it, which IPA"s comprise some 3 200 members (the majority of whom
are from previously disadvantaged communities), while Netcare is a leader in the
South African healthcare industry. The SAMCC"s role in this initiative will be
the setting of standards of healthcare delivery, the accreditation of providers
and the implementation of strict clinical guidelines, ethical standards and peer
review.
It has been Netcare"s stated objective and approach to develop an integrated
healthcare delivery model around its core hospital business. This initiative is
seen to be strategic in complementing the healthcare provider offering that has
been, and is, in keeping with Netcare"s core leadership strategy of customer
intimacy, which involves working closely with doctors.
2. Objectives and Rationale
Given that:
- the medically insured population has remained relatively static for the last
five years;
plans to make first world healthcare more accessible and affordable to all South
Africans have not been successful;
- the current third party payor fee for service model is considered not to be
sustainable, lacks accountability and offers limited growth opportunities with
no incentives for efficiencies; and
- Netcare has for many years advocated a change to the current re-imbursive
model with the objective of making quality healthcare more affordable to all
South Africans,
- the parties wish to embark upon this initiative which will facilitate the
delivery of accessible, affordable, quality healthcare with a particular focus
on presently uninsured low income earners.
It is considered that this will be achieved by the creation of a national
network of healthcare providers with the objective of becoming the lowest cost
provider of quality healthcare. The extensive general practitioner coverage
which the network will provide, together with the broad geographic presence of
Netcare"s private hospital network, its supporting specialists as well as its
portfolio of complementary healthcare interests and networks, makes for a
compelling comprehensive national provider network capable of offering a full
range of healthcare services. In terms of this initiative, the doctors within
the Medicross system (which encompasses practices containing 428 general
practitioners and 151 dentists) have become affiliated to the SAMCC.
3. Netpartner Investments Limited
In order to align the interests of the parties, an investment holding company
("Netpartner") is in the process of being established for the purpose of
investing in a range of healthcare enterprises. Healthcare professionals,
Netcare and strategic empowerment partners will be invited to participate, with
Netcare subscribing for shares so that it holds a minority interest in
Netpartner. Netcare intends to fund this investment through existing financial
resources within the Netcare Group.
Netcare has agreed to procure the following investment opportunities for
Netpartner:
- a 20% interest in Medicross for an amount of R50 million; and
- up to 100 million Netcare shares at a price based upon 90% of the average
trading price on The JSE Securities Exchange South Africa ("the JSE") for the 30
trading days prior to the signing of the MOU (27 May 2003), which price was 274
cents.
4. Managed Care Network Company
A Managed Care Network Company ("Networkco") will be established by Netpartner
and managed by the Netcare Group to facilitate alternative re-imbursive methods.
Networkco will utilise the experience and technology which has been developed by
Medicross and the SAMCC to expand their capitated products from the current 50
000 lives presently offered by ten medical schemes (Discovery, Liberty et al).
These products have proven to be successful with single digit annual escalations
over the past four years.
In addition, Netcare specifically formed and piloted the Netcare Medical Aid
Scheme that was administered by its wholly owned managed care company, Clinical
Partners. Since the Netcare Medical Aid Schemes" inception four years ago, it
has successfully kept its annual premium contribution increases to single
figures. The Scheme also enjoys reserves in excess of 30% despite the medical
providers earning fees above normal tariffs.
It is initially intended that Networkco will offer primary care alternatives
through existing Medical Aid Schemes and develop new products for the low-income
market. It is considered that this venture will also allow Netpartner, in
association with administrators, the ability to offer a comprehensive solution
for the estimated 480 000 public service employees soon to enter the private
healthcare market.
5. Financial Effects for Netcare
The financial effects of the proposals to Netcare are not material on a pro-
forma basis. However, the successful implementation of the provider network
should impact positively on the Netcare Group in the future.
6. Conditions Precedent
The proposals are conditional upon, inter alia, Netpartner raising an amount of
no less than R100 million in ordinary shareholders funds. It is intended,
however, that Netpartner will raise funds in the order of R 300 million.
7. Withdrawal of Cautionary Announcement
As a consequence of this announcement, Netcare shareholders are hereby advised
that they are no longer required to exercise caution in trading of their Netcare
shares.
Further announcements regarding the status of Netpartner will be published from
time to time.
Sandton
24 July 2003
Investment bank and corporate advisors to Netpartner
Nedbank
Netcare Sponsor
Merrill Lynch South Africa (Pty) Ltd
Attorneys
HR Levin
Reporting Accountants
Fisher Hoffman PKF (JHB) Inc
