Bloomberg News

Netcare Disputes Oxfam Report Over Hospital Costs in Lesotho

April 23, 2014

Netcare Ltd. (NTC), a private hospital operator in South Africa and the U.K., said its venture in Lesotho was a “success story” after an Oxfam report alleged it was draining the country’s health resources.

Netcare, which owns 40 percent of a group that won a contract six years ago to build, finance and run the Queen Mamohato Memorial Hospital in the capital Maseru, said the cost is about 35 percent of Lesotho’s health budget in the year through March. Oxfam said the figure was 51 percent, adding that the public-private partnership contributed the bulk of a two-thirds increase in government health spending.

“The project was designed to be flexible enough to ensure affordability for Lesotho,” Chris Smith, general manager for finance at Johannesburg-based Netcare, said in a telephone interview last week. “Any cost driver to government is from increased demand, but they get value for it.”

Netcare said the higher costs are due to an increase in demand above the contracted volumes of 20,000 inpatients and 310,000 outpatients per year. Additional inpatients attract fees of $786 each, according to Oxfam, which earlier this month reported that the project was draining funds needed by rural clinics in the landlocked country surrounded by South Africa. Lesotho’s gross domestic product per capita was $1,193 in 2012, according to World Bank data.

“This is a dangerous diversion of scarce public funds from primary health-care services in rural areas, where three-quarters of the population live,” Oxfam said. “Health PPPs of this kind are high risk and costly, and fail to advance the goal of universal and equitable health coverage.”

Catchment Area

Piet McPherson, Lesotho’s director general health, declined to comment.

Netcare said the new facility offers services, including intensive-care and neurosurgery units, that previously weren’t available at the old Queen Elizabeth II hospital.

“The 100-year-old facility was decrepit, dirty and unhygienic,” Netcare said in an April 14 statement, released one week after the Oxfam report.

Stripping out referrals, the new hospital and four clinics’ catchment area captures about 26 percent of the nation’s 1.9 million people, according to Netcare.

Lesotho’s government pays an annual fee to the hospital operator with additional outpatients costing $4.72 each, Oxfam said, citing the payment schedule for the 1.2 billion rand ($114 million) public-private partnership. The government was charged $9.4 million in 2013 for excess patients, more than double the previous year, it said.

Investment Returns

The Lesotho contract was signed with an expectation of generating a return of 13 percent to 18 percent, the same as on hospital investments in the U.K., Netcare said. At the end of the 18-year contract, the hospital and clinics will belong to Lesotho.

Netcare expects patient demand to decline over the next year as the Lesotho government refurbishes as many as 150 clinics, Smith said.

Oxfam predicts costs to increase after a proposal for the government to top up the salaries of workers in the hospital.

To contact the reporter on this story: Janice Kew in Johannesburg at jkew4@bloomberg.net

To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net Dylan Griffiths, John Bowker


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