Healthcare funders directly impact our patients’ ability to access healthcare services at our facilities, influencing revenue and market share.

The following factors impact healthcare funders as a material matter:

• The increasing prevalence of DSP network agreements, as healthcare funders reimburse 95.1% of the hospital division revenue in southern Africa (2018: 95.5%)
• The Group has significant exposure to Discovery Health Medical Scheme (DHMS) and the Government Employees Medical Scheme (GEMS) in South Africa, with these two funders making up approximately 49% (2018: 46%) of the hospital division’s turnover in southern Africa
• The consolidation of healthcare funders in South Africa has resulted in increased bargaining power, which could ultimately reduce the prices the Group can charge for services
• Internationally, public funders and our agreements with them influence the viability and sustainability of our businesses
• The affordability of private medical insurance in southern Africa, together with existing members buying down their medical insurance options

Cost of care continues to increase in all the regions we operate. This impacts our profitability, as well as our ability to deliver on our mission of improving the lives of people through the delivery of high-quality, cost-effective care.

The following factors impact the cost of care as a material matter:

• The costs of input materials and services needed to provide our patients with a high level of quality (this is closely linked to the quality of care standards as a material matter)
• Fluctuating exchange rates impacting the cost of imported necessities, such as surgical consumables and medical equipment
• Cost pressures on healthcare funders, who provide access to patients and therefore directly influence our revenue and market share (this is closely linked to healthcare funders as a material matter)
• Labour costs, which comprise approximately 44% of total Group costs (2018: 42%), including increases in salaries and wages, as well as scarce and critical skills such as specialised and registered nurses, specialist doctors and radiographers
• The ability to align nursing and radiographer staff levels with occupancies and to meet the needs of the patients, therefore balancing the mix of permanent and agency employee levels
• Partnerships with doctors and other medical professionals

The limited availability of doctors, pharmacists, specialist nurses, registered nurses, specialised ICU nurses, and other healthcare professionals in South Africa remains a concern, potentially impacting clinical quality and the cost of care, along with constraining future growth. Our businesses in Europe and Poland are also experiencing skills shortages, with uncertainties surrounding Brexit compounding problems in the UK.

The following factors impact specialised skills shortages as a material matter:

• A highly competitive employment market for skilled healthcare professionals, characterised by above-inflation wage increases
• South African immigration regulations and labour-related agreements that restrict the ability of people to work across borders
• The limited availability of skills development initiatives, training, bursaries and sponsorships
• Leveraging skills and the transfer of knowledge from facilities in Alliance Medical, in western Europe, and Scanmed, in Poland, to South Africa, specifically in areas such as radiology, oncology, gynaecology and cardiology

We operate in a highly regulated industry. While we believe that this level of regulation is often necessary, it does impact the cost of care and growth of the Group. We fully support the intentions of regulators; however, the ever-evolving operating environment places a burden on the business as the pace and scale of regulatory change remain unprecedented. Non-compliance may lead to penalties or withdrawal of our licence to operate and holds reputational risk for the Group.

The following factors impact increasing regulations as a material matter:

• Regulations relating to matters such as licences, conduct of operations, security of medical records, occupational health and safety, quality standards and certain categories of pricing
• Uncertainty around the possible impacts of the HMI, NHI and the Medical Schemes Amendment Bill on our South African operations
• While we expect Brexit to have an impact on our operations in the UK, the degree of this impact is uncertain at this time

Maintaining and improving the quality of care in all our territories is integral to the Group’s core values and to building strong relationships with our key stakeholders. The delivery of quality care is also critical to protecting the Group’s reputation. Quality of care is closely linked to the cost of care, as it is critical to achieve a balance between effective and profitable service provision.

Quality of care standards as a material matter is guided and impacted by a variety of factors, including:

• Government and other regulators that require that we adhere to various standards and practices
• The Group’s clinical quality policies, procedures, frameworks and standards
• Environmental, health and safety requirements
• Shortages in specialised doctors and skilled personnel such as pharmacists, nurses and radiographers
• Innovation in information systems and security

High wage increases affect the affordability of healthcare, while the shortage of skilled and specialised employees affect the quality of care.

The following factors impact labour relations and employee retention as a material matter:

• Competition for specialised and scarce skills in all regions where we operate
• South African and Polish nursing wage increases that are higher than inflation
• Industrial action in South Africa could impair the delivery of healthcare
• Talent management, succession planning, development, and training

As one of our primary stakeholders, governments impact our business in many ways – from originating laws and regulations to issuing licences to operate. Internationally, the government is the primary source of revenue for Alliance Medical and Scanmed, and also contributes significantly to our revenue in southern Africa.

The following factors impact government relationships as a material matter:

• Bed licences are required for brownfield and greenfield expansion in southern Africa
• Revenue and profitability may be impacted by healthcare regulatory reforms, changes in the budget allocated for healthcare services, and healthcare tariff changes
• The public sector provides a significant portion of Alliance Medical and Scanmed’s revenue, making regulatory reforms, the award of contracts, as well as reductions or delays in payments, highly significant to profitability of these businesses

Given our global footprint, the performance of each business unit is critical to delivering our growth ambitions.

The following factors impact our portfolio performance as a material matter:

• Local socio-economic and political conditions
• The demand for healthcare services
• The competitive environment in each territory
• Strength of local management teams
• Investment decisions made at a local and board level