Metropolitan Health Grows Eastern Cape Reach with PROVIDENCE Acquisition
14 November 2013 - Metropolitan Health has acquired Port Elizabeth-based PROVIDENCE Healthcare Risk Managers in a move which strengthens its position as the country’s largest healthcare administrator.
PROVIDENCE delivers administration and managed care services to approximately 140 000 beneficiaries for restricted membership schemes Gold Fields Medical Scheme, RUmed (Rhodes University) and Impala Medical Plan, for open schemes Medimed and Suremed Health as well as directly for the non-medical scheme employees at Harmony Gold and Impala Platinum. The company is also responsible for the management of the medical centres and clinical staff employed by two of its scheme clients.
It is envisaged that the acquisition will provide the current PROVIDENCE client base access to Metropolitan Health initiatives, such as an in-pharmacy clinic venture with the Alpha Pharm franchise group, Hello Doctor services and the Multiply Rewards programme.
Metropolitan Health CEO Blum Khan said that, in addition to significantly strengthening the company’s Eastern Cape footprint, the acquisition “fits perfectly with the company’s goals for profitable growth and the pursuit of innovative solutions that create greater access to healthcare.” He added that PROVIDENCE Healthcare Risk Managers “shares our determination to reduce costs, improve quality and create a transformed South African healthcare ecosystem that connects all South Africans to quality healthcare.”
The PROVIDENCE acquisition is further evidence of the momentum of consolidation in the industry. The latest Council for Medical Schemes (CMS) annual report indicates that there were 92 medical schemes at the end of 2012 in contrast to 144 in 2000 and 234 schemes in 1994. At administrator level, Metropolitan Health, which merged with Momentum Medical Scheme Administrators (MMSA) in December 2010, had 29.5% market share according to the CMS report, prior to the PROVIDENCE deal.
Khan believes that the consolidation trend at scheme level will continue as it “creates a less fragmented system of larger risk pools which offer the advantages of better economies of scale and effective cross-subsidisation from low-risk to high-risk individuals”. He also expects the high-volume/low-margin healthcare environment to drive further consolidation amongst smaller administrators.
Founder and chairman of PROVIDENCE, Donald Alexander, expressed excitement about the benefits to its major stakeholders, "PROVIDENCE has been built on providing unique delivery models and now, with the weight of a major player in the market behind it, has the scale to leverage these unique capabilities. This can only be a big positive for clients and senior management and staff under the ongoing direction of long serving CEO, Mike Neubert."
Mike Neubert added that “this is what we have been looking for for some time. It will also be completely seamless for all our clients and will add significantly to PROVIDENCE's empowerment credentials ”.