Metropolitan acquires PROVIDENCE, secures lead

Metropolitan Health says it has strengthened its position as the country’s largest healthcare administrator through an acquisition of the Port Elizabeth-based PROVIDENCE Healthcare Risk Managers.

The PROVIDENCE transaction, says Metropolitan Health, propels further the momentum of a consolidation underway in the industry. It comes after Metropolitan Health itself merged with Momentum Medical Scheme Administrators (MMSA) in December 2010. The merged entity had 29.5% market share before the PROVIDENCE deal.

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.

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.”

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 on-going direction of long serving CEO, Mike Neubert.”

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.

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