Group CEO's Report
2016-17 was a very significant year for us, it being the first full year of our Midland Public and Private Hospitals and the first full year of our responsibility for the Hawkesbury District Health Service. The addition of these two hospitals to the group in November has fundamentally changed us and we are delighted to have such close connectivity and accountability to local populations in these jurisdictions.
The advent of the two public hospitals, the sale of our pathology division, the acquisition of a disability service and various internal reviews led to some important structural changes to set us up in the optimal way for the next stage of our growth and development.
We treated 145,406 overnight and 207,575 day separations, up 9.1% and 8.4% respectively on the prior year. In part, this was due to 133,281 people (40.1% up on prior year) attending one or other of our five emergency departments (two public, three private). Emergency department activity is the main driver of public hospital separations.
Our Community Services undertook 27% more counselling services (up to 32,931) and had a 27.7% increase in client numbers (up to 4,831). It also accommodated 77,634 bed nights in our supported accommodation for people with intellectual disability, homeless youth and chronic mental illness.
As a result of the additional activity, our revenue rose a healthy 7.3% to $1,687.1 million. Most of this revenue growth was in our low margin public hospitals however so that our earnings (EBITDA) margin dropped from 7.3% to 6.9%.
Despite our $146.7 million capital investment, of which $105.2 million pertained to facility redevelopments, careful management of cashflow enabled us to only increase debt by $21.2 million to $333.2 million. Our most significant capital redevelopments were at our St John of God Bendigo Hospital ($41 million expansion and refurbishment), St John of God Geelong Hospital ICU/CCU ($21 million) and the new greenfield 190 bed St John of God Berwick Hospital (to be completed in October 2017 and commissioned in January 2018).
Patient safety and quality
As part of our Strategic Priorities we aim to have zero preventable harm. Significant effort was applied to our major clinical risk areas of obstetrics and mental health with both areas performing well ahead of national benchmarks. Other areas of focus related to wrong site surgery avoidance and pathology specimen transfer. Our patient safety efforts will be assisted by the implementation of the RiskMan incident system, due to be installed in the middle of 2017-2018.
Occupational health and safety
Our continuing focus on OHS has seen improvement but we still have a long way to go to achieve our goal of zero preventable harm. Our Lost Time Injury Frequency Rate (LTIFR) of 9.34 was a 4.2% improvement on prior year.
Mergers and acquisitions
In October 2016 we effected the sale of our Pathology division to Crescent Capital Partners in return for cash plus shares in Australian Clinical Laboratories (Clinical Labs), Australia’s third largest pathology operator. I am delighted to represent St John of God Health Care on the Board of Clinical Labs and see firsthand the capability and focus of the Clinical Labs Board and management to making it a leading pathology business. Clinical Labs provides pathology services to St John of God Health Care under a long-term contract.
Primarily in response to the implementation of the National Disability Insurance Scheme (NDIS), the Daughters of Charity transferred their Marillac services in southern Melbourne to our St John of God Accord division. The transfer took place in May leading to St John of God Accord being the third largest disability services provider in Victoria.
Internal restructuring to best support strategies
Following a comprehensive review of our Mission Management Model, we have implemented some important changes including a group approach to formation of caregivers and the appointment of Regional Directors of Mission Integration to best support our hospitals. We believe this clearly sets us up to be the benchmark in this area of work within the Australian church sector. We were delighted to recruit Marcelle Mogg to the Group Director Mission Integration role in November 2016.
Before embarking on our strategic objective of a group wide Clinical Information System (CIS) we contracted Accenture to help us develop an optimal Information Services operating model. This body of work will bear fruit following the appointment of Jenny Levy as our transformational Group Director Information Services. The ISOM has clarified the capabilities and resources needed to support our Strategic Priorities, including with regard to high quality care, analytics, agility, partnering and capital optimisation.
A review of our social outreach governance by Azure Consulting led to a new Group Management Committee role of Executive Director of Community Services with Kevin Taylor having responsibility for our St John of God Accord division (intellectual disability), Social Outreach division and oversight of our New Zealand division (St John of God Hauora Trust). We will continue to pursue significant growth in each of these community services areas. In the case of Social Outreach these services would not otherwise be provided were it not for our financial support.
In WA we collapsed the two previous senior executive roles into a single Executive Director of WA Hospitals and I was pleased to appoint John Fogarty to the role in January 2017. This has already led to improved coordination and strategy development amongst our seven Western Australian hospitals.
No government or health fund has enough resources to fund all the health needs and wants of their citizens/members. This has resulted in us moving into a phase of lower price increases, requiring us to improve productivity and invest in relevant supportive technology.
The broader economic environment in Australia has led to a small decrease in the number of people with private health insurance and a marked slowing in the growth of chargeable patients across the sector.
The public sector has deliberately become a more significant competitor, further impacting patient numbers.
These industry changes are making us much more cautious about investments in bricks and mortar so we are coming to the end of our capital cycle.
The year ahead
We will be focusing on completing our remaining Board approved capital projects, particularly our new St John of God Berwick Hospital.
To support our IS Operating Model implementation we are significantly increasing our investment in information and communications technology (ICT). We will develop a new digital strategy and go to the market for a CIS/Electronic Medical Record at the end of 2017-2018.
Further opportunities to grow our service range and capability in disability services will be grasped as the NDIS roll out gathers pace.
Financial stewardship will receive more internal focus due to the flatter market, greater competition and our need to significantly invest in ICT.
I thank my Group Management Committee and all the caregivers, doctors, allied health practitioners, volunteers, donors and consumer representatives who each year continue to devote themselves to the care and support of our patients and clients at St John of God Health Care. I also thank the Board and Trustees for their enthusiastic and capable support and oversight.