Modimolle Hospital Motivation [1] November 2010 Modimolle Hospital Motivation Urban Econ Development Economists 1088 Pretorius Street, Hatfield, 0028 Tel: 012 342 8686 Fax: 012 342 8688 pta@urban-econ.com
Modimolle Hospital Motivation [2] November 2010 Table Of Content 1. Introduction and purpose 3 1.1. Project description 3 1.2. Study Area Delineation 3 2. Benchmark Analysis 4 2.1. Demographic Profile 5 2.2. Age Profile 5 2.3. Employment 6 2.4. Education 6 2.5. Income Profile 7 2.6. Medical Aid Coverage 9 3. Need 9 3.1. South African Health Overview 9 3.2. Market Perspective 10 4. Market Potential 10 5. Broadening the Economic base 11 6. Motivation 12 List Of Tables Table 2.1: Population Dynamics 5 Table 2.2: Weighted Monthly Household Income 8 Table 2.3: Medical Aid Coverage 9 Table 3.1: Current market perspective 10 Table 4.1: Population and Medical Aid Membership 11 Table 4.2: Potential Market 11 List Of Figures Figure 1.1: Primary and Secondary Study Areas 4 Figure 2.1: Age Profile 5 Figure 2.2: Employment Profile 6 Figure 2.3: Education Profile 7 Figure 2.4: Monthly Income Profile 8 10
Modimolle Hospital Motivation [3] November 2010 1. Introduction and purpose The purpose of this memorandum is to motivate the need and desirability of a private hospital development in Modimolle, Limpopo. This report will provide a preliminary overview of the local market potential to absorb the proposed development. The findings will predominantly be based on the specific character of the target market population and the way in which this market are able to sustain a private hospital development. The study will rely on existing data sources and aim to provide a comprehensive and up-to-date understanding of the relevant indicators, trends and market influences. In addition to the analysis of the socio-economic character of the market population, the findings will also be informed by a range of parameters from prior research and similar projects in which Urban-Econ has been involved. The methodology used for the purposes of this study, which also outlines the remainder of the report, is as follows: project description; study area delineation; benchmark analysis; motivation of the market need; market gap; contribution to the economy; and motivation. 1.1. Project description The proposed hospital facility will be an ultramodern 130-bed healthcare facility, serving not only the local population, but also a larger region within the Waterberg District Municipality. The Class-B facility will provide four theatres, intensive care, casualties and a trauma unit. Other services typically associated with Class-B facilities can include a maternity ward, pathology and radiology department and a fertility clinic. The target market is the portion of the population in the Waterberg DM, Modimolle LM, as well as tourists to the area and passerby traffic that can afford to make use of a private medical facility. 1.2. Study Area Delineation The study area can be defined as the geographical area or segment of the market that will be primarily influenced by the proposed development. The study area is delineated in order to identify the area to be most influenced by the proposed development and to determine the scope and character of the potential market population. The primary study area for the purpose of this study is the Modimolle Local Municipality and the secondary study area is the Waterberg District Municipality. Figure 1.1 graphically illustrates the
Modimolle Hospital Motivation [4] November 2010 primary (Modimolle Local Municipality) and secondary (Waterberg District Municipality) study areas in terms of the provincial (Limpopo) context. Figure 1.1: Primary and Secondary Study Areas, 2010 Secondary Study Area Primary Study Area 2. Benchmark Analysis Source: Urban-Econ and wikimapia.com, 2010 The motivation document is packaged to compare the existing socio-economic profile with the benchmarks of industry standards associated with health care developments. This comparison will serve as a basis to inform the capacity or potential of the market to sustain a healthcare facility. The following sub-section will present the most prominent socio-economic factors of the study areas population. Each profile compares the primary market area, the secondary market area and the province. The following socio-economic factors will be analysed: demographic profile; age; employment; education; income; and medical aid coverage.
Modimolle Hospital Motivation [5] November 2010 2.1. Demographic Profile Examining population dynamics is essential to gaining an accurate perspective of the potential consumer market for the proposed hospital. Table 2.1 presents the population and household estimates for the primary and secondary study area compared to the provincial figures. Historic population growth rates were used to project the study area s population and households. Table 2.1: Population Dynamics, 2010 Population Households Primary area 60,317 18,566 Secondary area 631,242 158,870 Source: Urban-Econ Calculations based Stats SA Community Survey 2007 From Table 2.1 it is clear to see that the population of the primary and secondary study areas as well as the Limpopo province have positive growth rates. The primary study area currently comprises of 60,317 individuals and 18,566 households and the secondary study area comprises of 631,242 individuals and 158,870 households. According to industry standards a benchmark population of 145,000 is needed to sustain a typical community hospital. Therefore the combined population of the primary and secondary study area is estimated to be sufficient for the development of community hospital. 2.2. Age Profile It is import to look at the age profile as the older population tend to need more medical assistance. The age profile assessment will provide valuable insight into the composition of the study area population and will importantly establish the Potential Economically Active population (PEA). The PEA refers to the population that falls within the working age group - aged between 15 and 64. Figure 2.1: Age Profile, 2010 70.0% 60.0% 56.7% 60.4% 64.3% 50.0% 40.0% 30.0% 37.0% 33.0% 28.9% 20.0% 10.0% 6.4% 6.6% 6.9% 0.0% Limpopo Secondary area Primary area 0-14 15-64 64 & Older Source: Urban-Econ Calculations based Stats SA Community Survey 2007
Modimolle Hospital Motivation [6] November 2010 In Figure 2.1 the age profiles of the primary study area, secondary study area and the Limpopo province have been evaluated. 64.3% of the primary study areas population is aged between 15 and 64, while 60.4% of the secondary study areas population and 56.7% of the Limpopo province population falls in the PEA population category. The PEA population is the portion of the population that is generally employed and produce an income. It is generally the PEA that will be able to afford medical aid and be able to make use of the proposed private hospital.. The older portion of the population tends to use medical facilities more frequently. 2.3. Employment The employment profile is an important indication of the level of disposable income and subsequently the expenditure capacity of the study area. Figure 2.2 illustrates the distribution of individuals according to their employment status. Figure 2.2: Employment Profile 35.0% 30.0% 25.0% 20.0% 15.0% 15.3% 29.6% 23.9% 19.6% 31.9% 14.9% 10.0% 5.0% 0.0% Limpopo Secondary area Primary area Employed Unemployed Source: Urban-Econ Calculations based Stats SA Community Survey 2007 Evidently the study area is better off in terms of employment than the Limpopo province. Of the population in the primary study area, 31.9% is employed, a figure that exceeds the provincial (15.3%) and secondary study areas (23.9%) figures. The population that is employed generates an income that can be used for goods and services including private health care. The unemployed portion of the population is unlikely to be able to afford private medical care and will subsequently not make use of the proposed facility. 2.4. Education The level of education often informs the employment potential and income potential of the local population. Low education levels lead to a low skills base in an area while high education levels have
Modimolle Hospital Motivation [7] November 2010 the opposite effect, producing a skilled or highly skilled population. There is also a clear linkage between the education levels and personal income as people with higher education on average earn more than people with lower levels of education Figure 2.3 illustrates the highest completed level of education for the population of the primary and secondary study areas and that of the Limpopo province. Figure 2.3: Education Profile Higher 6.6% 7.4% 5.8% Secondary Schooling Primary Schooling 42.0% 43.2% 42.2% 40.6% 37.5% 37.6% No Schooling 10.8% 11.8% 14.4% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 50.0% Source: Urban-Econ Calculations based Stats SA Community Survey 2007 As illustrated in Figure 2.3 the education distribution of the primary study area is similar to the provincial and secondary study distribution, indicating that the majority if the population completed primary or secondary school. Approximately 50% of the population in the primary study area completed secondary school. Primary area Secondary area Limpopo The high education levels can be linked to a higher income, which can lead to a larger portion of the population that can afford private medical care. 2.5. Income Profile Disposable household income is a key indicator of socio-economic well-being in that it is a primary means by which people are able to satisfy their needs. Disposable income refers to the total income (after deductions) per household and indicates how much money is available to spend. Figure 2.4 illustrates the monthly household income of the primary and secondary area. The income categories
Modimolle Hospital Motivation [8] November 2010 were derived from the categories used in the Stats SA community survey in 2007 and has been adjusted by the yearly inflation rate to depict a realistic scenario. Figure 2.4: Monthly income profile, 2010 R61,142 and more R30,571 - R61,141 R15,286 - R30,571 R 7,644 - R15,285 R3,822 - R7,643 R1,912 - R3,821 R956 - R1,910 R479- R955 R1- R478 4.2% 2.9% 1.6% 4.9% 3.9% 3.3% 9.4% 7.9% 5.7% 14.0% 13.8% 10.1% 12.1% 11.6% 15.9% 3.0% 7.3% 8.6% 3.0% 3.5% 6.8% 26.4% 24.6% 21.9% 23.0% 24.5% 26.1% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% Secondary Study Area Primary Stuydy Area Limpopo Source: Urban-Econ Calculations based Stats SA Community Survey 2007 From Figure 2.4 it can be concluded the personal income distribution in the primary study area is higher than that of the secondary study area and the provincial distribution. The most prominent income category for the primary study area is R3,822 R7,643. The monthly household weighted average income is illustrated in Table 2.2. Table 2.2: Weighted average monthly household incomes 2010 Primary Study Area Secondary Study Area Limpopo Province R 7,671 R 6,039 R 4,365 Source: Urban-Econ Calculations based Stats SA Community Survey 2007 From Table 2.2 it is possible to determine that the primary study area population have a large disposable income compared to that of the Limpopo province. The monthly household income profile of the primary study area indicates a relatively high income distribution. Income will play a major role in the sustainability for the facility, as a higher income is likely to 2.6. Medical suggest a Aid greater Coverage proportion of the population that will be able to make use of the proposed private
Modimolle Hospital Motivation [9] November 2010 Medical aid coverage plays a major role in individuals lives with regards to medical treatment. Although not all patients that make use of private hospitals are members of a medical aid scheme, the majority of individuals that make use of private healthcare facilities are members of a medical aid scheme. Table 2.3 presents the medical aid membership of Limpopo compared to the national average. Table 2.3: Medical Aid Membership Medical Aid Coverage Percentage (2009) South Africa 16.6% Limpopo 8.0% Source: Health Systems Trust, 2010 The percentage of Limpopo s population covered by medical aid is very low, and is less than half of the national percentage. It was also determined that the Limpopo province has the lowest number of individuals covered by medical aid. Limpopo has a limited portion of the population that is members of a medical aid scheme. The higher the medical aid membership, the more likely the population will make use of a private medical facility. However, since there are no private medical facilities in the primary study area, the proposed facility can capture the entire market. 3. Need The following subsection will discuss the need for the proposed private hospital in Modimolle. The need for the facility plays a major role in the feasibility and long term sustainability. The content of this section provides an overview of the South African health care sector followed by a market perspective in terms of private medical facilities in Modimolle. 3.1. South African Health Overview South Africa's health system consists of a large public sector and a small but fast-growing private sector. Although the public health sector achieved substantial improvements post 1994, the sector is facing major challenges. The public health sector is under-resourced and over-utilised, while the rapidly increasing private sector caters to middle- and high-income earners who tend to be members of medical schemes (16.6% of the population). The private sector provides quality healthcare to a small proportion of the South African population, while the majority of South Africans depend on a struggling public sector characterised by long waiting lines and arguably lower quality of care. In the Limpopo province primary healthcare utilisation is very low, ambulances are few and staff turnover in the health sector is high. With the public sector's shift in emphasis from acute to primary health care in recent years, private hospitals have begun to take over many tertiary and specialist health
Modimolle Hospital Motivation [10] November 2010 services. The number of private hospitals and clinics continues to grow and majority of health professionals work in private hospitals. It can be concluded that the public health sector in South Africa is in a poor condition and is facing a great number of challenges. Taking in consideration the deterioration of the public health care system, it is becoming imperative for members of the public, which can afford it, to make use of private medical care. Sources: Health-e, Limpopo limping behind in Health Care, 2004; David Harrison, An overview of Health and Health Care in South Africa-2010. 3.2. Market Perspective The purpose of market perceptive analysis is to determine the current supply of private health care facilities in the primary study area. The supply refers to the existing facilities within the study area that has a similar function and character and share the same target market. There is currently not a private hospital in the primary study area. The private hospitals nearest to Modimolle are illustrated in Table 3.1. Although these hospitals are not in the primary market area, they are the primary competitive facilities currently servicing the local population. Table 3.1: Current Market Perspective Hospital/Clinic Location Approximate Distance Services Include Medi-Clinic Curamed St Vincent's Hospital Medi-Clinic Marapong Medi-Clinic Limpopo Montana private Hospital Thabazimbi 120km Emergency centre, high care unit, pathology and radiology. Theatre, maternity ward, radiology, casualty, surgical and laboratory services. Pathology and radiology Bella-Bella 20km Lephalale 140km Polokwane 140km Emergency centre, intensive care unit, fertility clinic, pathology and radiology. Surgery, neuro surgery, cardiology, internal medicine, paediatric, neonatology, plastic surgery, trauma department, pathology and radiology. Pretoria, Montana 100km The closest hospital is St Vincin s Hospital in Bella-Bella, approximately 20km from Modimolle. The Montana Private Hospital is the closest hospital offering a wide range of services. 4. Market Potential The market potential analysis aims to determine the market potential for a private hospital. The market parameters used to calculate the potential is based on prior studies conducted by Urban-Econ and will provide valuable insight in terms of the expected market potential for the proposed development.
Modimolle Hospital Motivation [11] November 2010 Table 4.1 presents the population of the primary and secondary study areas population and the population with medical aid respectively for 2010. As identified in section two of the report, 8% of the population in Limpopo are members of a medical aid. Table 4.1: Population and Medical Aid Membership Population Population with Medical Aid Primary Study Area 60,317 4,825 Secondary Study Area 631,242 50,499 From Table 4.1 it can be concluded that there are currently 4,825 individuals in the primary study area that can potentially make use of the proposed hospital facility. It is however anticipated that a portion of the population of the primary and secondary study areas will make not make use of the proposed facility. This portion of the population can be seen as a leakage. It is anticipated that the primary study are will have a leakage of 20% and the secondary study area will have a leakage of 10%. Table 4.2 illustrates the population that could be captured after the leakage factor has been taken into account. Table 4.2: Potential Market Potential Market Population Primary Study Area 4,343 Secondary Study Area 40,399 Total 44,742 As illustrated in Table 4.2, it is anticipated that 44,742 individuals could make use of the facility. 5. Broadening of the economy Limpopo is famous for the quantity and quality of its natural resource. It is thus natural that mining operations contribute to approximately 20% of Limpopo's economy. Limpopo's rich mineral deposits include platinum group metals, iron ore, coal and diamonds. The Limpopo RGDP has grown at an average rate of 13.8% per annum in the last eight years, proving that the province has a high potential for development and investment opportunities. The rapidly growing economy of the Limpopo province indicates that the need for a private hospital will only increase in future. The Modimolle economy relies to a great extent on the performance of the manufacturing, community service, trade, financial services and transport. The bushveld surrounding the town supplements an important tourist sector, which furthermore increases the need for a private hospital. The development of the private hospital will also contribute to the growth of the local economy, and provide employment opportunities for the population. If one looks at the economic benefits from both tiers, i.e. the growing economy of the area and the potential positive economic impact of the hospital development, the proposed private hospital could be a beneficial addition to the area of Modimolle.
Modimolle Hospital Motivation [12] November 2010 6. Motivation From the analysis contained in this report it can be concluded that a sufficient market to sustain the proposed development of a private healthcare facility. The following arguments is emphasised with regards to the need and desirability of the proposed private hospital. the combined population of the primary and secondary study area in accordance with industry standards is sufficient for the development of a hospital facility; the study area consist of a generally large PEA population that is in general employed and produce an income; the study area has a high employment rate; the income profile of the primary study area indicates a relatively high income distribution; although the study area have a low medical aid membership percentage, there is still a high portion of the population that could make use of the proposed hospital taken into account that there are currently no private medical centres available in the primary study area; the public health sector in South Africa is in a poor condition and is facing a great number of challenges, while the private sector is rapidly expanding; there is currently not a private hospital in the primary study area; there is a potential market population of 44,742 individuals; and the development of the hospital will benefit the economy from both tiers, i.e. the growing economy of the area and the potential positive economic impact of the hospital development. For the above reasons the development of a proposed hospital facility is viewed in a positive light being regarded in perspective to the available information as an economically feasible development option.