In the media

Medscheme: Making an impact in the medical industry

09 September 2015

"Medscheme's business model", he says, "is quite complex because it's a multischeme administrator and health risk management company, so it has multiple clients and some of those clients compete against each other."

  CEO: Kevin Aron

"One of the key leadership traits that you need to have is resilience. You need to have courage to make tough decisions and, most importantly, you need to have a great team under you. In essence, our business success depends primarily on people. Processes and technology are key but ultimately they are also driven by people."

Asked about the highlights of his 14 years with Medscheme, Aron says "I think the first one was in the period 2002 to 2005 when Medscheme found itself in a lot of trouble, both operationally and financially. I think that one of the main successes was that I was part of a team that helped turnaround the business. At one stage the company was almost insolvent and we turned it around with a strong management team and support from our clients and bankers. We restored Medscheme to a profitable business which has shown sustainable growth and earnings over the past decade and I feel quite proud of my role in terms of that turnaround."

“Another outstanding highlight”, he says, "was shifting the organisation from what was very much an inwardly focused operational business to an outwardly focused, client engaged and customer centric business. We spent a lot of time listening to our customers."

He says the cost of healthcare is a major problem. “Healthcare continues to rise exponentially. Inflation in healthcare is significantly more than CPI so that's a major challenge. The cost of being on a private medical scheme is becoming unaffordable to large parts of the South African population, so that's one of our biggest challenges; how do we better manage the cost of healthcare, how do we make medical schemes sustainable?"

Aron says Medscheme has been in existence for 44 years, "so I think we've got a huge amount of institutional knowledge. I regularly engage with people in the industry and often find that at some point in their career, they have worked at Medscheme, and this institutional knowledge has allowed us to adapt our processes, to refine our technology and I think that's one of the key benefits we have."

Asked about Medscheme's secret to success in keeping clients like Bonitas and Fedhealth on its books for so many years, Aron says: "The recipe for success is that you have to understand completely your clients needs, objectives and strategy. We spent a huge amount of time focusing on our clients strategy, understanding their key objectives and then ensuring that we meet those objectives and strategy" Medscheme, he adds, has several focus areas, including:

  Addressing the unsustainable cost of healthcare.
  Technology and process innovation. A significant investment is currently being made in the technology area where the core administration system is being re-engineered and rewritten. This will not only optimise existing business processes but will also better enable the company to meet the business needs of its clients through agile and flexible technology solutions. Attracting talent into the organisation, nurturing that talent, developing it, and retaining it.
  Diversifying its revenue streams and building a global presence in international markets through selective acquisitions. Aron says he is very lucky and blessed to have a team of very intelligent and strong people, who are all highly qualified, ranging from actuaries through to medical doctors, accountants and engineers.

"They are very strong in their own right, so that creates both opportunities and challenges from a leadership perspective, but in a sense it is the real beauty. They are very skilled and they are also professional in what they do and they're very driven, so my role is really to guide them and to create the strategic roadmap and ensure that ultimately we stay focused on that roadmap."

Asked what he would like his legacy to be, Aron says: "l think for me it's very much around how I have made a difference to the organisation, not just to the organisation in terms of strategy and objectives and financial performance, but, probably more importantly, how have I made a difference to individuals. Are there people out there that would say Kevin Aron was a mentor, or an inspiration, perhaps? I would also like my legacy to be around core values, and that people would say 'you know I learnt a lot from him, I respected him, but his legacy is that he was instrumental in building and leading an organisation with a strong foundation from a core values perspective. For me, that would be the perfect legacy to leave."

He says the recent deal in which Medscheme's holding company, AfroCentric, has concluded a transaction with Sanlam in which the latter will be taking a significant stake in AfroCentric is a "game changer". I think having Sanlam in as a significant shareholder with core capabilities in terms of product distribution channels, financial service products, loyalty programme offerings and know-how is going to enhance not only our value offering, but the value offering of our client medical schemes, our value chain, and I have no doubt that this is going to benefit us in terms of future growth. It will give us a competitive advantage."

Regarding the critical success factors that need to be met in order to maintain the success that Medscheme has achieved to-date, Aron says that these are mostly around building capacity within the organisation and staying focused on the company's key strategy "l think as one starts to grow and expand, there is a risk that you can become de-focused, losing sight of what made you successful in the past. That's obviously a major risk and something that I worry about a lot. It's all about sticking to the knitting as they say and not losing the recipe for success."

Another key challenge is ensuring that the company can meet the current and expected future growth, both from a technology and people perspective.

One of our biggest worries at the moment is attracting the right people and building capacity within the organisation, and that certainly is going to be one of the key critical success factors that we're going to need to do in terms of the future, if we are going to be successful and continue to grow," says Aron. "We're obviously looking at how we build our internal capacity and develop key people in terms of leadership programs and developmental programs," he adds.

He says he is very aware and acutely focused around the company's core values: mutual respect, integrity and accountability. "I try and ensure that on a consistent basis, in terms of the way l communicate within the organisation, that l continually re-enforce and reiterate the importance of those core values, so that you don't actually find that they are just words written on paper, but that it's the way the organisation lives and that it becomes the fundamental DNA of the organisation."

Regarding the future of healthcare in South Africa, he says: "There is an emotional aspect as well as a social aspect to healthcare. Everybody needs healthcare and l think that we are going to continue to see cost pressures on the industry The on-going challenges which I've alluded to are not just South African in nature. The escalating costs of healthcare are global, and there's going to be a continued focus on both the private and public health sectors to better address not only the rising cost of healthcare, but the increasing burden of disease based on poor lifestyle habits."

From a medical scheme perspective he believes consolidation in the market will continue.

"There are too many players in the market and consolidation will continue to happen until ultimately, l believe, there will be far fewer players in the market."

"l think for me it's really very much around how l have made a difference to the organisation, but not just to the organisation in terms of strategy and objectives and financial performance, but, probably more importantly, how have l made a difference to individuals"

One of the most fundamental issues that the private healthcare industry will face in 2016 is the Competition Commission Enquiry into healthcare costs, says Aron. "I think that is certainly going to be very interesting to see what comes out of that enquiry which is trying to unravel the root causes of inefficiencies and cost in the industry."

"We need to continue to focus on our core values, and we need to continue to focus on our vision, which is still relevant. Our vision is building a world of sustainable healthcare, and we haven't yet achieved that. So that will continue to be relevant and we need to continue to strive to get to that point where where access to healthcare is sustainable, because the majority of the South African population don't have access to very good healthcare. So that continues to be a key focus."

Another key focus area, he says, is to continue to focus on attracting and retaining thought leaders and key people, "because it is those thought leaders and those key people who have unique skills that will ultimately enable us to find the solutions, and those solutions will then make us competitive. We're not a business in manufacturing; we don't produce pots and pans.

We're in the business of producing solutions" He says Medscheme's shareholder, AfroCentric, is predominantly black owned and Medscheme is the largest black-owned health organisation in South Africa, and a level 2 BBBEE player, "and we're very proud of that."

He says that issues like transformation and social responsibility "are fundamental and critical to us". We have very large clients like the Government Employees Medical Scheme and Bonitas, where transformation is one of their key strategic imperatives, so our view is that it's very necessary and we're very committed to it. We have structures in place in terms of ensuring that we continue to transform, but certainly in terms of our track record and where we are at the moment we have done very well in terms of transforming the company from an employment equity perspective."

On a personal level he is very passionate about cycling and had completed most of the major races including the Cape Epic. He has also gone to France to watch the Tour de France and has in fact cycled many of the routes.

"I think what excites me about it really is that it's a wonderful sport that requires a large amount of discipline and a lot of focus. It's a stress reliever because it enables you to exercise and it's also very nice from a social perspective. You meet people. l really like cycling because it ticks all the boxes. lt ticks the box of exercise and fitness, discipline, relaxing, and stress relief."

He says the best advice he ever received was from one of the doyens of the pharmaceutical industry, Jack Perel.

"I will never forget that he called me into his office and he sat down and said 'Kevin, l want to give you some advice. You may not be as successful as you hope to be and you may one day not have all the money that you dreamed of having, you will face many challenges in your life, but the one thing that you must never lose is your name'. l think that was fantastic advice, and l’ve remembered it for 25 years."

Source: Newsclip Media Monitoring (PTY) LTD.


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