Mmegi Online :: Two business plans for Bokamoso got it wrong
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Last Updated
Friday 14 December 2018, 17:40 pm.
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Two business plans for Bokamoso got it wrong

Two business plans to revive Bokamoso Hospital got it wrong before consultants made recommendations that revived it from a state of partly self-inflicted financial ruin, Mmegi has established.
By Staff Writer Fri 14 Dec 2018, 22:34 pm (GMT +2)
Mmegi Online :: Two business plans for Bokamoso got it wrong








The overly-optimistic plans were presented in June and October last year.  According to a BPOMAS report presented at a special general meeting last month, a six-month plan was presented in June last year explaining how the hospital would turn profitable within that space of time.

BOPMAS Medical Aid Scheme is the majority shareholder in Bokamoso Hospital. When the six months plan did not bear fruit, another business plan presentation was made in October 2010. However, even the second plan's optimism would be knocked down by an independent report by Deloitte & Touche.

The six-month plan was premised on the hospital being able to rationalise and improve operational efficiencies, attracting more referrals from government, MVAF, local medical practioners, and introducing new services.

The hospital also promised to roll over bank facilities that were due for payment in the same plan period, as well as refinance and secure new financing. At the time, the hospital - driven by low patient volumes, a faulty billing and charging system, and a poor collection process - was unable to meet its financial obligations that ijncluded a payroll of P14 million, operational expenses of P9 million, Nonetheless, the management committee of Bokamoso remained upbeat that through the interventions that they would implement, the six-month plan was achievable and that the hospital would be turned around.

However, by August, as the hospital continued to rely on BPOMAS for emergency funding, the management committee resolved that the six-month plan was either failing or had failed. Another presentation, which was made in October last year, predicted a bright future for the hospital, including a 404 percent increase in revenue - from P50.06 million to P252.1 million by September 2011 - with a further 69 percent (to P426.38 million) by September 2012.

However, an independent assessment of the situation by consultants Deloitte & Touche in November last year trashed all that optimism. Deloite & Touche also revealed that Bokamoso management had operated without a well-defined operational plan or short-term cash flow forecast

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and appeared inadequately experienced to turn the business around.

The financial exposure of BPOMAS in Bokamoso at the time stood at P721.1 million, which was more than 80 percent of the scheme's total assets. The consultants dismissed the Bokamoso business plan as unrealistic, specifically that  it had projected that Bokamoso would break even by August 2011.

Of significance in the Bokamoso business plan was that a maximum in-patient volume of 33,000 per a year would be reached by 2013, while the consultants estimated that 11,000 would have been a more realistic estimate for the 150-bed hospital.

Deloitte & Touche projected that Bokamoso would continue to experience a negative cash flow beyond 2015 and concluded that the hospital was technically insolvent and in danger of liquidation from just any of its creditors, including staff for possible inability to meet salary obligations. The consultants also revealed over-staffing, with the head count growing from 170 to 579 within a year. The hospital occupancy rate was also 24 percent compared to the South African industry norm of 65.1 percent.

A salary bench-marking exercise also indicated that doctors and nurses were being remunerated at packages that were much higher than market norms. The consultants recommended that BPOMAS seek a managed sequestration and introduce a hospital operating partner. Such a partner could either contribute equity and operate Bokamoso or simply be contracted to operate the hospital. Subsequently, BPOMAS approached the High Court late last year and was granted provisional sequestration for six months, with Dr Edward Maganu appointed to turn its fortunes around.

Last month, BPOMAS reported that the new management had managed to achieve within three months what had failed the previous management in more than two years. End of June saw BPOMAS returning to the High Court with the news that the future was bright. At a press briefing today, the hospital's partners are expected to announce progress made in appointing the technical partner who will run the hospital in a profitable fashion.

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