Presentation to the Health Portfolio Committee NHLS Annual Report 2010/2011

1. Presentation to the Health Portfolio CommitteeNHLS Annual Report 2010/2011 Sagie Pillay CEO Adv Sesi Baloyi Board Chair Nov 9,2011

2. Clean audit For the fifth year in succession, the NHLS received a clean audit report. The NHLS posted an accounting surplus R264 million. Affordable prices Prices for the priority programmes of HIV, TB and pap smears were reduced, on average, by 10%, resulting in R217,7 million savings to provincial health departments. Overall, test prices decreased by 1%, well below the inflation rate increase of 4.1%. Our Money

3. Cash flow The accounting surplus of R264m did not materialise into cash due to the poor payment pattern by certain provinces. Debtors have increased by R340m, resulting in a cash deficit of R83m, despite reducing capital expenditure to R122m (R98m lower than 2010). Segmental analysis of net cash deficit This net cash deficit of R83m is made up as follows: Subsidy to National Institute for Communicable Diseases Subsidy to National Institute for Occupational Health and the National Cancer Registry Funding of teaching and training, and research Laboratory services NHLS is mandated by the NHLS Act of 2000 to fund the Institutes and teaching, training and research from the laboratory test fee-for-service. The impact of this on test prices is 14%.

4. Turnover for the year increased by R397m or 13% from R3,049m to R3,446m. The increase was attributable to the conversion of the KwaZulu-Natal flat-rate billing model to the fee-for-service model from 1 April 2010. Gross margin as a percentage of turnover increased by 2.2% from 29.1% in 2010 to 31.3% in 2011. This increase is attributable largely to the change in sales mix. Overheads increased by R98m or 10% from R938m to R1,036m. This is largely attributable to an increase in temporary employee numbers as well as salary increases. The planned implementation of Oracle Release 12 led to a R15m increase in software development expenses. Other significant increases related to an increase in the cost of utilities, salaries increased due to OSD.

5. Working capital management Inventory of R 73m (2009 - 2010 - R69m) is managed at 31 days which is 19 days better than the prior year of 50 days. Debtors of R1,786m (2010 - R1,328m) are at 154 days (2009 - 2010 - 126 days) due to the poor payment pattern of certain provinces. This has resulted in creditor days worsening from 45 days on 2010 to 62 days this year. Capital expenditure During the current financial year, capital expenditure amounted to R122m compared to the prior year amount of R213m and was funded purely from internal resources. Capital expenditure was spent as follows to maintain existing infrastructure:

6. 2010 – 2011 Financial highlights POSITIVES: Unqualified Audit Opinion – 5th year in a row Test Prices decreased by 1% NEGATIVES: Growth in revenue, whilst still positive, is declining Debtors collections is poor Capital Expenditure % of Turnover of 3% is the lowest in last 5 years

7. 5 Year financial summary

9. Annual price increase Year2007 2008 200920102011 Annual Price Increase 4.5% 2.2% 4.0% 6.0% 1.0% CPI 4.6% 7.2% 11.5% 7.1% 4.1%

10. DSO Year20072008200920102011 DSO 57 114 147 126 154

11. Scarce skills development The NHLS is committed to increase its training of the next generation of world class pathologists. During the past year the following increases in the scarce-skilled areas were achieved: Pathologists and medical officers: 8.7% (207 to 225) Registrars 2,9% (207 to 213) Medical scientists: 2,4% (207 to 213) Medical technologists: 2.2% (1385 to 1415) Medical technicians: 23,5% (528 to 625) Human Resources

12. Workplace Skills Plan The were 4,796 training occurrences at a cost of R39,543,687; that is 2,8% of payroll compared to the 1% stipulated by the Skills Development Act. Employment equity reached an 83% representation of black males and females.

13. Workforce Profile The overall headcount increased by 2.8% in the reporting period compared to 2.4% in 2009/10. Executive complement was fully filled. Pathologists and medical officers increased by 8.7% (18), making the total 225. The increase was mainly among Africans, Indians and Coloured females. Registrars increased by 2.9% mainly among African, Coloured and Indian females including Coloured males. African females in particular increased in number from 40 to 49.

14. Five-year trend

15. Five-year trend

16. Five-year trend

17. Five-year trend

18. Workforce profile Anincrease of 2.4% (5) medical scientists was recorded in 2010/11 compared 2009/10. Africans showed the most increase in numbers followed by Indians and then Coloured. This category was dominated by white females, whose numbers are stabilizing. An increase of 2.2% (30) medical technologists successfully completed the internship programme, mostly African males and females. The drop in number from 129 in the previous year was due to the low national pass rate of 47%. NHLS has achieved a 53% pass rate, 6% above the national mark. A significant increase of 23.5% (124) medical technicians was recorded, mostly NHLS laboratory support staff, who enrolled for further training to enhance capacity in the laboratories. African shows a significant increase, followed by Indian and Coloured. White medical technicians’ numbers remain constant and lower.

19. Five-year trend

20. Five- Year Trend

22. Core skills training A total of 1, 042 registrars , interns and students was recorded at the end of the 2010/11 financial year compared to 1, 025 in 2009/10. Registrars in training in 2010/11 were 213 compared to 207 in 2010/11. Medical scientist interns number reduced by 12.2% (9); this is line with the current organisational needs. The total recorded for student medical technologists is 2.9 % lower than the previous year. This is a result of reduced numbers qualifying for admission into the tertiary institutions; hence 61 new bursaries were awarded to matriculants in 2010/11 compared to 74 in the previous financial year. 16 out of the 61 bursars (26%), were attracted from the rural areas. Student medical technicians increased by 8.6%. This is a combination of student medical technologist who opt for the technician level qualification and skills development of serving laboratory employees.

23. Skills Development and grants A total of R39, 6 million was invested in various technical and managerial skills development initiatives. This is 2.8% of the payroll compared to the legislated 1%. NHLS has earned mandatory grants which are re-invested in the training of staff. Under the newly established NHLS Learning Academy: 58 employees were enrolled on various leadership and management development programmes funded by the NHLS A total of 4796 short term skills initiatives were funded and implemented Grants were received from various donors to enhance skills development: HWSETA: 44 phlebotomy technicians, DST: 10 additional medical technologists and scientists Basil Read: 5 medical technologist and 1 post-graduate student CDC: Improvement of training laboratories.

24. Employment equity Employment equity, skills development and transformation (EESDT) structure was devolved into the regions during the 2010/11 financial year with a central committee that oversees the organisational activities. The Department of Labour conducted a workshop on the Legislated Employment Equity Framework to guide the EESDT Committee. The representation of Black employees within the NHLS continues to improve from 81% to 83% over the past three financial years. The representation of Black executive and management appointments in 2010/11 was 67%, of which 72% of these were female. The representation of female in top and senior management positions was recorded at 47% in 2010/11, an improvement from the 45% recorded in the previous reporting period. The executive team recorded 25% female representation.

25. Training of scarce skills The NHLS trains all pathologists in South Africa. Bilateral agreements were developed to govern the relationships between the NHLS and nineuniversity affiliates which share joint responsibilities towards service, teaching and research. A bilateral agreement was drafted to regulate the NHLS’s relationship with eight Universities of technology regarding the training and qualifying of medical technologists. Academic affairs

26. Research The NHLS is renowned for its cutting edge research in fields particularly benefitting South Africa and its people. A total of 177 new grants to fund such research projects to the value of R178,399,660 were awarded by local and international agencies. NHLS researchers published 486 research projects in peer-reviewed journals and academic text books.

27. Doing it better An external surveyshowed a 6.9% improvement in customer satisfaction from 59.7% to 66.6% over the previous year. By year-end 72 laboratories had been accredited against a target of 184 by the 2014/2015 financial year. The total number of enrolments in the NHLS proficiency testing schemes increased by 9% to 2,599. Quality assurance

28. Improving service delivery A specimen tracking project was initiated and piloted in KwaZulu-Natal. The specimens and laboratory reports are scanned by the driver at the point of collection and delivery; the information is then transmitted via a cellular data connection to TrakCare Lab laboratory information system (LIS). Turnaround times are therefore measured more accurately, and the loss of specimens and reports while in transit is eliminated. The information will be used to produce audit and turnaround time reports in an effort to improve the overall service to the NHLS customers. Information Technology (IT)

29. Saving test costs To save costs for the Department of Health, an electronic gate-keeping (EGK) system was piloted and implemented at Tygerberg and Groote Schuur hospitals in the Western Cape. EGK uses the LIS to approve or reject laboratory tests based on the protocols for patient management devised by the hospital. Cell phone technology employed Phase one of the Mobilabs project which gives access to laboratory results through cell phones, was rolled out to 213 clinicians in the Eastern Cape and 110 in the Free State. In addition, 361 cell phones and 232 laptops were installed in hospital wards and in clinics in the Eastern Cape and Free State, respectively, enabling clinicians to access electronic results.

30. The Communications, Marketing and Public Relations department was added to the corporate structure in 2010 to create a single brand identity for the National Health Laboratory Service, to elevate its profile, to improve both the internal and external communication and develop a stakeholder relations strategy. Customer Satisfaction Survey A new measurement tool was developed to survey the satisfaction levels of a wider sample of customers for the NHLS. The tool will be implemented in the next financial year. Communications

31. Media An annual advertising budget of R400 000.00 the NHLS generated advertising value equivalent (AVE) in excess of R3million across all three mediums of print, electronic and broadcast. The NHLS is proud to have gained considerable awareness in the general press from the outstanding surveillance and research work being conducted. Internal communications support was offered with the development of an extensive internal campaign in delivering feedback from the Culture and Climate Survey Feedback road shows.

32. Our Priorities • Because HIV, tuberculosis (TB) and cervical cancer are the three biggest disease burdens in South Africa, the NHLS established the National Priority Programmes (NPP) Unit early in 2011 to make the diagnosis of these diseases more accessible and affordable to our people. During the year, the NHLS conducted: • 5.7 million HIV tests • 5.9 million TB tests • 13% more cervical cytology tests

33. National Priority Programmes 80%TB patients are HIV-co-infected Strategic Alignment of HIV and TB activities • Greatest laboratory synergies likely to arise in molecular testing at both a POC and centralized laboratory level • Laboratory planning needs to occur around mutual technology platforms, • skill and support needs.

37. National Priority ProgrammesTuberculosis

38. National Priority ProgrammesTuberculosis

40. Total number of Cervical Screening determinations Apr ‘10– Mar ‘11: 582 005

41. The Gynae (PAP) smears indicate all Gynae cases and smears received (some cases have >1 smear).

42. Gene Xpert Rollout (GX) Together with the Department of Health, the NHLS was the first laboratory diagnostic service provider on the African continent to introduce GX technology for the diagnosis of TB and rifampicin resistance. This is groundbreaking technology that produces a result in two hours. Microscopy and cultures can take up to between 48 hours and four weeks, respectively.

43. Information Management: Monthly reports In support of the NPP, the NHLS’s Corporate Data warehouse improved the provision of information to the Department of Health on multidrug-resistant TB and early diagnosis of HIV-infection in infants at 6 weeks. Monthly management summary reports by facility and by province are now automatically circulated to the provincial and national health departments. An antiretroviral hotline was also launched which enables clinicians who have registered on the system, to obtain results telephonically.

44. Better and faster Processing specimens to the testing laboratories and delivering results to clinics in the shortest possible time was one of the main objectives for laboratories in the four NHLS regions. Many of these laboratories are in very remote areas. Courier services to and from laboratories were overhauled with daily or twice daily pick and delivery times. Remarkable improvements in turnaround times, particularly for the priority programmes of HIV and TB, have been noted which means that appropriate treatment can be started earlier. In Gauteng, Free State and Northern Cape, for example, HIV PCR for babies increased by 12% - thus an improvement in the coverage of babies born to HIV-positive mothers. Regions

46. Finding the best health solutions PulseNet Africa, part of an international molecular subtyping network for foodborne and waterborne disease surveillance which provides early warning of disease outbreaks, emerging pathogens and acts of bioterrorism, was launched and will be run by the NICD Enteric Diseases Reference Unit.. Six other regional PulseNet networks exist: for the USA, Canada, Latin America, Europe, Middle East and Asia Pacific. National Institute for Communicable Diseases (NICD)

47. The Special Pathogens Unit conducted Ebola virus reservoir host studies in the Democratic Republic of the Congo. Ebola haemorrhagic fever is a deadly disease of which the cause is unknown. The purpose of the mission was to try to the feasibility of conducting an international research expedition to sample bats, particularly Hypsignatus monstrosus,but also other fruit bat species implicated as potential reservoirs of Ebola virus. Rotavirus is the most common cause of severe diarrhoea among infants and young children. Comparing the number of diarrhoea cases and the detection rate of rotavirus a year after the introduction of the rotavirus vaccine, NICD surveillance found a 20% decrease in diarrhoea cases and 49% in rotavirus-positive cases for 2010 and 2009, respectively.

48. 2010 Football World Cup The Division of Epidemiology prepared a Synopsis Guide for 2010 Football World Cup visitors to South Africa, which was posted on the NICD website. From February to August 2010, the monthly communiqués included pre- and post- 2010 Football World Cup communicable disease alerts for healthcare workers, visitors and the general public. The Outbreak Response Unit assisted the Department of Health with monitoring and response to communicable diseases during the 2010 Football World Cup period, both directly related and unrelated to the football activities. Laboratories were supported by facilitating the collection and testing of clinical and environmental specimens during foodborne disease outbreaks and other communicable disease incidents. Daily situation reports were provided.

49. Disease outbreaks The Outbreak Response Unit:assisted the Department of Health in reporting, field investigation, development of clinical and laboratory guidelines, management of laboratory surveillance data and interpretation of results, and recommendations for prevention and control of a number of disease outbreaks, namely Rift Valley fever, brucellosis, rabies, foodborne diseases, enteroviral meningitis, Odyssean malaria, pertussis, diphtheria, Crimean-Congo haemorrhagic fever, Legionnaires’ disease and cholera.

50. Disease warning systems Automated systems were developed by the Corporate Data Warehouse to alert outbreak response personnel to the diagnosis of priority communicable diseases. The system provides timely notifications and patient information following the confirmation of the following infections by NHLS laboratories throughout South Africa: Salmonella Typhi, Vibrio cholerae, and Neisseria meningitidis. A similar system was designed and piloted in 2010 to send automated SMS alerts.