The $8 billion private hospital giant Ramsay Health Care has emerged as the first beneficiary of Healthscope’s financial troubles, announcing plans to acquire its Canberra hospital for $251 million. This acquisition marks a significant development in the healthcare sector, as Ramsay Health Care seeks to expand its footprint amid the ongoing restructuring of Healthscope’s assets.
According to Ramsay Group chief executive Natalie Davis, “National Capital is expected to be in Ramsay’s Top 20 hospitals based on both revenue and profitability and is expected to be earnings per share (EPS) accretive in the first 12 months of ownership.” The statement, released to the Australian Securities Exchange (ASX) on Tuesday morning, underscores the strategic importance of this acquisition for Ramsay Health Care.
Healthscope’s Strategic Asset Sales
Canberra’s National Capital Private is one of four of Healthscope’s most valuable assets that have been put up for sale to the highest bidder. This move is part of a broader strategy by receivers to raise hundreds of millions of dollars for lenders, who are owed a staggering $1.7 billion. The sale of these assets is crucial for Healthscope’s creditors, who are facing significant losses.
In addition to the Canberra hospital, Gold Coast Private is another asset that could be sold off before Christmas, with Queensland’s Mater Health expected to be announced as the buyer. The other hospitals up for sale include Sydney’s Prince of Wales and Victoria’s Holmesglen Private.
Financial Struggles and Market Implications
Healthscope insiders have described the asset sales as a strategy of selling the crown jewels and hoping the remaining group of hospitals will still be viable. The fact that lenders are expected to receive as little as 50 cents for every dollar they are owed highlights the dire financial situation facing Healthscope.
Receivers from McGrathNicol are expected to turn their attention to the remaining 33 hospitals once the future of the most profitable operations is determined.
These receivers will have to decide whether to break up the group to get a better return for lenders or keep it intact as a not-for-profit operator. Earlier this month, they rejected a proposal from Canada’s Northwest Healthcare to carve off the 12 hospitals where it acts as landlord, as part of a deal with not-for-profit Calvary.
Impact on the Healthcare Landscape
The receivers are already banking $190 million from the New South Wales government after it terminated Healthscope’s operation of Sydney’s Northern Beaches Hospital under a public-private partnership model. Healthscope’s collapse into administration in May this year, following failed negotiations with Canadian financial giant Brookfield, underscores the challenges facing private healthcare providers in Australia.
The 23 hospitals with private landlords are particularly struggling to remain financially viable. HealthCo Healthcare, backed by rich lister David Di Pilla, acquired 11 of the Healthscope hospital properties in 2022 for $1.2 billion. Both Healthco and Northwest have announced plans to transfer their hospitals to new operators if receivers do not offer them an adequate deal on rents.
Future Prospects and Government Involvement
If the sales process does not find buyers for all 37 hospitals, state governments around the country may face the prospect of having to step in to keep these unviable operations afloat. This intervention would be necessary to ensure the public has access to essential healthcare services.
Private hospitals provide the vast majority of elective surgeries performed in Australia, making their stability a matter of public concern.
Meanwhile, the federal government is pressuring private health insurers to raise the proportion of premium revenue they pay to private hospital operators back to the pre-pandemic level of 90 percent. This move is seen as crucial to maintaining the financial health of private hospitals across the nation.
As Ramsay Health Care moves forward with its acquisition, the healthcare industry will be closely watching the unfolding developments at Healthscope. The outcome of these sales and restructuring efforts will undoubtedly have lasting implications for the sector.
