The $8 billion private hospital giant Ramsay Health Care has emerged as the first beneficiary of the Healthscope collapse, announcing plans to acquire its Canberra hospital for $251 million. This acquisition marks a significant move in the healthcare sector, as Ramsay Health Care expands its portfolio amidst the financial struggles of Healthscope.
“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,” Ramsay Group chief executive Natalie Davis stated in a release to the ASX on Tuesday morning.
Healthscope’s Financial Struggles
Canberra’s National Capital Private is one of Healthscope’s four most valuable assets, now up for sale to raise hundreds of millions for lenders owed $1.7 billion. This strategic sale is part of a broader effort to stabilize Healthscope’s financial standing following its collapse into administration earlier this year.
Gold Coast Private is another asset potentially sold before Christmas, with Queensland’s Mater Health anticipated as the buyer. Other hospitals on the market include Sydney’s Prince of Wales and Victoria’s Holmesglen Private.
Healthscope insiders have described the strategy as selling the crown jewels, hoping the remaining hospitals will remain viable. Lenders might receive as little as 50 cents per dollar owed, highlighting the perceived low value of many Healthscope hospitals.
Receivership and Strategic Decisions
The receivers from McGrathNicol are tasked with determining the future of Healthscope’s remaining 33 hospitals. They face the decision of whether to break up the group for better returns or maintain it as a not-for-profit entity. This decision follows the rejection of a proposal from Canada’s Northwest Healthcare to partner with not-for-profit Calvary in a $140 million deal involving 12 hospitals.
Meanwhile, the receivers have secured $190 million from the NSW government after the termination of Healthscope’s operation of Sydney’s Northern Beaches Hospital under a public-private partnership model.
Impact on the Healthcare Sector
Healthscope’s collapse is largely attributed to Canadian financial giant Brookfield’s inability to reach viable agreements with lenders or landlords like Northwest. The 23 hospitals with private landlords are particularly struggling to remain financially viable.
HealthCo Healthcare, backed by David Di Pilla, acquired 11 Healthscope hospital properties in 2022 for $1.2 billion. Both HealthCo and Northwest have expressed intentions to transfer their hospitals to new operators if receivers do not offer adequate rent deals.
Future Implications and Government Role
If the sales process fails to find buyers for all 37 hospitals, state governments may need to intervene to maintain public access to essential healthcare services. Private hospitals are crucial, performing the majority of elective surgeries in Australia.
The federal government is urging private health insurers to restore the proportion of premium revenue paid to private hospital operators to pre-pandemic levels of 90%.
This development underscores the complex dynamics in the Australian healthcare sector, where financial stability, government involvement, and private sector actions intertwine. As Ramsay Health Care expands its influence, the future of Healthscope’s remaining hospitals remains uncertain, posing significant challenges and opportunities for stakeholders.
