Poor health strikes
Writedown, bailout on torrid day
THE challenge of retaining GPs is weighing on Australian healthcare players, with one operator dramatically cutting the value of its medical centres and another bailing out on a torrid day for the sector.
Primary Health has booked a net loss of $517 million for the year to June, down from a $74.7 million profit a year earlier, after taking a knife to the value of its medical centres division.
The dive into the red follows a previously flagged $587 million writedown on the goodwill of Primary’s 71strong medical centre unit and underperforming sites.
It came as private hospital operator Healthscope announced it would offload its portfolio of 48 medical centres in a $55 million deal.
At Primary, underlying profit – which excludes oneoff items – was down 4.9 per cent at $92.1 million.
Revenue was up 1 per cent to $1.66 billion, with abovemarket growth in its pathology arm offsetting the 3.3 per cent dip from its bulk-billed clinics. The company has altered its pay-sharing deal with doctors in the past year in a bid to boost retention levels, offering GPs a bigger slice of total billing revenue in lieu of generous front-loaded contracts.
Interim chief executive Malcolm Ashcroft said while the new pay arrangement had led to a record 153 GPs joining during the year and signifi- cantly reduced capital costs, the transition was weighing on the performance of the medical centres division.
Analysts said incoming chief executive Malcolm Parmenter — who ran Sonic Healthcare’s primary care division and takes up his new role next month – would inherit a business undergoing “massive transformations”.
Meanwhile, Healthscope is selling its medical centres, including four specialist skin clinics and a breast diagnostic clinic, to Fullerton Health for $55 million.
Best known for its network of hospitals, Healthscope yesterday said the division contributed just 2 per cent of group pre-tax earnings in the six months to December.
It marks the first major strategic play from new head and former Telstra executive Gordon Ballantyne.
“The medical centre operations have been subject to a strategic review and our decision to divest will allow our management team to focus on our core hospitals and international pathology operations,” Mr Ballantyne said.
For Healthscope, the sale price will be all-but offset by a $54.7 million non-cash impairment related to the transaction, to be recorded in its full-year results due next week. Shares in Primary closed up 2.8 per cent at $3.63, while Healthscope shed 0.9 per cent to close at $2.17.