Pathology sector to keep the heat on government over bulk-billing, Healius says

The amount pathology companies are paid for common tests by the federal government are not sufficient to maintain a ‘sustainable and viable sector’, Healius says.

Common blood tests need to be indexed or pathology service provision will become unsustainable, according to Healius.

The amount pathology companies are paid for procedures such as diabetes and cholesterol tests by the federal government are not sufficient to maintain a “sustainable and viable sector’’, Healius chief executive Paul Anderson says.

Speaking as the company handed down its full year results on Wednesday, Mr Anderson said the government had introduced incremental changes to rebate payments in the most recent budget, but broadly, payments for pathology tests had not increased in 25 years.

Companies in the sector are running a Keep Pathology Bulk-Billed campaign, arguing that the gap between the costs of administering the tests and what companies are paid by the government continues to grow.

“We will continue the sector-based Australian pathology campaign to keep pathology bulk billed,’’ Mr Anderson said.

“Collectively, we do not believe that the federal government’s response to index only one third of pathology items is sufficient to maintain a sustainable and viable sector.

“The campaign will continue until all pathology tests are indexed.”

The company added in its announcement to the ASX on Wednesday that the changes announced in the budget did not go far enough.

“Healius repeatedly called on the federal government to urgently address this funding gap in the 2024-25 federal budget, but the government responded by indexing just one-third of pathology items, and only from July 2025,’’ the company said.

“While this is recognition that pathology items need to be indexed, it is not enough.

“Government rebates for tests that diagnose diabetes and many common tests, like blood cholesterol, will not be indexed at all.

“This inadequate response does not address the concerns raised by Healius and the broader sector.’’

Healius, which announced its full year results on Wednesday, also said progress on the potential sale of its Lumus Imaging business was “well advanced’’ with a number of companies doing due diligence.

Healius reported underlying earnings for the full year near the top end of guidance, coming in at $346.6m, down from $376.2m last year. Revenue increased to $1.74bn from $1.64bn.

Its net loss ballooned to $645.8m from $367.8m a year earlier, hurt by a $603.2m impairment as a result of the writedown of goodwill in its pathology division in the first half. This was caused by lower near-term volume forecasts and cash flows, Healius said.

The pathology division’s revenue rose 4.7 per cent to $1.27bn, while Lumus Imaging revenue increased 5.7 per cent to $519m. Agilex Biolabs’s revenue soared nearly 21 per cent to $39.5m.

On the outlook, Healius said volume growth in pathology continued in July and August, up 4 per cent on the previous period.

“Imaging has continued to grow revenue by approximately 12 per cent year-on-year, and Agilex has also had a strong start to FY25 with growth that is expected to continue throughout the year,” the company said.

“Healius expects its gearing to remain within bank covenants during FY25 and is intent on resuming dividends as soon as practicable.”

Investors cheered the result, with the shares up 8.6 per cent to $1.59 by noon on Wednesday.

RBC Capital Markets said the result was in line with guidance.

“Reported EBIT was worse than expected due to higher digital transformation, higher transaction and unexpected termination costs,” the broker said.

“Divisionally, pathology earnings exceeded consensus expectations, whilst imaging earnings were slightly below consensus expectations.”

Healius’s gearing was 4.1 times, within its debt covenant requirements of 4.5.

Healius did not declare a final dividend.

Originally published as Pathology sector to keep the heat on government over bulk-billing, Healius says