Ramsay Health Care flags need to return to talks with insurers if wage costs blow out

Ramsay Health Care says it will need to reignite talks with insurers on payouts if wage costs blow out, as angry NSW nurses challenged the company’s board over pay.

Ramsay Health Care chair David Thodey.

Ramsay Health Care says it will need to reignite talks with insurers on payouts if wage costs blow out, as angry NSW nurses challenged the private hospital operator’s board over their pay and protested outside its annual general meeting on Tuesday.

Ramsay’s board, led by chair David Thodey, also faced questions about how the company planned to revive the share price, which is languishing around decade lows.

Mr Thodey said the board recognised that the performance had been below expectations.

“It has been an extremely challenging period for the healthcare sector and particularly for the private hospital sector,’’ he said. “This needs to change. We have a number of transformation programs under way to drive improved performance.

“Regarding negotiations with health funds, we continue to work with our payors to achieve indexation which is trying to align with inflation over the last few years and of course we’ve got to think about future inflation.”

Ramsay management’s comments about their relationships with insurers come just days after Healthscope tore up its contracts with Bupa and the 26 health funds in the Australian Health Service Alliance over their refusal to agree to higher payments for hospital stays and procedures.

Mr Thodey also told the meeting that the value of Ramsay’s European arm, Ramsay Sante, which operates hospitals and clinics in France, Sweden, Norway, Denmark and Italy, “was not reflected in the share price’’.

A nurse addresses the Ramsay Health Care annual general meeting in Sydney on Tuesday. Picture: Cameron England

“We continue to look at ways to create further value within the business and obviously improve returns, but more work to do,’’ he said.

Ramsay shares closed 3.5 per cent higher at $39.35.

K Capital’s Charlie Kingston asked how the company could return to pre-pandemic earnings margins.

Mr Thodey said margins had been squeezed by increased costs without a commensurate increase in payouts from insurers, with a combination of cost control and extracting more from insurers the path forward for margin improvement.

“It’s a work in progress. We think we’ve got an opportunity to improve going forward, but we’ve not said what that will be or what time frame.”

Mr Thodey said in regard to the company’s portfolio outside of Australia, “we are actively managing the portfolio, and we know the return on capital that we need to get and if we’re not getting the return on capital we’ll look at whatever options we need to do, but we’ve not declared any time frame at all … but it’s very actively being managed’’.

Two NSW-based nurses addressed the meeting, expressing their disappointment that pay rise negotiations had not been settled after 20 months of negotiation and 18 bargaining meetings resulting in two rejected pay rise offers, according to the NSW Nurses and Midwives’ Association.

Hundreds of striking nurses and midwives from 17 Ramsay hospitals across NSW attended a rally in Sydney on Tuesday, calling for better pay, with the union querying why Queensland nurses are paid more than nurses in NSW. Mr Thodey said the company was “very committed” to working through the pay discussions respectfully and in good faith.

“Our goal is to find a balanced outcome which supports our people and is sustainable for the business,’’ Mr Thodey said.

On the outlook, outgoing managing director Craig McNally said Ramsay expected to grow its activity rate this financial year, but at a slower pace than in the previous year.

“We expect activity to continue to grow and while the growth rate is expected to be lower than in FY24, we have had a positive start to FY25,” he said.

“We expect the increase in activity to drive growth in net profit after tax from continuous operations. I would reinforce that as we did in FY24, if wage inflation increases above our forecast levels we will be recommencing discussions with our payors to achieve fair compensation for our ­services.’’

Over the longer term, Mr McNally said there were significant global tailwinds for the healthcare sector, driven by macro trends such as the ageing population and an increase in health spend as a proportion of gross domestic product.

“With Ramsay’s unmatched network of strategically located facilities, world-class healthcare team, industry-leading investment in clinical excellence, trusted payor relationships, targeted push into new and adjacent services and investment in technology, we feel that we are uniquely positioned to benefit from these tailwinds and deliver attractive long-term benefits to all stakeholders,’’ Mr McNally said.

Originally published as Ramsay Health Care flags need to return to talks with insurers if wage costs blow out