Receivers appointed to private hospital operator Healthscope as lenders swoop on $1.4bn debt pile
Australia’s second largest private hospital operator is in administration after lenders swooped over a staggering debt pile. Here’s what it means for hospitals, staff and 8700 surgeries schedled this week
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Australia’s second largest private hospital operator is in administration after lenders swooped over $1.4bn in debt.
A syndicate of banks and hedge funds that control Healthscope’s loans placed the company into receivership after being handed control by its previous owner, Canadian asset management giant Brookfield, earlier this month.
Healthscope chief executive Tino La Spina said there has been no impact on hospitals, staff or patients and that 8700 surgeries scheduled for this week would go ahead as planned.
The operational business, which runs the hospitals, is not yet in receivership or administration.
“All 37 of our hospitals continue to operate as normal and today’s appointment of receivers, including the additional funding, ensures a stable path to a sale, with no impacts on any hospitals, staff or patients,” Mr La Spina said.
“Our incredible teams are all working as normal, providing the high standard of care they always have.”
Despite the assurances, the long-term futures of hospitals, surgeries and clinics around Australia remains in doubt as well as thousands of jobs.
More than 19,000 people, including 6000 nurses and midwives, are employed by the company.
McGrathNicol Restructuring was working with Healthscope management to sell the business - either as a whole or in parts.
Federal Health Minister Mark Butler stuck by his pledge that taxpayers would not bail out the flailing company, despite the potential ramifications of a group-wide collapse.
“I want to be clear I expect to see an orderly sale process eventuate from this decision to any owner with no impact on patients and hardworking staff,” he said.
McGrathNicol have been provided with a new $100m funding package by the CBA to support operations during the sale process, while the company also has $110m cash to fund continuing operations.
Healthscope’s existing working capital financier, Westpac, is also providing support.
Mr La Spina said he did not expect the extra funding being would be needed but that it provided additional support.
“The receivers and management share the same goal of maintaining our market leading
standards of patient care and protecting the business, the hospitals and our amazing people.”
The Healthscope Board has appointed partners from KordaMentha as administrators to the same non-operating entities.
McGrathNicol’s intention is to transition all hospitals to new ownership, with no plans for hospital closures or redundancies. They will undertake an immediate review of the sale process to date, with a view to re-engaging with interested parties in the coming weeks.
The Australian Nursing and Midwifery federation several Secretary Annie Butler said the financial collapse of Healthscope was a “shocking reminder” about the dangers of privatising healthcare services and that Americanised health care does not work in Australia.
“We will be urging the Government to review the types of companies they allow to participate in the delivery of health services and prevent unethical and unscrupulous parties, which have no regard for patients or the health workforce, from entering the system,” she said.
“We can’t allow profits to be put before patient care. All Australians deserve access to timely, quality healthcare, which is what we get under Medicare.”
McGrathNicol partner and appointed receiver, Keith Crawford said: “We want to make it clear that the subsidiaries that own and operate Healthscope’s network of hospitals are not affected by our appointment to the shareholding companies.”
“Our immediate focus is to engage constructively with all key stakeholders to ensure uninterrupted operation of Healthscope hospitals and continuity of best practice standards of
patient care.”
“We will also work closely with Healthscope management to support any operational funding
requirements via access to $100m of new funding from Commonwealth Bank while we pursue an orderly transition of ownership of Healthscope’s hospitals.”
NSW is the most exposed with 12 Healthscope assets including the Prince of Wales Private Hospital and Sydney Southwest Private Hospital while Victoria also has 13 including Latrobe and Knox private hospitals.
In Queensland, Healthscope operates Brisbane Private Hospital, Gold Coast Private Hospital, Peninsula Private Hospital, Pine Rivers Private Hospital and Sunnybank Private Hospital.
South Australia’s Ashford Hospital, Flinders Private Hospital, Griffith Rehabilitation Hospital
and The Memorial Hospital are also operated by the group.
Healthscope has National Capital Private Hospital in the ACT as well as the private hospitals in Darwin and Hobart.
Australian Medical Association president Danielle McMullen said the Healthscope network of hospitals was a key part of private healthcare delivery in Australia.
Dr McMullen said the AMA expected the government swould play a strong role in helping to ensure the sale of the group’s assets went well.
“We also welcome the commitment by the receivers to engage constructively with all key stakeholders,” Dr McMullen said.
“The AMA is ready to work with the receivers as part of ensuring the uninterrupted operation of Healthscope hospitals.
“Private health is an essential part of Australia’s healthcare system and the situation that has emerged with respect to Healthscope further reinforces the need to adopt the AMA’s proposal for an independent Private Health System Authority giving much better oversight of the sector.”
Health Services Australia NSW secretary Gerard Hayes said the “sorry episode” showed why there was no place for private equity in public health.
“The commercial need for an operator like Healthscope to turn a profit will always chafe against the needs of patients and hospital workers,” he said.
“This is why we have had absurd situations like the maternity ward at Northern Beaches Hospital being rented out as a film set. This is not the first time public-private deals have failed in public hospitals but it needs to be the last.”
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Originally published as Receivers appointed to private hospital operator Healthscope as lenders swoop on $1.4bn debt pile
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