Western Hospital’s stark woes laid bare in new administrators’ report

A private hospital in Adelaide’s west looks to be saved but a damning administrators’ report claims it was trading while insolvent for years and may face potential legal strife.

Western Hospital was trading insolvent “from as early as October 2019” and its board of directors may face legal action if the claims of insolvent trading of up to $15.5m are sustained, a bombshell administrators’ report reveals.

The board may also face further legal difficulties with the administrators listing three “potential breaches” which may warrant further investigation.

The Henley Beach private hospital, which went into voluntary administration on January 29, has a shortfall in assets of $38.9m and its long list of creditors includes employees who are owed $2.1m, according to an administrators’ report lodged with ASIC.

The good news is a buyer has been found, with a meeting on September 2 now planned to be adjourned to November 2 to permit time for completion of the sale — however it will be a vastly different facility.

The GP clinic, oncology clinic and cafe will be sold separately, part of the premises will be leased, and it will go from the single tenant Western Hospital to become the multi-tenant Western Health Hub under the plan.

Big changes ahead for Western Hospital at Henley Beach. Picture: Brett Hartwig

The September 2 meeting will vote on a proposal administrators EY be paid $994,000 for their work from June 1 to September 2, and a further $471,000 to December 2 if the sale falls through and they are required to instead liquidate the facility.

This is on top of $2.5m they have been paid for work from January 29 to May 31.

If it were to go into liquidation, the administrators say recovery for the benefits of creditors could include claims of up to $15.5m compensation for insolvent trading from the directors; unfair preference payments in the order of $800,000; and “uncommercial transaction/unreasonable director-related transactions” of around $1m.

The administrators have already identified real estate owned by directors while assessing their “ability to pay” any compensation to creditors.

“The administrators estimate the shortfall in assets to be at least $38.9m,” the report states.

The report says the hospital’s failure was due to reasons including “poor books and records that did not allow for informed decision making”, under use of the hybrid theatre, ICU costs, inefficient hospital layout, inflation, subtenant rental arrangements and inability to secure anticipated volumes of public patients.

It lists three relevant offence provisions and potential breaches which need further investigation if a liquidator is appointed.

These are “failure to act in good faith”; “failure to exercise reasonable degree of care and diligence”; and “being a director at a time when the insolvent company incurs a debt and there are reasonable grounds for suspecting the company to be insolvent.”

Colleen Billows, widow of founding chairman Gordon Billows, was relieved the hospital looks to be saved.

“We were really starting to worry about it, this is great news it will be saved, it is a really important community hub,” she said.

Mrs Billows only recently laid flowers at Mr Billows’ memorial tree in the hospital’s grounds and silently urged him “to get to work to save the hospital — well, he did,” she said.

The hospital has been trading as usual while the administrators do their work, with former SA Health chief executive David Swan appointed to oversee operations, and a $1m lifeline provided by the state government for rent prior to going into voluntary administration has not been repaid.

The 54-bed acute care surgical and medical private hospital was established in 1973.

The Cudmore Tce centre offers a wide range of services — taking pressure off the public system — including intensive care, surgical services such as orthopaedics, and cardiology, oncology, dermatology, gastroenterology, ophthalmology, gynaecology, palliative care, pathology, physiotherapy, radiology and a pharmacy.

Originally published as Western Hospital’s stark woes laid bare in new administrators’ report