Only several months after Medibank Private and Macquarie Group teamed up to make acquisitions in the healthcare space, it appears they could be doing so a second time.
This time, it’s the area of primary healthcare, where the pair is showing some interest in buying businesses.
The understanding is that inquiries are being made to gain more knowledge of the space around the market ahead of a potential move into the sector on behalf of the $10bn Australian-listed private health insurer Medibank, with Macquarie in tow.
If they are in the market for an acquisition, the obvious place to look is in the back yard of BGH Capital.
The Melbourne-based private equity firm backed by Ben Gray, Simon Harle and Robin Bishop, formerly of TPG Capital and Macquarie Group respectively, owns the former primary healthcare unit of Healius.
BGH purchased the business in 2020 for $500m and has since renamed it ForHealth.
BGH has reportedly been gauging views around the market in recent months to assess whether now would be a good time to place the business up for sale.
General practice has been a challenging area in the healthcare industry thanks to a shortage of doctors unprepared to take on bulk billing cases as they are unable to make the numbers stack up.
But driving a stronger performance this current financial year has been the work it has carried out for the government by providing Medicare Urgent Care Clinics.
In the 2023 budget, the federal government announced $358.5m over five years to establish 58 Medicare UCCs, to reduce pressure on hospitals and emergency departments.
It is expected that BGH would want more than $1bn for ForHealth that operates more than 80 large-scale, multidisciplinary medical centres, providing critical primary care services, including general practitioners, dental, specialist, diagnostic imaging, pathology, allied health and pharmacy services.
The last accounts filed showed it generated $291.8m of revenue as it fell to a $23.3m comprehensive loss for the year to June 2023 and an $18m profit before net financing costs.
Last year, Medibank, together with Macquarie, was the underbidder in the auction for day surgery owner Cura Group that was sold to Intermediate Capital Group for about $600m.
The motivation for Medibank to invest in day surgeries is that the patient care for its customers is cheaper than private hospitals.
It also comes as private health insurers are under industry and government pressure to increase payments for patient services by healthcare providers, struggling with higher industry costs and staff shortages.
Medibank in 2020 purchased a 49 per cent stake in the East Sydney hospital in Woolloomooloo and has a joint venture with mental health service provider Aurora Healthcare – the Healthe Care hospital spin-off owned by China’s Luye – initially investing $31m into three hospitals.
While Medibank’s management may be exploring a primary healthcare market entry, whether its directors are supportive is another matter, and may want it to demonstrate it has delivered on its health investments and other performance areas to date.
The board has been distracted by allegations from the Australian Information Commissioner that it failed to protect personal information of its almost 10 million current and former members from a major cyber attack in 2022, and the health insurer has been taken to the Federal Court.
Medibank told the market on June 5 that AIC had started the Federal Court civil penalty proceedings.
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