PEP applies microscope to Healthe Care

Healthecare consists of at least 12 acute care hospitals. Picture: iStock

Pacific Equity Partners is the latest private equity firm thinking hard about the way forward for its private hospital company on the back of rising industry costs, with its Healthe Care business launching a review.

In a letter sent to the NSW Nurses and Midwives Association, Healthe Care’s head of Human Resources, George Diakos, said Healthe Care hospitals were embarking on a “process of review” across their entire facility to ensure the hospitals were being operated as efficiently as possible.

The letter was dated February 5.

Healthe Care said that the rising costs were driven out of the global pandemic recovery and compounded by other inflationary forces.

Adding to the challenge for the industry was that private health insurance indexation had not kept up with the increase in costs associated with running private hospitals.

Healthe Care said what outcomes of the review would be delivered remains unclear, but it may be the case some hospitals will require changes to either workforce structure, workforce composition, rosters, processes and or policy.

Time frames would vary across the group, as each site would be undertaking their reviews independently.

PEP purchased Healthe Care in 2021 from Luye for a price believed to be around $400m in a deal that excluded the Aurora Healthcare business.

As a result, PEP secured a portfolio of about 12 acute care hospitals.

It also secured as part of the deal the Brisbane Waters Private Hospital and North West Private Hospital in the Healthe Care portfolio, both of which offer mental health facilities.

Luye purchased Healthe Care from Archer Capital in 2015 for $938m.

It comes as lenders to the country’s second-largest hospital operator Healthscope is in the process of appointing a financial adviser to assist with negotiations as the group strains under $1.6bn of debt amid a period of rising industry costs.

Healthscope is owned by Canadian private equity firm Brookfield and was purchased in 2019 for $4.4bn.

The private hospital sector is facing structural change, with technology allowing many medical procedures to now happen in day surgeries, substantially reducing costs, while higher insurance premiums has also made private health insurance unaffordable for many, which has lessened demand for private hospital operators.