Ramsay Health Care keen on Healthscope hospitals

Some Ramsay investors suggest that Ramsay’s strategy is likely to be managing the Healthscope hospitals for a fee. Picture: Bloomberg

Ramsay Health Care is believed to be positioning itself to become involved in a break-up of Healthscope and is keen to gain control of hospitals owned by its rival.

Ramsay would normally be unable to buy Healthscope, the No.2 player in the market, because of concerns from the Australian Competition & Consumer Commission.

But it could buy individual hospitals where competition concerns do not exist. And the ACCC may take a lenient approach if the alternative is a hospital closure.

Some Ramsay investors suggest that Ramsay’s strategy is likely to be managing the hospitals for a fee rather than buying new hospitals from Healthscope.

It comes as David Di Pilla’s HMC Capital works on a buyout proposal for Healthscope, to protect the rental stream for one of its listed satellites which is one of Healthscope’s two major landlords. The other is Northwest Healthcare Properties.

HMC Capital is in discussions with various parties about working together on a bid for Healthscope, but the only group locked in so far is hospital operator Bupa, which would operate about 10 hospitals in the portfolio of 38.

Among the parties it is in discussions with is Northwest Healthcare Properties, which is believed to be willing to participate in a viable solution.

Other groups approached to take on the management of some Healthscope facilities include St John of God Healthcare and St Vincent’s Healthcare.

Not-for-profit healthcare providers have the advantage of being exempt from payroll tax and land tax in hospital ownership.

Three of Healthscope’s hospitals in Victoria have been identified as being likely to close: Ringwood Private, the Victorian Rehabilitation Centre and Fort Street House.

Other hospitals in the portfolio could be turned around with new operators. Aurora Healthcare could buy the mental health rehabilitation clinics.

Brookfield paid $4.4bn to purchase Healthscope, the country’s second-largest private hospital operator, in 2019 but it is expected to breach covenants on $1.6bn of debt in March as it struggles with high operating costs.

Any acquisition of Healthscope would be a very complex deal that would take at least six months to execute and require state government approvals.

Sources believe that the lenders would likely waive the covenants to create time for Brookfield to arrive at a solution.

Mr Di Pilla’s plan could involve buying debt from Healthscope’s lenders, which sources have suggested would now be worth less than 50c in the dollar.

With HMC Capital as owner, its debt repayment costs would be reduced, placing Healthscope in a better position to pay its rent.

Brookfield is understood to believe there is no equity left in the business and has put restructuring experts in charge.