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Australian section THE HEALTHSCOPE STORY The Road to Market Wisdom |
This web page charts Healthscope's origins in 1985 from a hopeful group of idealistic medical administrators and businessmen, through its listing on the share market in 1994 and its expectations for rapid growth. The naive illusions about the market were soon dispelled as the company's market performance slid from bad to worse. Institutional and large business investors soon imposed their own managers and their market priorities on the company. It escaped the rigor of the market and the negotiating power of insurers by buying where there was no competition. It expanded into niche markets where it was the only provider. Like companies in the USA in the 1980s it was spectacularly successful in this.
It applied a rigorous market philosophy closing or selling anything that was not profitable and expanding or growing wherever it identified further profit.
The ambitions and pressure for growth remained and it finally returned to the competitive medical/surgical market where it confronted and faced down a major insurer. While still trying to return loss making medical/surgical hospitals it had purchased to profitability, it bought the large Gribbles pathology group acquiring holdings in Asia. It is promising more local and global growth, and claims a prospective profitability which many are questioning.
The company is a high stakes, high pressure entity. Its policies and practices are compared with similar situations in the USA where high pressures resulted in seriously dysfunctional practices.
From a failing minnow it moved to a niche market where there was no competition and it became bigger and profitable. It then seized opportunities, created by the problems of a major competitor (Mayne Health) to take a major stake in the competitive medical/surgical and pathology sectors. It has bought money losing businesses and has focused on the vulnerable not for profit sector.
It remains to be seen whether Healthscope can make these sectors sufficiently profitable, in competitive sectors where it previously failed, to meet its promise? Can it do so without going down the dysfunctional but very profitable US path of patient exploitation and fraud.
Healthscope has embraced vigorous and ruthless market policies and practices which seem inappropriate to those who embrace the Samaritan tradition in health care. There is no suggestion that Healthscope has done anything illegal or unacceptable when its is examined from the perspective of the market and its analysts. I do not believe that this is a socially acceptable perspective.
The problems:- Healthscope was among a number of health care private enterprises and market listings which were initiated in the late 1980s and early 1990s. At the time doctors and administrators were becoming more and more disillusioned with a public system which was frozen in bureaucracy and burdened with financial restrictions. The freedom from restrictions offered by the private system was enticing. The abundance of funds for medical services in the large US hospitals many visited was evidence of its superiority and the opportunities for all. I visited many leading hospitals in the USA in 1986 and returned with similar views but reservations about the growing corporate role. They were not yet dominant.
The effect of this on the US economy, and the dysfunction on which much of it was built was not apparent. Politicians and manufacturers were acutely aware of the developing problems. Joseph Califano wrote about them in his 1986 book and led the way in curbing the affluence which gave doctors this freedom, so driving the system into dysfunction and fraud.
The private hospital system was seen as a fragmented disorganized and inefficient cottage industry that needed reorganization and consolidation. Many of the private hospitals were so small that it was impossible to provide the sophisticated resources needed for modern medicine. There are no arguments about what the problems were but it is the marketplace for-profit solutions imposed that are now so worrying. Their blind faith in this new market focus led them to buy hospitals which even the aggressive US multinationals had failed to make profitable.
The solutions:- To these people, and to policy makers in government, the market seemed to offer solutions to the problems in both the public and the private systems. There were plenty of messianic advocates for such a system and its success was apparent from the large profits made in the USA. The capital from floats, and the larger payments from insurers would allow everyone to meet needs, practice good medicine and serve the community better - or so the argument went. The new economic thinking was spreading across the world and was seen to be all embracing and self evident.
Businessmen, with the USA example in mind saw the potential for profit and joined with these disgruntled health providers to form companies. The businessmen were looking for profits up to 30% as had occurred in the USA. To raise capital for the necessary growth these new companies soon listed on the share market.
Different starting points:- The problem for both is that profits and the cost cutting needed to achieve them in a system with funding limits are, and always will be, in direct conflict with care and service to the community. Care and service are costly in terms of labour and equipment. Insurers had to prioritize their own profits and were not going to fund both care and large profits for the new corporations. If insurers took similar 30% profits less than half of the money intended for care would filter through to care - as has happened in the USA. The administrators and the businessmen embraced conflicting starting points and had different expectations.
Power structure:- While the companies were still owned by the original individuals the administrators and doctors held significant sway. Healthscope and its medical administrators enthusiastically embraced the idea of Total Quality Management (TQM). Many, including a Healthscope administrator returning from the USA, had become evangelists for TQM. Some feel that in health care this has more to do with words and marketing than real improvements in care (see Kilham HA, MJA Feb 7, 2005 page 119). TQM is well suited to the misty mirrors of verbal delusion which typically accompanies corporate health care. The less directly a person was involved in care the more logical TQM seemed.
Once the companies were listed on the share market the balance of power swung to the powerful institutional investors, the banks and the analysts. They controlled the appointments of boards and managers. The survival of administrators and senior doctors depended on seeing things the market way. In an industry which should have looked to long term benefits the market insisted on instant financial gratification. Those who could accommodate and embrace the new thinking thrived. Those who had difficulty departed.
The press reports about Healthscope illustrate these developments.
A rapidly growing private hospital group will purchase Mildura Private Hospital for an estimated $6 million. The change of ownership of the hospital, which is losing money, continues the rationalisation of the health-care industry in Australia.
Early History
The 50-bed hospital was built and previously operated by American Medical International (Australia) Pty Ltd.
The managing director of the purchaser (which is still in the process of registering a corporate name), Mr Peter Wilson, said yesterday he believed his group could solve some of the problems of Mildura Hospital.
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Mr Wilson said his group already had been involved in the rationalisation of the medical industry: - - - - -
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While government is decreasing its involvement in the health industry, the private sector is waking up to the industry's potential to realise profits through proven management techniques.
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The emergence of aggressive publicly-listed companies in the hospital area would ensure the pace of change accelerated, he said.
Hospital Group Expands Australian Financial Review September 5, 1986
The Company was incorporated in Victoria in 1985 as Salishaw Pty Ltd and changed its name to Healthscope Pty Ltd the following year. The Company adopted its current name and was listed on the Australian Stock Exchange in 1994.
Early History
The Company was formed to acquire The Melbourne Clinic, a private psychiatric hospital.
In 1986, it bought Mildura Private Hospital and Bellarine Private Hospital and, in 1988, opened North West Private Hospital in Burnie, Tasmania.
In 1994, Healthscope acquired SGIC hospitals from the State Government Insurance Commission of South Australia, comprising six hospitals in Adelaide and one in Darwin, for $75 million. Later that year, it acquired Bellbird Private Hospital from the receiver.
Healthscope Limited. Jobson's Year Book January 5, 2004
Wilson's (business founder) consortium (himself and 19 other investors) already have 200 hospital beds through Healthscopes' flagship, the Melbourne Clinic psychiatric hospital in the Melbourne inner suburb of Richmond, and the Mildura Private Hospital. They have plans to build a $7 million to $8 million hospital at Burnie in Tasmania, a $1 million same-day surgical centre on existing land in Richmond, and to extend the Melbourne Clinic and the Mildura hospital. Wilson says the private healthcare industry is ripe for rationalization and consolidation and he intends Healthscope to play a leading role in the process. He expects Healthscope to have more than 1000 beds by 1990.
1986 -- The Business View
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Wilson says private hospitals have been around in their present form for many years. "But," he says, "what is new and different is that big business is coming into it and tackling it in a professional way. I think these trends are in the best interests of the industry."He says investors are moving into the industry because "they can see what a mess the public sector is in and that there is no hope that it is going back to the good old days where public healthcare was all things to all people.
Astute investors believe they can get good returns from private hospitals by introducing sound business practices such as marketing and cost control. Wilson predicts that Healthscope ultimately will achieve a 15 per cent return on its net assets, but others within the industry have said returns from private hospitals can be as high as 30 per cent.
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Wilson says the fact that his consortium of 20 Healthscope unit-holders will not receive immediate returns on their investment indicates their long-term commitment to the industry. Indeed, the trust deed includes penalties for investors who want to sell their investment within the first five years.
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In 1982, Wilson considered buying the Melbourne Clinic as an extension to Epworth's existing services. The hospital board was keen, but unable to arrange finance, so he dropped the idea. Then in 1984, Wilson heard that the clinic was on the market again and had an interested buyer. If Wilson wanted it, he would have to move fast. This time finance was no problem but the Epworth board did not want to go ahead. Wilson was ready for a change anyway and, when a colleague offered his support, he decided to arrange a consortium to buy the clinic himself.The consortium involved 20 unit-holders, six of whom have a controlling interest. Control rests largely with the board comprising Wilson, chairman Dr Robert Hjorth (a neurologist), a chartered accountant, a pharmacist, a solicitor and a valuer. Some of the unit-holders from the old management of the clinic have taken up shares in Healthscope.
Getting Set For A Healthcare Boom Business Review Weekly October 3, 1986
The new companies have taken advantage of the long public hospital waiting lists and have grown from the general consumer dissatisfaction with the public health system. Dreher (Dr Geoffrey Dreher, Medical administrator) is typical of the top professional, frustrated by restrictions from the top and reactions from underneath, who has chosen a new direction. The professionals who have taken the same path as he has include medical people and management people from the top areas of government health services.
1987 Administrators and Doctors
The flourishing private hospital industry is luring them to new jobs with greater administrative freedom, new challenges and more money. Hospital sources say that over the past five years big numbers of top administrators have left of their own accord, or have been eased out for political reasons.
Dreher, 49, was in the government service for 24 years, but took little time deciding to move when Healthscope approached him. "I just couldn't achieve my objectives any more - management in the public arena is being strangled and autonomy eroded," he says. He says that decisions are being made by the health department, and hospital administrators are becoming little more than glorified clerks".
New Strength For Private Hospitals Business Review Weekly May 15, 1987
Unlike previous private hospital floats which had a heavy weighting towards property development the Healthscope float would focus solely on service provision and look to lease its hospitals in the future, its managing director, Dr Geoffrey Dreher, said.
1994 - Market Listing
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Healthscope is currently owned by 35 Melbourne investors
HOSPITAL GROUP IN APRIL FLOAT Australian Financial Review February 18, 1994
Healthscope's facilities span a range of in- patient and out-patient services, including medical, surgical, obstetrical, psychiatric and rehabilitation services. With the SGIC, the group will have 800 private beds, or just below 10 per cent of the national market.
1994 Services
Hospital Group Goes To Public For $70m, The Age 28 February 1994
Healthscope's prospectus, registered with the Australian Securities Commission on Monday, is due for release next week. The $70 million raising of 40 million $1.75 shares - underwritten by brokers CS First Boston - will be used to acquire the South Australian State Government Insurance Commission's hospital interests.
1994 The Company Floats
The merger-float of the SGIC Hospital group and Victorian-based Healthscope will form a company with net assets of $92 million, capitalised at $113 million upon listing in mid-May. The SGIC is expected to take $60 million in cash from the float and subscribe to $15 million in shares, thereby taking a 13.7 per cent stake in Healthscope, formed in 1985 to operate The Melbourne Clinic - Australia's largest private psychiatric hospital.
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Earnings before interest and tax is forecast at $19 million in 1994-95, with the forecast net profit of $10.5 million equivalent to 16.5c a share on the total 64.3 million shares on issue.The merged SGIC -Healthscope hospital group totals 856 beds, admits 40,320 patients and performs 30,600 operations (and 1,583 births) a year.
$10M PROFIT AIM FOR HEALTHSCOPE Australian Financial Review March 23, 1994
The Company's commitment to the establishment of quality hospitals, the provision of the highest quality hospital care, the proactive management of costs and its ability to identify and implement initiatives that raise the profile of individual hospitals and increase admissions has contributed significantly to Healthscope's growth.
1994 Typical Idealism
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The Directors believe that the dedication, depth and calibre of management is a key factor in the Company's success. The Managing Director, Dr Geoffrey Dreher has over 30 years experience in healthcare management.
HEALTHSCOPE LIMITED - PROSPECTUS (Part B) Australian Stock Exchange April 11, 1994
The Melbourne Clinic program concentrates on "curing the state of mind'' leading to the disease, with emphasis on developing "living skills", and self-esteem improvement.
1994 Advertorial including about TQM
The Healthscope group has five hospitals in Victoria and Tasmania and is about to acquire seven more in Adelaide and Darwin for $75 million.
It is also building a new hospital at Wangaratta and a medical centre in Burnie.
TQM Disciple Is Manager At Melbourne Clinic The Age April 16, 1994
Following its recent successful float and acquisition of the State Government Insurance Commission Hospitals in South Australia and Northern Territory, and acquisition of Bellbird Private Hospital in Victoria, Healthscope's Managing Director, Dr Geoff Dreher, announced that the Company has purchased the Queen Victoria Hospital site in Adelaide. The option to purchase the QVH site was granted by the Minister for the Environment and Natural Resources to SGIC in June 1993.
1994 Media release re acquisition
HEALTHSCOPE LIMITED: PURCHASE OF QUEEN VICTORIA HOSPITAL SITE (Part A) Australian Stock Exchange Company Announcements June 17, 1994We remain optimistic about the future of private health care operations in Australia. We see a continuing need for private purpose built high quality hospitals. We also see further opportunities to provide management services in Australia.
1994 Optimism and Consolidation
We believe that further consolidation of the private hospital sector is inevitable and this trend will assist us in our plans for expansion.
HEALTHSCOPE LIMITED: CHAIRMAN'S ADDRESS (Part A) Australian Stock Exchange Company Announcements November 22, 1994
Disillusionment:- The Float was not as successful as claimed. Shareholders got their first of many shocks when the price promptly fell 15 cents then dropped another 40 cents in the next 3 weeks. From there the share price went steadily down and down until it was only a fraction of its original value. Healthscope had expected its revenue to rise from 29 million to over $80 million with a net profit of 10.8 million. Instead it made large losses.
The quality of the hospitals:- This was a collection of several previously failed hospitals picked up by this group before listing, and some government owned not for profit hospitals acquired when floating. They operated across a wide range of medical services and had few strengths in any of them.
As more sophisticated and costly facilities for major surgery and sick patients were required, doctors would have moved their patients to larger hospitals where such expenditure was justified. These small hospitals would have become less and less viable. In addition private health cover was at an all time low so there were fewer patients. These hospitals could not compete.
Corporate Australia had embraced the colocation of private hospitals on public hospital campuses. Public hospitals were not usually located in affluent suburbs where most private patients resided so that the commercial expectations from proximity were often disappointing. Many made losses. Some became embroiled in legal disputes with the government when the companies tried to sell them.
Healthscope’s smaller hospitals were soon performing as before - badly. Plans for rapid expansion foundered on the economic rocks. It was to be years before Healthscope’s share price recovered. It would eventually become a very different sort of company. When Healthscope later moved back into general hospitals in big cities it bought larger hospitals.
It was a sickening feeling for shareholders in Healthscope Ltd yesterday when the share price of the hospital group dipped on debut on the back of another market slide.
1994 Disappointment
Healthscope opened at the issue price of $1.75, but steady selling during the day pushed the price to $1.60 at the close of trading, with 767,000 shares changing hands.
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The initial top 20 shareholders list showed that First Boston retained 1.9 per cent of the stock, with the State Government Insurance Commission the largest shareholder at 13.7 per cent.
FIRST DAY SICKNESS Australian Financial Review May 5, 1994
The two newly listed entrants, Alpha Health Care and Healthscope, are reincarnations of operators which ran into debt problems during the past decade.
1994 Past failure
Healthscope, which listed in May, is a bundling together of the South Australian SGIC Hospitals and a number of Victorian hospitals, giving it a total of 836 bed licences. Its prospectus says that to remain at the forefront of the industry it will be essential to increase the number of beds under management to 2,000 over the next five years.
PRIVATE HOSPITAL OPERATORS ENJOY RETURN TO GOOD HEALTH Australian Financial Review September 28, 1994
Development programs underway, as described in the Prospectus, which are proceeding to completion are:
1994 Development programs
- The construction and operation of the Wangaratta Private Hospital in Victoria due to open in November 1994, on time and on budget.
- The construction and operation of the North West Medical Centre in Burnie, Tasmania, due to open in January 1995, on time and on budget.
- The acquisition of the Queen Victoria Hospital site in Adelaide which is proceeding.
Other projects in Adelaide, Darwin, Victoria and Tasmania, are under discussion with the relevant authorities or are the subject of invited tender by Healthscope.
HEALTHSCOPE LIMITED: Periodic Reports Prel.Final (Part C) Australian Stock Exchange Company Announcements September 8, 1994
Privatized public hospital in Modbury:- The boundless faith in the ability of the market to run the public hospital system better and more cheaply than government led Healthscope to capitalize on its relationship with the government in South Australia. Modbury Public Hospital board wanted a colocated private hospital on the campus. Instead the government contracted the running of the public hospital to Healthscope. In the disaster that followed the colocated private hospital was never built. Instead Modbury was lumbered with Healthscope and its problems.
The company had agreed to financial terms and conditions which it could not meet. It proved to be a massive drain on profits. This was a major factor in driving the company towards bankruptcy - probably only averted when the SA government relented and renegotiated the agreement. Government had saved millions of dollars and refused to release Healthscope from the agreement. It did not want it to go under. The privatization of the Modbury public hospital is addressed on a separate page.
"The South Australian Minister for Health has today publicly announced that our Company is the Government's preferred tenderer to construct a colocated private hospital and manage the delivery of public hospital services at Modbury Hospital. The target date for assuming management responsibility for those public hospital services is January 1995. Healthscope and the South Australian Health Commission (SAHC) (on behalf of the South Australian Minister for Health) are currently finalizing Heads of Agreement to enable us to assume full management responsibility from 1 January 1995.
1994 Modbury contract
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This overall project will add significantly to the number of hospital beds under our management and we believe will also result in significant cost and efficiency savings both to government and the general public.
HEALTHSCOPE LIMITED: DEVELOPMENT AND MANAGEMENT AGREEMENT FOR MODBURY HOSPITAL (Part A) Australian Stock Exchange Company Announcements 18 October 1994
The original administrators go:- A little more than a year after the company floated its shares the differences in perspective between the market and the medical administrators reached breaking point. Resignations and repeated restructuring took place. It took 5 months to find a replacement for its managing director.
Healthscope md, Dr Geoff Dreher, quits the board of the Vic-based hospital operator just 15 months after its debut on the Aust sharemarket
1995 Management break up
Chief quits troubled Healthscope The Advertiser August 26, 1995 (from ABSTRACT by Australasian Business Intelligence)
The chairman of Healthscope, Kevin McCann, sites a difference in visions between the company's board and the former md, Geoffrey Dreher, as the reason why Dreher departed from the firm
1995 Management break up
Faulty vision November 1, 1995 (from ABSTRACT by Australasian Business Intelligence)
Losses:- It soon became clear that the company would fall short of its $10.8 million financial targets by about 38%. The share price fell to 50% of its original $1.75 value and eventually as low as 66 cents. Healthscope was short listed to manage the Sir Charles Gairdner hospital in Perth, but the government backed away from this privatization. Healthscope was even seen as a takeover target for Mayne Nickless. The company went through a series of Managing Directors as it searched for someone to do what was required to make profits.
Hospital owner and operator Healthscope Ltd has slumped to a $22 million interim loss and signalled a $25 million asset sale program to slash its debt load by half.
1997 Losses and asset sales
Healthscope Looking Sick Australian Financial Review March 12, 1997
Managing director Mr Bill Kricker said the $38 million-a-year outsourcing contract for Modbury Hospital was "bleeding the company of profit and management time".
1997 Modbury
Healthscope Looking Sick, Australian Financial Review March 12, 1997
Troubled hospital group Healthscope Ltd yesterday announced the sudden departure of its managing director and chief executive, Mr Bill Kricker, and a restructure that will involve the sale of a quarter of its hospitals. Healthscope CEO Agrees To Resign Australian Financial Review April 22, 1997
1997 Another MD goes
- - - shares in Healthscope hit an all-time low of 53cents.
1997 Share prices
Thorn In The Side May Prove Lethal, Australian Financial Review July 18, 1997
More losses:- It was not only Modbury hospital which was losing money. By 1996 private health insurance was at an all time low. Competition was intense so that general hospitals were bleeding. Alpha and Healthscope were not competing successfully. In the second half of 1996 Healthscope lost $22 million. It wrote down $24 million and started restructuring and planning for a $25 million asset sale. All the talk about care and services disappeared as the imperatives of the market took over.
- - - - - the company has declared that assets which fail to generate acceptable returns or do not fit into the future strategy could be restructured
1996 "Restructuring services"
Healthscope reviews SA operations The Advertiser November 26, 1996 (from abstract by Australasian Business Intelligence)
Targeting doctors and selling assets:- Healthscope adopted the US formula, increasing its marketing activities and targeting doctors. In little more than a year the new M.D. had gone and the company had gone through three managers. It put up 4 of its Victorian hospitals for sale, Mildura, Wangaratta, Bellarine and Bellbird private hospitals. It closed its loss making Ulverstone hospital in Tasmania, the Hutt Street hospital and the Vales Private Hospital, both in Adelaide. It sold its Kiandra Private Hospital.
Healthscope's managing director Bill Kricker said today the group was currently carrying out a major strategic review which may result in selling off hospitals.
1997 Strategic review - marketing - doctors
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"To this end, the company has stepped up its marketing program and undertaken new initiatives with doctors and surgeons to improve earnings," he (Kricker) said.
AUSTRALIA'S HEALTHSCOPE POSTS HALF-YEAR NET LOSS ASIA PULSE March 11, 1997
He said attracting doctors and surgeons to its private hospitals and turning some of its general hospitals into specialist providers was the key to staying on top of technological change and improving earnings.
1997 Attracting doctors
HEADLINE: Healthscope Looking Sick Australian Financial Review March 12, 1997
Healthscope sold its Mildura and Wangaratta hospitals but after renegotiating its contract for the Modbury hospital it withdrew the others. During 1997 it lost $21.6 million. The restructuring was effective and by February 1998 four years after it listed it was able to record its first $1.75 million profit. This was in spite of a poor performance by its colocated Darwin Private Hospital.
Profit briefly:- In August 1998 it posted a year's profit of $A3.6 million. Healthscope's M.D. claimed that the improved figures were the result of harsh cost cutting and the stopping of loses previous experienced at the Modbury Hospital
But the Modbury hospital continued to lose money with a potential June 1999 overrun of $1.8 million. It October 1998 Healthscope went back to the government cap in hand, but the government was increasingly unsympathetic. In March 1999 the company announced a loss of $11.1 million to accommodate this.
Australian private hospital group Healthscope is making a $A13.5m abnormal provision for losses on March 1, 1999. Healthscope says the provision is due to its Modbury Hospital contract, which it admits will continue to make losses until the end of the contract in 2010.
1999 Losses
Hospital pact a millstone, The Australian March 2, 1999 (quote from ABSTRACT by Australasian Business Intelligence)
Management changes:- Healthscope’s investors ran through a selection of senior managers before the institutional investors appointed the sort of hard headed, business focussed managing director they wanted from one of their own companies in November 1997. Over subsequent years they built up a board of directors which sounded like a who’s who of Australian corporate directors. These were people with multiple directorships.
As Managing Director they appointed Bruce Dixon from their largest shareholder, Spotless Services Ltd. - the company that cleaned and bleached the hospital linen. This was a group which understood the dynamics of the marketplace and had become Healthscope’s largest shareholder. Dixon understood the market and would do what was required to give investors their profits.
Policy changes:- Instead of talking about care and services Dixon was into cost cutting, and closing hospitals which were unprofitable. He was soon talking of expansion and consolidation which is what institutional investors wanted. He gave it to them. His plans for expansion followed the commercial needs of the company rather than the needs of the community.
Dixon, one must assume, knew that the money came from patient care and was mediated through doctors. While he realized that care had to be maintained and that doctors and their patients had to be kept on side it is clear that he also realized that these were not key competitive issues. Competition itself was detrimental to profits. The real competition was when negotiating fees with large and powerful insurers. Gaining market leverage over competitors and so having negotiating strength when setting fees would enable Healthscope to keep profits rolling.
Healthscope never lost its focus or its faith in consolidation and size. It became more aggressive in its pursuit of profits. Non performing hospitals were closed or sold off, even when the local community and doctors saw a need for services. This is a key difference between the philosophy of for profit services which follow the money, and not for profit services which are established to meet community needs and stretch the money to do so.
Under Dixon, Healthscope avoided more complex general hospital care which was costly and where there were large powerful competitors. Instead it concentrated on niche markets, particularly hospitals in psychiatry and rehabilitation where there were only a few in a region. There was no competitors to undercut them in negotiations. It also concentrated on rural hospitals where there were no other competitors in the towns. When it did go back to general hospitals it tried to secure regional dominance. It did so successfully in South Australia where it had a show down with the major insurer. Market analysts were delighted. The competitive market was working for investors by avoiding competition between providers!
Hospital group Healthscope Ltd has snapped up a new chief executive officer from one of the divisions of Spotless Services Ltd. Mr Bruce Dixon, - - -
1997 Dixon for MD
HEALTHSCOPE SPOTS NEW CEO Australian Financial Review November 21, 1997.
Some analysts see rationalization of the sector as inevitable, with the assets of small operators such as Alpha Healthcare and Healthscope coming into play. They are expected to face increasing pressure as health funds impose tougher performance benchmarks on hospitals.
2000 Rationalization
The Prognosis For Health-care Stocks Australian Financial Review 5 January 2000
"However, given the insurance funds control over revenue growth, hospitals need to be able to display some sort of comparative advantage to extract more margin from the insurance funds. In this light, Healthscope has good geographic coverage, with dominance in regional areas allowing the company to have more leverage over the insurance companies.
2002 Market leverage
Plenty of scope in health. Shares Magazine April 1, 2002
Healthscope owns and operates private hospitals throughout Australia. The hospitals provide psychiatric, medical, surgical and obstetrical services. Other services include plastic surgery, orthopedics, ophthalmology, gynecology and oral and dental surgery.
2002 Services
Gympie Heads Rising Sector : This month's projections Shares Magazine May 1, 2002
The situation which existed in 1998 was not dissimilar to that which existed in the USA in the mid 1980's. The response was the same. The Australian government and insurers were closely monitoring services in general hospitals. DRG's were being introduced to counter the cost blow out associated with fee for service payments. Private insurance was at an all time low and the government's rescue package had not worked. All this combined with the competitive pressures made it difficult to make a profit.
The company had started following the USA and would continue to introduce practices successful in the US system. Like Tenet/NME, and the nursing home chain Sun Healthcare in the USA, it branched out into markets which were more easily exploited, where patients were not discerning, where there was less oversight, and where there was little or no competition. These included psychiatry, substance abuse, rehabilitation and rural hospitals, areas where there were few competitors. It upgraded some South Australian Hospitals (e.g.. Parkwynd Private Hospital) and converted other small hospitals into psychiatric units. Bellarine Private Hospital became The Geelong Clinic, a psychiatric facility. Funding decisions and support were based on current or projected profits and the needs of the community were seldom mentioned in this context.
On 27 October 1998, hospital group, Healthscope, announced plans to focus on rehabilitation and psychiatric services. Chairman, Kevin McCann, said the decision had been made after unacceptable results from its mainstream hospital operations.
1998 New focus
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The direction change will also reduce Healthscope's reliance on revenue from private health insurance funds
Diagnosis is for a full recovery, The Advertiser October 28, 1998 (quotes from ABSTRACT by Australasian Business Intelligence)
The company's managing director, Bruce Dixon, later foreshadowed moves for Healthscope to become a national player.
1998 Growth
Health group ready to expand Herald Sun October 28, 1998 (Taken from ABSTRACT by Australasian Business Intelligence)
Hospital operator Healthscope Ltd will spend $2.3 million expanding its Griffith Rehabilitation Hospital in Adelaide's south-western suburb of Hove. (the only recognized private rehabilitation hospital in South Australia.) - - - - - the 55-bed hospital had been an outstanding performer for the group - - - - .
1998 Following the money
BRIEFS : Griffith hospital to expand, Australian Financial Review December 2, 1998
Hospital operator Healthscope Ltd has bought the 120-bed Ivanhoe Manor and Olympia group of private rehabilitation hospitals in Melbourne for $11.5 million. It marks a swing towards rehabilitation services for the company,
1999 Acquisitions
Companies And Markets Briefs, Australian Financial Review February 11, 1999
The company has shifted away from its dependence on health funds, by acquiring the Ivanhoe Manor and Olympia Group of rehabilitation hospitals for $12 million, selling facilities in South Australia and downsizing Modbury.
1999 Escaping the insurers
Healthscope Hopes For Quick Recovery, The Age (Melbourne) October 27, 1999
Privatization:- This strategy proved successful and the company started to make money for the first time. In spite of its experience with Modbury, Healthscope was still "focusing on public hospital management opportunities in Victoria" in February 1998. In December 1998 it tendered for the Royal Darwin public hospital. Privatization of public hospitals was proving a disaster area for both parties and governments were already backing away. The Northern Territory soon followed.
Darwin:- Healthscope's colocated private hospital in Darwin was performing poorly. The company had a close working relationship with the Northern Territory government who were pursuing privatization enthusiastically and rather unrealistically. This flawed policy was later abandoned.
Healthscope solved its problems in Darwin by restructuring its management. When someone has difficulty in making a profit the market appoints someone who will find a way of doing so. All too often they don't realize, prefer not to know, or connive in what their new managers are doing to produce what they demand. We don't know how it was done.
Healthscope reached a deal with Indonesia's largest health insurer to send patients to their hospital in Darwin. It joined the state in developing a Cardiac catheterisation service for the Northern Territory and this clearly helped.
Hospital operator Healthscope Ltd will sign an agreement today which paves the way for Indonesia's largest health insurer, PT Askes, to send patients to Darwin for treatment at the Australian company's 150-bed hospital.
1998 Darwin Private Hospital:
Companies And Markets Briefs, Australian Financial Review April 17, 1998
Darwin Private Hospital will be able to provide cardiac catherisation diagnostic services. Northern Territory (NT) Health Minister Steve Dunham said in the NT Parliament on 11 May 2000 that the service would be a joint venture of the NT Government, Healthscope and NT Cardiac Services.
2000 Darwin Private Hospital:
$1.5m boost for NT's heart centre, Northern Territory News May 12, 2000 Friday (quotes from ABSTRACT by Australasian Business Intelligence)
Following a complete restructure of the hospital's management, Darwin Private Hospital experienced an encouraging turn-around in activity with bed occupancy levels increasing during the second half of the financial year.
2003 Darwin Private Hospital:
Growing cooperation between the public and private sectors was a key factor in the hospital's performance. More consultants are now working across both sectors, compensable admissions are being shifted from public to private facilities, and a number of services are being jointly developed.
Darwin Private Hospital worked with the state government to set up a cardiac angiography facility, which services both public and private patients. This became operational in the beginning of 2001. Healthscope Limited. Jobson's Year Book January 20, 2003
Looking for opportunities:- Healthscope started talking about expansion and of targeting aged care and retirement villages. I can find no record of their actually buying them. Their interest was in the potential for profit and not the needs of the elderly.
Hospital operator Healthscope Ltd is set to diversify into aged care and retirement villages as part of an expansion phase which also includes plans to acquire private hospitals in Melbourne and Adelaide.
1998 Aged care and a nice flat income
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Healthscope owns or operates 13 hospitals in Australia and Mr Dixon said aged care was a priority as it would produce "a nice flat income" and was not subject to the volatility of hospital earnings. - - - - - - The company was conducting a feasibility study on turning its Kiandra 40-bed hospital in Adelaide into an aged care facility - - - -.
Ailing Group Targets The Aged, Australian Financial Review April 24, 1998
The company tried to sell the Darwin Hospital to Ramsay and buy Melbourne hospitals from them but Ramsay backed away when the Northern Territory government threatened to privatise five public hospitals.
1999 Losses and deals
Modbury continued to be a problem and dragged the company into a $11 million loss for 1998/99.
Healthscope would have recorded a profit but for an abnormal loss of A$ 19.305 million associated with future losses from the Modbury Public Hospital contract in South Australia, a write down in the value of The Geelong Clinic and other costs.
AUSTRALIAN HOSPITALS GROUP HEALTHSCOPE POSTS NET LOSS, ASIA PULSE September 13, 1999
Doctors:- It was not until well into 2000 that the support which government had given to private insurance filtered through to the hospitals and they began to make money. That is all except Mayne Nickless. Never popular with doctors Peter Smedley's appointment as Mayne MD in 2000, and his cost cutting and aggressive business solutions frightened doctors away. They took their patients elsewhere. By 2002 Mayne Nickless was in serious trouble as a consequence. The much smaller Healthscope and Ramsay Healthcare undoubtedly benefited from this by picking up patients, perhaps more than they did from the increased funding for private care. Both boasted of their good relations with doctors so encouraging more to defect from Mayne. Healthscope could move into the vacuum created by Mayne's misfortune.
Profit:- Disillusioned Healthscope shareholders were initially skeptical when Healthscope reported a $5.9 million profit for 1999-2000 and the share price hesitated before rising. Modbury had broken even probably the result of cost cutting and bed closures. Healthscope's turnaround was due to its psychiatric, rehabilitation and extended care dominance.
HEALTHSCOPE surprised long-suffering investors earlier this week by revealing that its earnings in the half year just ended will at least triple those of the same period a year ago, yet its share price barely moved.
2000 Profits at last
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Still, Mr Dixon believes government initiatives are fixing the problems by encouraging people to take up private health cover.
XCHANGE :: STILL AILING, Sydney Morning Herald January 21, 2000
While two of the smaller listed hospital operators, Healthscope and Alpha Healthcare, have flagged healthier first-half results following restructuring last year, they remain under pressure to remedy their languishing share prices.
2000 Focus and growth
In the case of Healthscope, a board shake-out - - -
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Healthscope managing director Mr Bruce Dixon identified psychiatric care, rehabilitation and extended care as growth areas for the company.
Health industry ills, Australian Financial Review January 29, 2000
Victorian-based hospital operator Healthscope, 20 per cent-owned by businessman Ron Evans (Spotless owners), has enjoyed a sudden bout of investor confidence for almost the first time since it went public. The shares have almost doubled in little more than a month.
2000 Shares double
A run sans news, Sydney Morning Herald August 4, 2000
Healthscope, based in Melbourne, has been attracting interest because of its vastly improved profitability. In 1998-99, the company reported a loss of $11.6 million.
2000 Profitability
Private Hospitals In Recovery Ward, Business Review Weekly 17 November 2000
The Glenhaven Extended Care Centre and numerous community houses provide a number of step-down community housing options for long term acquired brain injury patients and their families to enable semi-independent living while remaining within the rehabilitation program. Healthscope Limited. Jobson's Year Book January 20, 2003
2003 Glenhaven Extended Care Centre
A buying spree:- After its $5.9 million profit in November 2000 Healthscope went on a buying spree. It bought Victoria House Private Hospital in Melbourne. This was associated with a sports medicine centre and orthopaedic surgeons specialising in a number of areas. The attraction and the enthusiasm were for the potential profit rather than a desire to serve the community.
Healthscope bought Queensland's largest private psychiatric hospital, the Palm Beach Currumbin Private Hospital at Queensland's Gold Coast, and Dubbo Private Hospital in central NSW from Sun Healthcare when they left Australia. It then bought The Sydney Clinic, a private psychiatric hospital. It opened a drug and alcohol rehabilitation unit in the former Warburton Hospital in Melbourne. Its public relations blurb promoted this as Australia's own version of the United States' Betty Ford Clinic.
Psychiatric pitfalls:- An innocent sounding company release reminds one of Tenet/NME's activity in the 1980's. Tenet/NME used marketing and public education to fan anxiety. It capitalised on the community's anxiety about drug abuse and teen-age behaviour by exploiting the commercial possibilities of hot lines and screening mental health programs.
One is reminded particularly of the many US psychiatric hot lines funneling gullible patients into the psychiatric fraud. In Chemical abuse there was the "800 Cocaine" hot line promoted by the highly suspect Dr Gold in his book of the same name. The sole purpose of this hot line was, not to help addicted youngsters, but to funnel unsuspecting inquirers into Tenet/NME's New Jersey and Florida hospitals where Drs. Gold and Pollock worked and where the patients' insurers were fleeced. As a 1993 report on Tenet/NME by the West Australian Health Department revealed there is a real danger that this sort of thing will happen in Australia when large corporations operate and control hot lines or screening programs. Healthscope set up a hot line for psychiatric care in Melbourne.
Victoria House is unique in its degree of specialisation in musculoskeletal and sports medicine. While providing a strong revenue stream for the company. Acquisition of Victoria House Private Hospital, Company News - AUSTRALIAN ASSOCIATED PRESS November 30, 2000
2000 Victoria House
Healthscope's purchase of the 78-bed Queensland Palm Beach/Currumbin private psychiatric hospital and the 58-bed regional Dubbo Hospital in NSW represented the Melbourne-based company's first foray into NSW and Queensland
2001 Queensland and NSW
Alpha talks of new suitor The Australian April 27, 2001
National private hospital owner/operator Healthscope Ltd today announced the acquisition of The Sydney Clinic, a private psychiatric hospital licensed for 34 beds located in the prime Eastern Sydney suburb of Waverley.
2001 The Sydney Clinic
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Healthscope is a major provider of private psychiatric care. It owns Australia's largest private psychiatric hospital, The Melbourne Clinic as well as The Geelong Clinic in Victoria and Palm Beach Currumbin Private Hospital on Queensland's Gold Coast. With hospitals in Victoria, SA, NSW, QLD, Tasmania and the NT, the acquisition of The Sydney Clinic marks Healthscope's entry into Australia's largest private health care market - - - .
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"Healthscope's growth strategy is based on the company's traditional strengths in the fields of psychiatry, rehabilitation and regional hospitals" Mr Dixon said.
Acquires The Sydney Clinic, Company News Release AAP NEWSFEED May 18, 2001
"Dubbo Private Hospital provides exceptional facilities and lacks competition in its market catchment.
2001 NSW
Acquires hospitals at Palm Beach Qld & Dubbo NSW, Company Release to ASX 26 Apr 2001
Private Hospital operator Healthscope Ltd has snapped up Mayne Nickless Ltd's Northpark Private Hospital in Melbourne's north-east, with no plans to slow its buying spree.
2001 Northpark Private Hospital
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Healthscope added 345 new beds to its 17-strong nationwide hospital network in the past year.
Latest hospital buy won't slow Healthscope's shopping spree AAP News November 21, 2001
PRIVATE hospital operator Healthscope continued its spending spree yesterday, picking up Sydney's South West Private Hospital.
2001 Sydney's South West Private Hospital
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The 102-bed Sydney South West, at Liverpool, becomes Healthscope's largest Sydney facility and is one of the city's largest private hospitals
Hospital chain buys 7th private facility this year. Adelaide Advertiser December 19, 2001
PACMAN activity:- Traditional humanitarian private hospital groups founded by motivated people in the community were at the mercy of the health insurers and could not survive in the new corporate marketplace. Healthscope recognized this and like Columbia/HCA and Tenet Healthcare in the USA specifically targeted this vulnerable sector. In the USA this rapid gobbling up of community centred services was known as PACMAN activity because the greed so resembled this computer game. It has been a bone of contention across the USA stemming from the unhappiness of the communities. They saw services directed to their interests replaced with ones directed to profits. A separate page has been devoted to Healthscope’s PACMAN activity
National private hospital owner/operator Healthscope Ltd announced today the acquisition of Peninsula Private Hospital (86 beds) and Riverview Private Hospital (60 beds) in outer metropolitan Brisbane. The hospitals were acquired from an independent family company, - - - - .
2002 Brisbane in Queensland
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There are now 20 hospitals in the Healthscope group as Healthscope continues to enhance its reputation as a consolidator in a previously fragmented industry.
Healthscope Limited (HSP.AX) Acquires Peninsular Private & Riverview Private Hospitals. Australian Stock Exchange Company Announcements May 28, 2002
Shares recover:- By March 2001 the price of Healthscope shares had risen to $1.20. This was sufficient for the South Australian government agency to disengage from Healthscope and sell its 10% share in the company - recovering some of its losses. It had started at $1.75.
By July 2001 the shares exceeded their 1994 listed price reaching $1.84. By now analysts were full of praise and the banks were investing in the company. It raised $10.7 million from the market and went looking for more acquisitions.
Healthscope went on to buy Northpark Private Hospital in Melbourne from Mayne Nickless, a general hospital in Bundoora, and Sydney's South West Private Hospital from bankrupt Sun Healthcare which had vacated Australia. It had purchased 7 hospitals in less than a year.
HEALTHSCOPE Ltd has boosted full year net profit 10 per cent and says it will consider further acquisitions after a flurry of hospital purchases over the past few month Healthy growth Courier Mail August 29, 2001
2001 Profit
Market leverage:- The company became an increasingly strong advocate of consolidation in order to increase negotiating power. After recovering in 2000 Healthscope adopted an aggressive growth strategy that progressively changed it from a small niche company hiding from competition into a competitive predator.
During 2002, 2003 and 2004 Healthscope’s policies proved themselves in the marketplace. They went from strength to strength. Share prices only fell slightly when other sectors of the health care marketplace ran into trouble. This was in large part due to the largesse of the federal government. There was money and plenty of it given to the insurers. If you had the market leverage you could force them to hand it over and Healthscope was well placed.
The three big hospital companies - Mayne Group, Ramsay Health Care and Healthscope - all benefited from the Howard Government's policies on pushing people into private health insurance, with Ramsay and Healthscope showing significant rises in their total earnings and profit margins.
2002 Government support
Leaders Of The Pack Business Review Weekly April 24, 2002
Legitimacy:- Ramsay and Healthscope’s policies were repeatedly compared positively with the disaster that Mayne Health had become, so giving their policies and practices greater legitimacy. They had not antagonized the medical profession. They made much of their good relationship with doctors in their public statements, no doubt drawing the support of many Mayne doctors in the process. They grew and grew, promising better and better profits, until analysts expressed doubt about their ability to meet the targets they had set themselves - but they regularly did so. Investors worried about their ability to integrate new purchases and turn loss making facilities around but Healthscope met its own and exceeded the market's projections.
We were expecting HSP's profit margins to deteriorate significantly in 1H03 as the company absorbed underperforming private hospitals ahead of management improving their performance, but this did not happen.
2003 Proves analysts wrong
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We thought the effect would be more negative than it was.
HEALTHSCOPE (HSP) $2.11 - Private Hospitals Your Money Weekly March 13, 2003
Looking for red flags:- Healthscope’s may well have superior management skills and be able to do better than others. If we look to the US experience for red flags warning of possible problems then we should remember another company with a similar name that always met its own and analysts market projections - HealthSouth. Its chairman is charged with fraud. It is claimed that he simply handed accounting documents which did not meet company projections back to his accountants and told them to adjust them. Over 17 years they added a fraudulent US $4 billion to profits and hid this in multiple complex takeovers. HealthSouth rapidly expanded to totally dominate its marketplace. This was US $4 billion that did not exist.
Bankers:- Investors in HealthSouth allege that compliant bankers played their part. Bankers like Citigroup and UBS have played their part in many frauds using what they call "structured finance" to manipulate company accounts so that losses appear as profits. Citigroup has set aside US $6 billion to settle their involvement in the Enron and other frauds. The Parmalat receiver in Italy is suing Citigroup alleging their involvement in that fraud. These financiers and bankers operate in Australia and we should be critically aware of the potential for problems when companies do unexpectedly well.
Explaining success:- In 2003 Dixon had a simple explanation for the company’s remarkable success. In the absence of conflicting evidence we must accept it. It is nevertheless wise to do so with an open mind about behaviour in the sector and the nature of relationships between financiers and the companies they support and advise.
Dixon says he is often asked why the company is in the business of turning around under-performing hospitals. He believes it is a question of simple economics that allows it to boast the highest margins in the private hospital sector.
2003 Why profitable
The average replacement cost of each new hospital surgical bed is between $400,000 and $500,000 and some of Healthscope's acquisitions have come in between $120,000 and $150,000. In contrast, the company picked up Mayne's hospitals for $50,000 per bed.
Healthscope to bed down new hospitals. Australian Financial Review February 14, 2003
More growth:- Modbury remained a drain on the company and the government refused to take it back. Healthscope continued its growth.
Healthscope has offered to hand back management of the hospital (Modbury) to the State Government without penalty and the issue is being reviewed
2002 Modbury
Contracts stay, The Advertiser May 30, 2002
Healthscope managing director Bruce Dixon said the company would not be easing back on its growth strategy despite acquiring nine hospitals in the past 18 months, and it continued to look for more acquisitions.
2002 Growth policy
Healthscope seeks buys, Townsville Bulletin May 29, 2002
* Significant expansion of the group during the year through the acquisition of five Satellite/Regional Hospitals (404 beds) and of four Psychiatric Facilities (178 beds) in Victoria, New South Wales and Queensland.
2002 Expansion plans
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The satellite hospitals acquired significantly enhance our negotiating strength with health funds.
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Plans to expand bed capacity at The Melbourne Clinic and The Sydney Clinic are now well advanced.
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Plans to expand Northpark Private Hospital and Ivanhoe Rehabilitation Hospital are in the concept stage and await Board approval, - - -
Healthscope Limited (HSP.AX) Preliminary Final Report. Australian Stock Exchange Company Announcements August 20, 2002
HSP has indeed moved quickly to consolidate the private hospital industry. FY02 saw the acquisitions of: Dubbo Private Hospital, Northpark Private Hospital, Sydney South West Private Hospital, Riverview Private Hospital, Peninsula Private Hospital, Sydney Clinic, Palm Beach/Currumbin, Warburton Clinic, and Victoria Clinic. The first five were medical/surgical hospitals with a total of 404 beds. The last four were psychiatric hospitals with a total of 178 beds. HEALTHSCOPE LTD (HSP) $2.26 - Private Hospitals Your Money Weekly September 12, 2002
2002 Acquisitions
TRADING in Melbourne-based private hospital operator Healthscope has been suspended for a day while the company raises $25 million to help fund expansion plans.
2002 Raising money
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Healthscope now has 20 hospitals in Queensland, NSW, Victoria and South Australia. And managing director Brian Dixon said the company was still on the acquisition trail.
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"With more size you certainly get better leverage with the health funds, and you also get some savings through economies of scale in areas like finance and supplies."
Healthy, wealthy and eyes for more buys. The Australian August 21, 2002
"We predict that consolidation of the industry will accelerate as stand-alone hospitals lack the scale benefits of the larger groups," the group (Healthscope) said. Healthy Healthscope raising $28m. The Sydney Morning Herald August 21, 2002
2002 Consolidation
Healthscope also intends to continue on the acquisition trail, although growth will also be fuelled by $15million in developments adding 58 beds to capacity at the company's Melbourne and Sydney clinics by 2004.
2002 Development program
Investment - Healthscope off the critical list Australian Financial Review October 9, 2002
National private hospital owner/operator Healthscope Limited announced today that it has entered into an agreement to acquire La Trobe University Medical Centre Private Hospital (LUMC-PH) at the La Trobe University's Bundoora campus. The agreement is subject to a number of conditions, including transfer of the hospital licence and obtaining a number of third party consents.
2002 Latrobe University Private Hospital
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LUMC-PH, which is currently owned by Independent Practitioner Network Limited (IPN) (formerly Lifecare Health Limited), - - - -
Healthscope Limited (HSP.AX) Agreement to Purchase LaTrobe Uni.Medical Centre Private Hos. Australian Stock Exchange Company Announcements December 24, 2002
Mayne's loss making hospitals:- By 2003 Mayne Health was in deep trouble and sold off a package of 6 money losing hospitals. Healthscope snapped the package up at a low price even though there were some it would rather have done without. As some of these were colocated private hospitals and one a privatized public hospital there were complex issues and disputes between government and the previous owner to resolve. Healthscopes successful business philosophy of escaping competition is clearly spelled out by its MD to justify buying these money losing entities.
Later in 2003 Mayne had all its hospitals for sale. Healthscope was interested in some of them but Mayne elected to sell them as a package to a Citigroup linked consortium of venture capitalists.
Mayne Group Limited has reached an agreement with Healthscope Limited for the sale of six hospitals. The hospitals are Hobart Private, St Helen's Private, Mersey Community Hospital, National Capital Private, Geelong Private and Mosman Private.
2003 Sixpack from Mayne
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The agreement is conditional on licence transfers and agreement from government authorities with responsibility for assigning leases and transfer of operating agreements.
Mayne Nickless Limited (MAY.AX) Divestment of 6 hospitals&Assoc writedown&Significant items. Australian Stock Exchange Company Announcements February 3, 2003
The disappointing performance of the six hospitals meant Healthscope got an attractive package deal, paying about $50,000 per bed, compared with previous acquisitions in which it had paid more than $120,000 per bed.
2003 Sixpack from Mayne
Mayne Cuts Out Rot For $90m Australian Financial Review February 4, 2003
Buying Mayne Group's hospital division amputations was a "very big deal" for Healthscope but the low-profile operator is confident it can make money where the industry giant could not.
2003 Sixpack and leverage
The six hospitals to be acquired will lift Healthscope's network to 27 hospitals with almost 2100 beds.
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"They fit ideally with Healthscope's strategy of developing a quality portfolio of regional/satellite medical surgical hospitals, psychiatric and rehabilitation hospitals."Mr Dixon said Healthscope's hospitals had been selected on the basis that they did not have much or, in many cases, any competition from other hospitals. This gave the company extra clout when negotiating insurance reimbursement rates with the powerful health funds.
He said Healthscope's medical and surgical hospitals were in regional centres such as Darwin and Dubbo, where they were the only private hospitals in town.
When Healthscope hospitals were in larger cities, they offered specialised services such as psychiatry and rehabilitation that were not offered by the other operators.
"The key to the whole industry is the rates you get off the health funds," Mr Dixon said.
Healthscope has good bargaining power with the powerful health funds, he said.
"The hospitals are all in very strong positions and it is essential for a health fund to have a contract with Healthscope if it wants to write business in, say, Darwin, Dubbo or Burnie.
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(In reference to a general hospital near Melbourne)
"It's too far for people or doctors to travel to Melbourne so, like in Darwin, we have a captive market."While Healthscope's psychiatry hospitals are in Melbourne, they are the only ones and the company does "pretty well" all the psychiatry in Victoria.
Healthscope happy to play the monopoly game. The Sydney Morning Herald February 4, 2003
The acquisition of the National Capital, Geelong, Mosman and Hobart Private Hospital businesses involves the transfer of leases for the land and buildings and purchase of all equipment and leasehold improvements.
2003 Leases
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In regards to Mersey Public Hospital, Healthscope will takeover Mayne's role under the management agreement to operate the public hospital and also purchase the hospital equipment.
Healthscope Limited (HSP.AX) Acquires 6 Mayne Hospitals. Australian Stock Exchange Company Announcements February 4, 2003
What is interesting about the Mayne hospitals is how well they fit into Healthscope's portfolio. If Dixon had been able to choose a preferred group of hospitals to buy from Mayne, he could not have done much better than those he ended up with. Since 1997, Healthscope has been creating a portfolio of hospitals that have a strong or dominant market position. Its hospitals are either in regional areas, where there is usually only one hospital, or, if in the metropolitan area, they are set up to provide a specialist service not otherwise available in the same area.
2003 Sixpack and leverage
Hospital Pick-me-up Business Review Weekly March 13, 2003
Healthscope Limited advises - - - it has now completed the acquisition of - - - -
2003 Problems with leases
Hobart Private Hospital
St Helens Private Hospital
Mersey Public Hospital.The completion on the other 3 hospitals, - - -has been delayed due to delays in the assignment of various leases.
Healthscope Limited (HSP.AX) Completes acquisition of hospitals from Mayne Group. Australian Stock Exchange Company Announcements April 14, 2003
And, unlike most other industries, it is not the biggest operators who have the most bargaining power. It is location that counts, and Ramsay and Healthscope have built their networks around this principle.
2003 Leverage
Health returns on the mend. The Age April 18, 2003
National Capital Private Hospital
The sudden sale of their colocated hospital ruffled some feathers in Canberra. Negotiations with Canberra dragged on for 6 months and Healthscope had to agree to new lease conditions improving services before they were granted the lease. Whether these were to plug areas exploited by Mayne to reduce costs is not clear.
The ACT Government has been treated like a 'rubber stamp' in Mayne Group's secret negotiations to sell six hospitals, including National Capital Private, a spokesman said. But Health Minister Simon Corbell said yesterday the Government would investigate the proposed lessee's credentials and protect the community's interest
2003 Government
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The Government - which leased the building to Mayne Group and had to approve changes to the agreement - was disappointed to learn about the deal via a media release.
Private hospital sale to be investigated. Canberra Times February 4, 2003
The ACT Government is yet to give the green light to the sale of National Capital Private Hospital, five months after the owners announced plans to sell the facility. - - - - - A spokeswoman for ACT Health Minister Simon Corbell said yesterday Healthscope had to meet conditions and provide certain services to secure Government approval for the sale.
2003 Delays
Sale held back The Canberra Times July 15, 2003
Mayne Group Ltd advised that the company has completed the sale of National Capital Private Hospital to Healthscope Ltd. This completes the sale of all seven hospitals announced earlier in the year.
2003 Completed
MAYNE GROUP COMPLETES SALE OF NATIONAL CAPITAL PRIVATE HOSPITAL Australian Company News Bites August 25, 2003
Healthscope had to agree to new lease conditions such as providing 24-hour medical coverage, developing an anaesthetists roster in partnership with Canberra Hospital and setting up a high-dependency unit. It would work as a transitional unit for seriously ill patients moving between intensive care and the general ward. National Capital Private Hospital would now handle patients with more complex conditions, improving options for private health insurance members and potentially relieving pressures on the public system.
2003 Conditions
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"National Capital Private Hospital was our target in the whole group [of six hospitals sold by Mayne Group]," Mr Dixon said.
National Capital Private sale a boon for patients, says Corbell. Canberra Times August 26, 2003
This colocated hospital sale in Victoria was soon embroiled in a conflict with the local Barwon Health Authority which had to approve the sale. Barwon Health claimed that Mayne had not met the conditions of its agreement and in particular had closed its intensive care facilities, throwing the burden and cost onto the public hospital. The courts found that the authority had no right to block the sale - a precedent setting victory for the market and a defeat for the community. As was done with the National Capital Private Hospital Healthscope compromised by setting up a high dependency unit but this is a much less costly substitute which escapes the very costly ICU patients. It takes some pressure off the public hospital ICU. This is not a criticism as ICU's require the sort of staffing and organisation which private facilities have more difficulty in providing. Duplication on the same campus simply dissipates limited resources and skills. This moves the costs from the private to the public system. The latter is so severely underfunded in Australia that they have difficulty in providing adequate services. The private operator does not pay their share.
Barwon Health is refusing to reassign the lease because it is disappointed with a Mayne decision to close the intensive care unit at the Geelong Private hospital.
2003 Transfer lease denied
It is also concerned that there is no doctor constantly on the premises at Geelong Private, according to a memo written on February 3 by the chief executive of Barwon Health, Sue de Gilio. Mayne Hospitals Sale Stalled The Age (Melbourne) February 11, 2003
The legal battle over the sale of one of Mayne Group's loss-making private hospitals ended on Friday - - - - -
2003 To court
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The court ruled on Friday that Maybury Craft (Mayne linked vehicle) did not have to seek Barwon Health's consent to transfer the sublease to Healthscope, clearing the way for the sale.
Mayne Gets Its Hospital Discharge Australian Financial Review June 14, 2003
The high-dependency unit will open its door on Monday as part of a $500,000 overhaul of the hospital.
2004 Compromises
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After-hours medical cover will also be re-introduced next week, with doctors in the hospital 24-hours a day.
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Growing surgical areas at Geelong Private include orthopedics, urology, vascular surgery and more complex general surgeries.
Modern unit for hospital Geelong Advertiser February 27, 2004
Mosman Hospital in NSW and Mercy Hospital in Tasmania
NSW is the state where colocations and privatisations were intensely disputed. The state government has been opposed to the whole concept and has been in repeated conflict with Mayne in regard to the privatised Port Macquarie Base Hospital which they bought back from Mayne when it sold its other hospitals to Affinity Health. Allegations suggest that Healthscope wanted to turn the Mosman hospital into a psychiatric hospital but it denied this. It took 6 months to renegotiate the lease of this hospital and we do not know the nature of these negotiations. What happened at Mosman Hospital is such a good illustration of the way the market operates in its own rather than the communi