WESTERN Australia’s Labor opposition and unionists at the LHMU may not like it, but the trend towards private sector involvement in hospitals is gathering pace around the country, led, ironically, by Labor governments in other states.
WESTERN Australia’s Labor opposition and unionists at the LHMU may not like it, but the trend towards private sector involvement in hospitals is gathering pace around the country, led, ironically, by Labor governments in other states.
South Australia’s Labor government announced this week that a private consortium, led by Leighton Contractors, Macquarie Capital and Spotless, has been selected as the preferred proponent to build and run a new Royal Adelaide Hospital.
With 800 beds, the new Adelaide hospital will be Australia’s largest – just ahead of Perth’s Fiona Stanley Hospital, which will have 783 beds – and will be run by the private consortium for about 30 years.
This followed similar moves in NSW and Victoria, where private consortia have successfully developed (and now run) at least four major hospitals over the past decade.
In WA, Labor and the LHMU are running a vigorous campaign against the Barnett government’s privatisation of hospital services, arguing that private operators invariably put profits ahead of service quality.
Their targets include international company Serco, selected recently as preferred bidder to provide non-clinical facilities management and support services at Fiona Stanley Hospital.
Plans for the private sector to develop and operate the new 400-bed Midland Health Campus have added fuel to the campaign.
However, research for WA Business News Book of Lists has found that the private and community sectors already own or operate more than 3,000 hospital beds in WA, just short of the total number of beds run by the state government.
The major players include St John of God Healthcare, which has about 1,200 hospital beds in WA and generates about $550 million in revenue from its operations in the state.
ASX-listed Ramsay Healthcare also has about 1,200 beds in WA. It recently completed an expansion of Hollywood Hospital, which has 659 beds, and is in the midst of a major expansion at Joondalup Health Campus, which will expand to 541 beds.
Other private sector operators include Health Solutions (WA), which operates the Peel Health Campus.
Annual accounts lodged with the Australian Securities and Investments Commission show that Health Solutions (WA) generates annual revenue of about $68 million and net profit of about $5 million.
Other groups did not disclose their WA financial performance but did report the profits (earnings before interest, tax, depreciation and amortisation) of their hospital operations in Australia.
A top performer was Ramsay, which said its hospital EBITDA margin improved last financial year to 18.3 per cent.
Mount Hospital owner Healthscope (recently acquired by private equity investors) reported an EBITDA margin of 17.0 per cent.
St John of God lifted its EBITDA margin to 12.5 per cent, while Health Solutions’ margin ranged from 11.9 to 13.4 per cent.
The private sector’s role in running WA hospitals is set to expand, after tenders were invited for the delivery and operation of the new 400-bed Midland Health Campus.
Expressions of interest closed last month.
Midland’s operations will be modelled on the Joondalup and Peel health campuses, which have private operators running co-located public and private hospitals.
The private sector may also have a role in facilities management and support services at the new children’s hospital to be built at the QEII Medical Centre, though the state government is non-committal on which way it will go.
The state government originally planned for the new children’s hospital to be a fully-fledged public private partnership, with private sector funding, but after getting a financial windfall from mining royalties chose to fund the hospital itself.
