Banks step in to keep Healthscope running as receivers appointed

One of Australia’s largest private hospital owners Healthscope has gone into receivership after its lenders voted to end their support for the current owner, Brookfield, which has been unable to pay to keep facilities open, including Sydney’s embattled Northern Beaches Hospital.

Receivers have been appointed from McGrathNicol with the Commonwealth Bank and Westpac, two of the lenders owed $1.6 billion, providing additional funding for both receivers’ sales process, and working capital for the hospitals to ensure the hospital operations continue as normal.

Healthscope has 38 private hospitals – including Sydney’s Northern Beaches Hospital, Holmesglen Private Hospital and The Melbourne Clinic – which house 5000 beds and employ 17,000 staff across the country.

Brookfield, which has more than $1 trillion of assets under management and paid $4.4 billion for Healthscope in 2019, has been unable to find a buyer for the business and attempted to hand control to the dozens of parties which made up the debt syndicate, including Australia’s Big Four banks.

The issue came to a head this year when Healthscope had to reach an agreement with its lenders to delay payments on $1.6 billion worth of debt, and was unable to pay all of its rent.

Brookfield’s plans to be a long-term owner of Healthscope, and profit from long-term trends like the growth of healthcare needs of an ageing population took an immediate hit with COVID, which forced the shutdown of elective surgery which is its core business.

After the pandemic, Healthscope’s revenue was squeezed by an acceleration of the trend to at-home treatment for services that previously required a lengthy hospital visit. While the rate of lucrative multi-day admissions to private hospitals have dropped over the past five years, expenses have soared because of staff shortages and rising wages.

Sydney’s Northern Beaches Hospital has become a flashpoint for perceived problems in the private ownership of the hospital operator.

Doctors at the hospital warned a parliamentary inquiry last week that chronic understaffing and a dysfunctional patient record system pose significant risks to patients, piling further pressure on the state government to take control of the troubled hospital.