Healthscope $1.4B debt triggers receivership, Health Minister rules out taxpayer bailout

Healthscope, Australia’s second-largest private hospital group, has collapsed into receivership. Two major banks, Commonwealth Bank (CBA) and Westpac, have stepped in to prop up the company as it searches for new owners.

Mark Butler MP, Minister for Health and Ageing, Disability and National Disability Insurance Scheme (NDIS) said “This news will be highly distressing to the patients, staff and local communities that depend on Healthscope’s services. While Healthscope have announced they will remain operating as normal with no change to patient care or staffing, this will still be difficult for the hospital’s employees, and their patients.”

Despite the debt of $1.4bn to nearly 20 lenders, Healthscope CEO Tino La Spina, said “All 37 of our hospitals continue to operate as normal and today’s appointment of receivers, including the additional funding, ensures a stable path to a sale, with no impacts on any hospitals, staff or patients.

“There is no interruption to the outstanding care we provide. Our incredible teams are all working as normal, providing the high standard of care they always have. The additional funding, while we do not anticipate it being required, provides additional support.”

Key supplier relationships will remain unaffected, with payment terms maintained.

McGrath Nicol has been appointed as the receiver, with its new $100m from CBA in addition to HealthScope’s current cash balance of $110m and additional assets backing the group. McGrath Nicol said its intention is to transition all hospitals to new ownership, with no plans for hospital closures or redundancies.

McGrathNicol partner and appointed receiver, Keith Crawford said “Our immediate focus is to engage constructively with all key stakeholders to ensure uninterrupted operation of Healthscope hospitals and continuity of best practice standards of patient care.

“We will also work closely with Healthscope management to support any operational funding requirements via access to $100 million of new funding from Commonwealth Bank while we pursue an orderly transition of ownership of Healthscope’s hospitals.”

In a warning shot to the private sector, Minister Butler made clear where the Government stands. He said, “Today, the Government has met with the administrator and the receiver to outline our priorities and expectations. The Government expects all parties to continue to put patient care and workers as their priority. We expect that these hospitals remain a critical part of our healthcare system. The Government does not want any of these important assets to be put in jeopardy to satisfy international investors.”

Minister Butler asserted that “there will be no taxpayer bailout. We remain steadfast in our view that an orderly sales process that maintains the integrity of the entire hospital group will provide the best outcome for patients, staff, landlords and lenders.”

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