Hospital operator Healthscope to go not-for-profit following last year’s financial collapse

Healthscope’s lenders have backed a proposal to turn the nation’s second-biggest hospital operator into a not-for-profit company following its financial collapse last year.

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Cheyanne Enciso
The Nightly
Lenders voted down a proposal to sell Healthscope’s prized Prince of Wales Hospital in Sydney to Pacific Equity Partners for $120m.
Lenders voted down a proposal to sell Healthscope’s prized Prince of Wales Hospital in Sydney to Pacific Equity Partners for $120m. Credit: Andreas Rentz/Getty Images

Healthscope’s lenders have backed a proposal to turn the nation’s second-biggest hospital operator into a not-for-profit company following last year’s spectacular financial collapse.

US private equity giant Brookfield handed Healthscope — and its $1.6 billion debt pile — over to receivers at McGrathNicol last May.

The receivers on Friday unveiled a plan that would create a new not-for-profit organisation with 31 hospitals and 18,000 staff. It is expected to be operational by mid-year.

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It comes as lenders voted down a proposal to sell Healthscope’s prized Prince of Wales Hospital in Sydney to Pacific Equity Partners for $120 million. Healthscope argued the hospital was worth double that offer.

In WA, Healthscope operates the Mount Hospital on Mounts Bay Road in central Perth. It also operates the John Fawkner Private Hospital in Melbourne.

“Healthscope’s lenders have rejected an offer for the Prince of Wales Private Hospital in favour of supporting a holistic solution to transition the operation of 31 Healthscope hospitals, including Prince of Wales, to a new, not-for-profit organisation,” McGrathNicol said in a statement.

“This organisation would be the largest not-for-profit private hospital operator in Australia, providing stability to Australia’s hospital system.”

The receivers, led by Keith Crawford, said Healthscope’s transition into a not-for-profit would support the long-term sustainability of the private health sector in Australia and take the pressure off the public health system.

By becoming not-for-profit, Healthscope won’t have to pay payroll tax, which is believed to have been costing the group as much as $100m a year.

“This is a transformative day for our people, our doctors, our patients and the Australian healthcare sector,” Healthscope chief executive Tino La Spina said.

“Our whole organisation has been galvanised by the idea of transforming Healthscope into Australia’s largest not-for-profit hospital operator, reinvesting surpluses back into our hospitals and people to continually improve patient care.”

Mr Crawford said it had been a complex process involving a large number of assets across multiple jurisdictions.

In December, Ramsay Health Care — the nation’s biggest private hospital operator — acquired Healthscope’s National Capital Private Hospital in Canberra for $251m.

The receivers have also found buyers for Hobart Private Hospital, Holmesglen Private Hospital in Melbourne, Gold Coast Private Hospital and Tweed Day Surgery in NSW.

The NSW Government last October agreed to pay $190m to take back full control of Healthscope’s Northern Beaches Hospital in Sydney.

“We believe the plan announced today for the Healthscope portfolio is in the best interests of all stakeholders, preventing hospital closures and protecting jobs,” Mr Crawford said on Friday.

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