Healthscope in receivership but $100m lifeline will keep hospitals open amid sale process

Healthscope, Australia’s second-largest hospital operator, points out that the operational business is not in receivership, which means all 37 hospitals within the portfolio will remain open with “no impact on staff, doctors or patient care”.

The receivership comes just six months after Healthscope threatened to pull out of its contracts with health insurer Bupa and the Australian Health Services Alliance after they refused to pay a planned hospital facility fee.

It also follows Healthscope’s closure of maternity wards at Hobart and Darwin hospitals earlier this year, citing a falling national birth rate making the operations unviable.

The group, which was acquired by US private equity group Brookfield for $4.4 billion in 2019, is understood to have debts of $1.4 billion and has been fielding inquiries from various interested parties to sell that debt at a discounted rate or to undertake a buyout of the group.

Healthscope’s group lenders have appointed Keith Crawford, Jason Ireland, Kathy Sozou and Matthew Caddy, from McGrathNicol, as receivers and managers to two holding companies in the group - ANZ Hospitals Pty Ltd and Healthscope Newco Pty Ltd.

The Healthscope board has appointed Mark Korda, Craig Shepard, Andrew Knight and Lara Wiggins, of Korda Mentha, as administrators to assist in an orderly sale of the business.

“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,” says Healthscope CEO Tino La Spina.

“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.”

Healthscope has revealed that McGrathNicol has been provided with a new $100 million funding package by Commonwealth Bank to support operations while administrators look for a buyer.

The group’s cash balance prior to this package being offered stood at $110 million with the company also noting it has “substantial additional asset backing across the group”. Healthscope says its existing working capital financier is also providing support.

“The additional funding, while we do not anticipate it being required, provides additional support,” says La Spina.

“The receivers and management share the same goal of maintaining our market leading standards of patient care and protecting the business, the hospitals and our amazing people.”

Healthscope’s key supplier relationships are expected to remain unaffected during the sale process, with payment terms maintained.

McGrathNicol says its plan is to “transition all hospitals to new ownership, with no plans for hospital closures or redundancies”.

The receivers will undertake an immediate review of the sale process that has been undertaken to date by Healthscope and it plans to potentially re-engage with interested parties over the next few weeks.

“We want to make it clear that the subsidiaries that own and operate Healthscope’s network of hospitals are not affected by our appointment to the shareholding companies,” says McGrathNicol partner and appointed receiver Keith Crawford.

“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.”