Ramsay shelves regional hospital plans

Thursday 23rd of February 2012 05:03:17 PM By AAP

Ramsay Health Care may shelve plans to build private hospitals in regional Australia amid fears people will downgrade their health cover if a means test is introduced.

Australia's largest private hospitals operator on Thursday launched an attack on the federal government's plan to means test the private health insurance rebate.

The attack by Ramsay boss Christopher Rex came as Ramsay unveiled a 22 per cent rise in first half profit and said it was upbeat about its earnings potential for the rest of 2012.

Mr Rex said the means testing legislation, which passed parliament's lower house in early February, could hurt the company's earnings, particularly if people pulled out of private health insurance or downgraded their cover.

As a result, Ramsay's development committee would decide whether certain projects, such as regional hospitals, would proceed or not.

"The sort of facilities that are likely to be affected clearly are those smaller ones in single markets, regional markets where a small downturn in activity has a profound effect on the performance of the business," Mr Rex told analysts.

"Developments in those sort of areas would be looked at more closely in terms of, well we might wait and see."

But he said strong demand for private hospital services would ensure developments in urban areas would go ahead.

Ramsay is concerned that high income earners who will be most affected by the means test may downgrade their cover.

Ramsay fears that such a move would have an adverse effect on the financial viability of the private health insurance industry and potentially affect the group in years to come.

Despite upgrading its full year net profit growth guidance to 13-15 per cent and unveiling a 22 per cent rise in first half profit to $125.7 million, Ramsay shares drifted 22 cents, or one per cent lower, to $18.52.

Given the challenging economic situation in Europe, Ramsay has slowed its expansion plans in France where it owns 20 hospitals.

The company still plans to invest around $100 million in new projects each year.

"Whilst we continue to explore a range of potential hospital acquisitions, we are not going to rush in and buy things that are too expensive," Mr Rex said.

He was pleased with the UK business but growth in France had been relatively sluggish.

"We continue to explore a whole range of opportunities in a range of markets."