Healthscope’s hospitals landed in receivership earlier this year after being bought for about $4.4 billion in 2019 and the current owners have been working with advisers to stabilise a network of 37 facilities that includes several loss-making sites. The group previously sold around 22 hospital properties for roughly $2 billion to real estate investors and now operates a mix of freehold and leased hospitals, with some locations also sitting on government-owned land.
In the latest step, a handful of major operators have been given exclusive rights to examine the numbers on specific hospitals. The country’s largest private hospital group is assessing a Canberra facility, a leading for-profit operator backed by private equity is reviewing a major Sydney private hospital and a Queensland-based not-for-profit network has secured an exclusive look at a Gold Coast hospital. Another not-for-profit operator appears to be in pole position for a Melbourne hospital and a Hobart site while a separate healthcare organisation has also been circling at least one of these assets. The combined price tag for the highest-quality hospitals appears to be around $600 million.
Behind the scenes, however, some big lenders are pushing for a different outcome. Hedge funds that reportedly bought Healthscope’s debt at about half its face value have been blocking deals they see as too cheap, including an offer in the $100 million to $140 million range for a bundle of leased hospitals. These investors seem to be targeting a profit closer to $150 million and a return of around 40% and they appear to favour a plan where Healthscope keeps more hospitals, converts into a not-for-profit operator, refinances its $1.6 billion debt stack and pays them back once profitability improves.
That not-for-profit pivot is a crucial part of the story. Moving away from a for-profit model would allow the hospital group to avoid payroll tax, which in Australia can run from roughly 2.5% to 6.5% depending on the state. For a network of Healthscope’s size, that exemption is estimated to boost annual earnings by around $100 million, a saving that could help keep marginal hospitals open and make it easier to repay creditors who are hoping to recover more than 55 cents in the dollar.
The bigger picture is that this sale and restructuring process appears likely to redraw the private hospital map, even though many details are still unsettled. Top-tier assets may end up concentrated in a smaller number of large operators, leased hospitals could change hands again once lending targets are met and some facilities at risk of closure might survive under not-for-profit ownership. With final bids already lodged and multiple hospital groups still in talks over the remaining 11 leased operations, the outcome seems likely to influence everything from regional access to care to how investors view private hospital debt in Australia for years to come.
