Ramsay Health Care has cut its earnings guidance for 2018, citing continued challenges in the UK market.
Australia’s biggest healthcare company, which entered the UK market with the acquisition and subsequent rebranding of Capio in 2007, said NHS demand management strategies were having a ‘significant negative impact’ on volumes despite lengthening NHS waiting lists.
Roughly 70% of Ramsay’s UK activity is publicly funded and despite this week’s announcement of a cash injection for the NHS, the company said trading conditions were likely to remain challenging in the medium term.
As well as volume pressure, Ramsay said onerous lease provision and asset write-downs related to six UK sites meant it would recognise a charge of £70m, net of tax, in its 2018 year-end results.
The provisions and impairments are non-cash and the charge will be excluded from its Core NPAT for 2018. However, Core EPS growth is now expected to be around 7% compared to previous guidance of 8% to 10%.
Ramsay managing director Craig McNally said: ‘We continue to focus on operational efficiency improvements in our UK business, which have included a restructure in recent months, as well as focusing our efforts on building our non-NHS business.’
The impact of NHS demand management strategies is being felt across the private hospital sector. Last year, Spire Healthcare issued a profit warning after reporting dampened NHS demand while BMI Healthcare recently reported a 4.5% dip in NHS volumes – trading conditions which have contributed to Netcare’s decision to exit the UK market.
Speaking at LaingBuisson’s Private Healthcare Summit this week, Ramsay Health Care UK CEO Andrew Jones said the sector was in for a challenging 12 months but that he was optimistic about the long-term prospects of the UK market.
Asked why the NHS was not making greater use of the space capacity available in the independent sector, Jones told delegates: ‘It is hard for many people outside of the UK to understand why we have spare capacity in our system yet there are still over 4 million people on the waiting list. As we have a standard NHS tariff, providers need to focus on delivering the most efficient and effective models of care.
‘In most markets, and healthcare is no different, it is the most productive systems that survive. I believe that it is up to all providers to reform and deliver the best possible model of care, in the right place, at the right time and at the right price. Those that can meet this challenge will be able to purchase greater volumes.’