Primary blames an ongoing shift to more attractive doctor recruitment and retention policies for its drop in profits
Primary Health Care has suffered a sharp plunge in earnings at its mainstay medical centres, blamed on its ongoing shift to more attractive recruitment and retention policies.
The industry giant reported revenue from bulk-billing medical centres fell 5% to $157 million in the six months to December, but pre-tax earnings tumbled 36% because of slower-than-expected recruitment of doctors.
Managing director and CEO Peter Gregg said the plunge in earnings before tax and interest reflected the short-term pain of Primary’s “transformation agenda”, including offering GPs more flexible conditions and higher billings in a bid to ramp-up recruitment.
“Recruitment and retention of healthcare practitioners is a key priority as we shift our business model to one that is flexible, sustainable and patient?centric,” he said.
“The change from the old one?size?fits?all contracts to capital?light flexible recruitment contracts enables Primary to attract a wider cohort of (healthcare practitioners) and significantly reduce its capital costs.”
The company said revenue was affected by offering a higher share of billings to doctors.
Primary said it needed to recruit more doctors than in the past due to lower average contracted hours under the new contracts.
The company also blamed the limp result on the ongoing Medicare rebate freeze.
The transformation agenda at medical centres included added investment in support services and nursing capabilities for GPs, more “employee engagement” and new offerings in specialist, dental, occupational health and chronic care.
Overall, underlying net profit after tax for the half-year slipped from $49.1 million to $41.9 million, weighing down the annual profit outlook.
In its earnings announcement, Primary revealed a drive to secure more Approved Collection Centres (ACCs) in response to the government’s policy on regulating the rents GPs could charge for ACCs at their rooms.
It added 60 collection centres in the half year on a net basis.
“Primary will look to reset its strategy once the government has provided clarity on this policy. As part of its ACC strategy, Primary also continues to close underperforming centres,” the company said.
Revenues from pathology were robust, growing by $22.6 million, or 4.7%, and imaging revenues were stable, with expansion moves offsetting hospital contract losses.
In November, Primary’s Private Billing division launched Health & Co as a new “market-facing brand” for its move away from the high-volume bulk-billing model of general practice.
“Health & Co is operating as a separate entity, leveraging Primary’s scale to deliver a model that is patient?centric and focused on quality outcomes while retaining the elements both GPs and patients value from traditional practices,” the company said.
In February, Health & Co announced a partnership with Professor Kerryn Phelps, whose two Sydney clinics are the founding practices in the Health & Co network.