Independent auditors have cast doubt over the ability of Northern Beaches Hospital to continue operating if the company charged with running the public-private hospital cannot convince its lenders it can turn its faltering financial performance around.
In documents filed to the Australian Securities and Investments Commission (ASIC), Healthscope directors said they expected the company would be able to pay its debts but “significant doubt” would be cast over its ability to do so if it failed to improve its performance and generate enough revenue from its hospitals.
Healthscope has a contract with the NSW government to run the public wing of Northern Beaches Hospital until 2038.Credit: Nick Moir
Chief executive Greg Horan wrote that the rates paid by private health insurers had not kept up with the rising cost of providing healthcare and that the company was taking steps to “ensure that the long-term viability of the business is addressed”.
The hospital is operated by Healthscope but its revenue, assets and costs are lodged to ASIC via a holding company.
Healthscope charged the holding company a $260 million management fee which it says includes “employee expenses and other costs” it incurs operating the hospital.
The company’s total debt, most of which is owed to its parent company, is about $283 million, far exceeding the $79 million it has in cash and other current assets.
In their audit of the financial documents, independent accountants from consulting firm Deloitte said that these conditions, along with the financial constraints highlighted by Healthscope itself, “indicate that a material uncertainty exists that may cast significant doubt on the [Northern Beaches Hospital holding company]’s ability to continue as a going concern”.
Asked if the northern beaches community should be concerned about the auditor’s report, a Healthscope spokesman said: “As detailed in the accounts, the large majority of the NBH holding company’s current liabilities are from intercompany loan of $280 million, provided by the Healthscope group.”
“Healthscope’s absolute priority is providing high quality and safe clinical care for patients in our hospitals,” the spokesman said. “We are taking actions to address underfunding now, to be able to maintain the highest standards of care into the future.”