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Among the many industries that have been challenged by COVID-19, pathology has navigated a singular journey. Initially driven almost to the wall, the industry’s agility and hard-nosed negotiations with the federal government have enabled it not only to survive, but thrive.
Healius-owned Laverty Pathology recently posted a $75.6 million net profit after tax in its half-year results, on the back of a 10.2 per cent - largely COVID-driven - increase in pathology sales.
Shares in Healius were up 2.8 per cent to $5.05 on Monday and trading near six-year highs, having risen 36 per cent for the year so far.
Healius CEO Dr Malcolm Parmenter said he will hand back $1.3 million in JobKeeper payments to the government.Credit:Dominic Lorrimer
But back in March 2020, the industry was staring into the abyss.
Patients had abandoned routine testing as the pandemic took hold and sales volumes were down by as much as 40 per cent.
Healius closed 30 collection centres as its share price tumbled to lows of $1.925, levels not seen in the 20 years of the ASX200. Other companies laid off hundreds of staff.
But the industry managed to reverse its fortunes by negotiating an increase to the scheduled fee for testing.
The previous rebate of $24.40 was not high enough to cover costs.
The new price needed to build in the cost of periodically surging the workforce, new equipment and technology as well as an incentive for the industry to step up.
On April 1, the government introduced a standalone Medicare item for COVID-19 testing with an $85 rebate.
Whether that fee strikes the right balance between fair compensation and profiteering is open for debate.
Once pathology companies invest in infrastructure, actual tests are cheap to perform, so if a company does very little testing then, it needs to charge more to break even - but if it does a lot, then it can make a healthy profit.
Malcolm Parmenter, the chief executive of Healius, said it was clear from the company’s half-year results that COVID-19 has been a “net positive” for shareholders.
“It’s certainly helped drive significant volumes,” Dr Parmenter said.
“Pathology laboratories are largely fixed cost business, and it needs a certain amount of revenue to get above that cost base and if you get large volumes it does tend to drive profitability.”
Read Harriet Alexander’s full feature on Laverty Pathology, and its ‘testing times’, here