Funding cuts spoil Primary's profit party
The criticism comes despite the company posting a 50 per cent jump in first-half profit.
Primary, which provides services to doctors, specialists and other healthcare providers operating within its medical centres, said a decrease in Medicare subsidies was causing the company "headwinds".
Speaking after the release of the first-half results, the chief executive, Edmund Bateman, said a review by the Productivity Commission last month revealed significant reductions in incentive payments to doctors and health practitioners.
The healthcare provider announced strong results, despite acknowledging the economic uncertainty had made some patients change their mind about seeing a doctor.
Primary's net profit was $69.5 million, and revenue rose 5 per cent to $720.7 million. It declared an interim dividend of 6.5¢ a share, up 30 per cent from the same period last year.
The company charges doctors a service fee based on a percentage of what they bring into the practice. All the centres use bulk billing.
"If there's 15 per cent reduction in funding to doctors, our share of income is equally reduced," Dr Bateman said. "So we've got to combat that over time by being more efficient."
The company did not issue an earnings upgrade. Dr Bateman said it wanted to review the effects of the Queensland floods and other factors on the economy.
"We're just a very conservative company," Dr Bateman said.
Primary expects full-year pre-tax earnings to be between $370 million and $380 million.
The shares closed flat on Wednesday at $4.49.
Frequently Asked Questions about this Article…
Primary reported a 50% jump in first‑half profit with net profit of $69.5 million, and revenue rose 5% to $720.7 million.
Primary says cuts to Medicare subsidies and incentive payments to doctors are creating "headwinds" that flow through to its bottom line because reduced funding to doctors lowers the income Primary receives.
Dr Edmund Bateman said a Productivity Commission review revealed significant reductions in incentive payments to doctors and health practitioners, which is affecting Primary’s revenue mix.
Primary charges doctors a service fee based on a percentage of what they bring into the practice and all its centres use bulk billing, so if funding to doctors falls (for example a 15% reduction), Primary’s share of income is equally reduced.
Primary did not issue an earnings upgrade; management said it wanted to assess the effects of the Queensland floods and other factors. It expects full‑year pre‑tax earnings to be between $370 million and $380 million.
Primary declared an interim dividend of 6.5 cents a share, which is up 30% from the same period last year.
The shares closed flat on the day at $4.49.
Primary noted economic uncertainty has led some patients to delay seeing a doctor, and the company flagged the potential impact of events such as the Queensland floods as factors it wants to review when assessing future performance.
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