Primary Health Care under investigation

Primary Health Care is being investigated for allegedly choosing profits over patient wellbeing.

Ask any doctor and they'll have an opinion: Primary Health Care (ASX: PRY) is either a medical miracle or dangerous sausage factory. Either way, the company is now being investigated for potentially putting profits ahead of patients.

Edmund Bateman, Australia's richest doctor and worth close to $500m, built Primary Health Care from a single Sydney practice to a $2.4bn network of medical centres because he was among the first to see the potential for 24-hour bulk-billing clinics to bring down the cost of healthcare.

Indeed, Primary's clinics have made a visit to the GP more affordable and more convenient, despite ballooning healthcare costs putting more pressure on government budgets than ever before.

But the low-margin business model relies on high utilisation of the medical centres so there is a clear incentive for Primary to quickly churn through patients, even if a longer consultation would provide more thorough care. Nonetheless, financially incentivising the company's 900 GPs to do so is illegal.

The Federal Government is now investigating whether Primary is doing just that, following an ABC report that said it had evidence the company offered bonuses to doctors if they billed more patients each day.

“Under the offer, GPs who work for Primary Health Care were offered $1,000 if they wrote 100 diabetes plans, $2,000 if they wrote 100 asthma plans, and $3,000 if they saw three extra patients a day, all completed inside six months."

If found guilty, the charges against Primary could damage Dr. Bateman's reputation after successfully running the company for nearly 30 years. Dr. Bateman announced he would step down from an executive role in January 2015, following a period of sick leave that began in September.

The investigation will also put pressure on Primary's medical centres division which had a disappointing 2014, with revenue rising just 3% to $310m for the year to 30 June due to already lacklustre attendance. And saddled with $1.1bn of net debt that results in interest payments consuming nearly a quarter of operating earnings - and which needs to be refinanced in 2017 - Primary doesn't look too healthy.

To get more insights, stock research and BUY recommendations, take a 15 day free trial of Intelligent Investor's Share Advisor now.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Join the Conversation...

There are comments posted so far.

If you'd like to join this conversation, please login or sign up here

Related Articles