Ramsay and Medicare bury hatchet

Ramsay Health Care has emerged from a bitter dispute with Medibank to sign a record three-year contract with the insurer.

Ramsay Health Care has emerged from a bitter dispute with Medibank to sign a record three-year contract with the insurer.

The move boosted Ramsay's share price on a day in which it also flagged strong profit growth for the coming year.

Ramsay shares surged 5.3 per cent, to close at $36 each on Thursday, as investors expressed relief in a resolution that would see renewed co-operation between the two healthcare powerhouses.

The agreement came as Ramsay, Australia's largest hospital operator, said it expected further expansion of its Australian medical centres to boost its earnings in the current financial year ahead of a possible change in government.

Ramsay has in the past been one of the biggest donors to the Liberal Party, and stands to benefit from changes to healthcare policy that have been signalled by the Coalition.

On Thursday, the company reported a full-year net profit of $266.4 million for the year to June, up 9.1 per cent from a year earlier. It said its underlying profit, which includes rent expenses relating to its UK hospitals, was stronger at $290.9 million, up 15.1 per cent. Chief executive Chris Rex said the company was on track to grow its core net profit by 12-14 per cent for this financial year through an expansion of its domestic medical centres.

"We expect to progress our involvement in public-private collaborations, given our significant experience in successfully operating these ventures," he said.

While he said a Coalition win would help the company, he believed any government would have difficulty funding new policies.

"I'm sure given [the Coalition's] very positive view of private health insurance and private healthcare, if they could inject some money or partially restore the rebate I'm sure they would do that," Mr Rex said. "But, clearly, for a period of time it's simply unaffordable."

Earlier on Thursday, Ramsay shares fell more than 5 per cent, after a report by Britain's Competition Commission recommended the sale of some privately operated hospitals in the country to improve competition between healthcare providers. Mr Rex told investors that he believed Ramsay, which operates 36 hospitals in Britain, had not been mentioned in the report, and the impact of it would be limited.

The dispute between Ramsay and Medibank flared earlier in the month when the insurer accused Ramsay of unfairly driving up the cost of a night in hospital, and Ramsay said it would not be coerced into accepting pricing that could threaten patient safety.

Industry sources say private hospitals would normally expect an annual rise of 3 per cent to account for salary rises, new technology and the costs of an ageing population.

Mr Rex would not discuss details of the agreement but said both parties were pleased with the outcome.

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