Wakefield earnings outlook slumps on Govt, insurance woes

Fewer people are choosing private hospitals for elective surgery, says Wakefield Health. Photo / Dean Purcell

Wakefield Health, the private hospital operator, slashed its earnings forecast for the first half of this year as the worst economic slump in 30 years slowed demand from patients using the private health system.

Profit in the six months ended Sept 30 will be 30 per cent to 40 per cent lower than the year-earlier NZ$6.1 million, the company said in a statement.

Fewer patients went private for elective surgery in the three months ended June 30, it said. The short-term outlook is uncertain, and if the weakness persists, Wakefield Health also expects the full-year profit to "fall materially short of last year's record result."

Wakefield Health, which owns Wakefield and Bowen Hospitals in Wellington, said a decline in the number of self-funded patients, the volatility of contract work for District Health Boards, and the Accident Compensation Corp.'s funding of elective surgery are potential risks to earnings.

"The health sector had shown some resistance (to the recession), but around March-April we saw it flowing through to the private sector," chief executive Andrew Blair told BusinessWire. "It's a combination of the things we highlighted" which are making it "very difficult" to make forecasts for the coming year, he said.

The shares slipped 1 per cent to NZ$9.90 in trading today, and have climbed some 15 per cent in the past six months.

In June, Health Minister Tony Ryall changed the protocols to allow DHBs to enter long-term arrangements with private providers in a bid to trim surgery waiting lists. Still, work flows from the public sector to the private sector are unpredictable, Blair said.

"It's still working through the DHB bureaucracy, which for the last nine years has worked with the private sector as a last resort," he said. "They need to shift their thinking, and I think there are some signs this is happening," he said.

ACC Minister Nick Smith ordered an audit of the corporation's accounts by independent advisors in May, as he seeks to claw back a NZ$1.5 billion blowout by the government's workplace insurer. This has resulted in ACC approving fewer surgeries, and has weighed on Wakefield's bottom line.

Similarly, Blair said there's been a drop-off in the number of self-funded elective operations as more people weigh up their medical insurance policies in the current economic environment.

Health Funds Association of New Zealand, the organisation representing life insurance providers, will release the statistics on the number of life insurance policy holders for the March quarter later this week, and Blair expects to see a decline after several years of quarter-on-quarter growth.


-BUSINESSWIRE