12 September 2018

Primary’s Monserrat ‘upstream deal’ good sign for GPs

Finance General practice

Primary Health Care continues its charge in a direction that shouldn’t harm it’s image among GPs, but the finance community isn’t over the line yet on a transformation.

Hot on the heels of its $160 million capital raising, this week’s acquisition of Montserrat Day Hospitals by Primary  signals a company that is aggressively attempting to dilute its past dependence on MBS revenues and diversify its business into alternative, but synergistic, revenue streams to its existing base.

Although the synergies of the Montserrat acquisition lie more with Primary’s specialist businesses and its pathology division, Primary CEO Dr Malcolm Parmenter says the acquisition will form the nucleus of a new Primary Day Hospital Division. As a part of this strategy, Primary is developing a series of centres which, as well as performing day procedures, will manage urgent-care patients with non-life threatening conditions, who might normally have to go to hospital.

Several of these centres are believed to be on schedule for a launch prior to the end of the year, something that will likely be assisted by Primary’s successful capital raising.

The new urgent-care centres are being developed by Dr Tim Haggett, Primary’s CEO of Medical Centres,  and are believed to be partly based on the model Dr Haggett developed in Western Australia in a group of centres he sold two years ago to the St John Ambulance service.

At the time, St John said it was looking to change the paradigm of its service by moving to servicing non urgent patients that might normally present to hospitals. Most such patients presented to the Apollo centres without appointments and were mixed billed.

Some mix of this model, and certain synergistic day-care work and a normal GP practice, seems to be where the new Primary centres are heading. All of it takes GPs upstream from the traditional corporate GP centre to some degree and presents new challenges and career growth for a Primary GP.

At the same time, Primary is looking carefully at new technologies, particularly mobile-based and cloud technologies, to allow its GP and allied health professionals to get more mobile. The idea is they go upstream and downstream, on the downstream side all the way into servicing patients in their homes and in aged care centres.

Talking to the acquisition, Dr Parmenter told media: “Monserrat is strategically aligned to Primary’s core business of providing frontline community healthcare.”

It’s no secret that Dr Parmenter, a GP himself, thinks GPs are the main soldiers on that front line.

Primary’s intentions for GPs is reasonably clear, declaring at its annual results in early August a desire to raise capital to be used, in large part, to transform existing GP clinics and recruit up to another 500 GPs over the next three years. That would be an increase of nearly 50% on the current GP workforce in a very short space of time.

Notably, Primary added only 20 GPs in the last financial year but the increase was a first in a few years reversing a worrying trend for the group.

Sealing the Monserrat deal, even though it could cost the company nearly $140 million over the next few years, depending on other factors and earn outs, was welcomed, with shares in the group recovering nearly all the ground  lost following the annual results.

Primary is on a well-publicised mission to shift its image and its business base both externally and internally.

The Monserrat sale is the biggest stake in the ground so far from relatively new CEO Dr Parmenter, who has stated clearly that relying on the government to change the funding base of the healthcare system in the short term to address the shift from acute to chronic care is not a good strategy for any healthcare group.

He, and his major competitor at IPN Dr Ged Foley, both feel primary care is going to transform over time, particularly through the application of digital technologies and data.

For GPs working at Primary or thinking of a corporate career stint, everything seems to be heading the right way so far.

But some analysts aren’t over the line yet on the Primary transformation story. And although these finance houses don’t have a deep dive on culture and the changing approach to medicine that the organisation clearly is attempting, they are good on the numbers, and the numbers in the end will be a big part of dictating the future prospects of the group as an employer.

Motley Fool’s healthcare analyst James Mickleboro might sum up the investment community mood on the group best when he says: “ While I think that this acquisition has the potential to be a key driver of growth for the company in the future, I still feel it is a little too soon to invest, and I believe there are other options out there with more compelling risk/rewards. I would class it as a hold at this point.”