Major private hospital operator to be broken up after lenders back consortium bid

Australia’s second-largest private hospital operator, Healthscope, will be broken up, with Sydney’s Prince of Wales Private Hospital and Melbourne’s Knox Private Hospital to be sold to private equity under a deal announced on Monday.

Lenders to the embattled healthcare group approved the deal, which follows its financial collapse in April last year under $1.7 billion worth of debt after its private equity owner, Brookfield, walked away.

Damien Bruce, chief executive of Calvary Health Care, will be the big winner from the break-up proposal. Oscar Colman“We are pleased to announce agreements have been reached which provide certainty and continuity of services to Healthscope patients, employees and communities through the sale of Healthscope hospitals to well-credentialed healthcare operators,” said Healthscope’s receivers, led by Keith Crawford.

The receivers said that lenders agreed to the deal after the new owners promised strong job protection for the group’s 14,000 staff and more certainty for the future of the hospitals.

Under the deal, 14 of the company’s remaining 25 hospitals would be operated by not-for-profit firm Calvary Health Care – which had already agreed to acquire two other Healthscope hospitals.

Pacific Equity Partners-backed hospital operator Healthe Care will take on six hospitals, including Prince of Wales and Knox. Private operators including Acurio and KnG will pick up the remainder.

“Today’s announcement delivers on our commitments on continuity of hospital services and protecting jobs in the interests of patients, employees and the Australian community,” Crawford said. “The continued operation of Healthscope hospitals across Australia also avoids placing additional pressure on Australia’s public hospital system.

“Healthscope’s lenders have shared our commitment to securing the best possible outcome for all stakeholders. This has been instrumental in enabling us to take the necessary time to work through a very complex process with care and diligence.”

Speaking for the consortium, Calvary Health Care chief executive Damien Bruce said: “This is an example of what can be achieved when organisations work beyond individual interests and focus on the long-term needs of patients, communities and the health system as a whole.

“We recognise the resilience and dedication shown by staff through a period of significant uncertainty, and we thank them for their ongoing commitment to patients and families. Together, we have an opportunity not only to grow, but to build a stronger, more sustainable future for healthcare that continues to put people at the centre.”

Crawford said: “We look forward to working with Healthscope, Calvary, Healthe Care, Acurio Health and KnG Group, as well as other key stakeholders, to complete the transaction by November 30, 2026 and ensure the smooth and timely transition of operations.”

Other hospitals have been sold during the receivership, and the NSW government took back control of Sydney’s Northern Beaches Hospital after it terminated Healthscope’s operation of it under a public private partnership model.

A stand-off with landlords scuppered plans announced in February – after they were approved by Healthscope lenders – to convert the group into a non-profit operation run by its current management team.

HealthCo, which owns 10 Healthscope properties, is backed by rich-lister David Di Pilla.

Northwest owns 12 Healthscope properties. Both Northwest and HealthCo chose to back the private equity-led consortium that would split the hospitals between several operators, after Northwest boss Richard Roos previously blasted a proposal to turn Healthscope into a not-for-profit.

“The real purpose of the proposed Healthscope PurposeCo is to enrich offshore hedge funds at the expense of Australian taxpayers,” Roos, co-head of Northwest’s Australasian operations, said in February.

Knox Private Hospital in Melbourne, part of Healthscope, will be sold to a private equity firm.Eddie Jim“This sets a dangerous precedent if debt holders can successfully deploy a strategy to increase their returns by converting to a charitable entity and taking millions of Australian taxpayers’ dollars.”

But placing hospitals such as Prince of Wales Private Hospital back into the hands of private equity owners may face its own challenges. Dozens of doctors last year expressed fears that the sale of the hospital to another for-profit investor would lead to cost-cutting measures, diminished safety standards and an exodus of highly skilled specialists.

Healthscope was bought by Canadian private equity giant Brookfield in 2019 for $4.4 billion, but struggled under the weight of rising interest rates, higher rents and the inflated cost of delivering healthcare during and after the COVID-19 pandemic.

The future of Healthscope is significant for Australia’s health system. The private hospital sector provides about 70 per cent of elective surgeries in Australia, taking immense pressure off state and federal governments.

Private hospitals are also under pressure as a result of funding problems with private health insurers and due to the loss of lucrative multi-day hospital stays by private patients in favour of at-home care.

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