The collapse of Healthscope, Australia’s second-largest private hospital operator, has laid bare the risks of heavy private equity involvement in essential care services. Once touted as a model of efficiency and community partnership, Healthscope’s rapid descent into receivership on 26 May has prompted urgent questions about the viability of privately run hospitals under intense debt and profit pressures.
From Acquisition to Overleverage
In late 2019, Canadian asset manager Brookfield paid a staggering A$4.4 billion to acquire Healthscope’s 37 hospitals and ancillary facilities. To fund the purchase—and extract returns for its shareholders—Brookfield saddled Healthscope with A$1.6 billion of debt. Within months, the COVID-19 pandemic forced elective surgeries to a near standstill, decimating revenue streams just as the company faced its first big rent bill to the new property owners.
The Rent Trap: Properties Spun Off to REITs
Immediately after the acquisition, Healthscope’s real estate assets were sold to two trusts: Canada’s Northwest Healthcare Properties REIT and Australia’s HMC (formerly HWC), backed by ex-banker David Di Pilla. Burdened by rock-bottom operating income, Healthscope found itself paying above-market rent—up to A$100 million annually—simply to service the properties that housed its hospitals.
Elective Surgery Shutdown and Revenue Collapse
As pandemic lockdowns shuttered operating theatres, Healthscope’s core business—elective procedures—vanished almost overnight. With COVID-19 inpatient care largely absorbed by the public hospital system, private operators like Healthscope were left bereft of their primary revenue source. Bankruptcy-grade debt and unrelenting rent obligations set the stage for insolvency.
Bankers Abandon Ship: Debt Trades at Half-Price
By early 2025, Healthscope’s debt was trading in the secondary market at around 50 cents in the dollar. A syndicate of 27 banks, hedge funds and bondholders who once backed the leveraged buyout began offloading their positions. As liquidity dried up, Healthscope’s creditors lost patience, appointing McGrathNicol as receiver on Monday and effectively ending any hope of a government bail-out or refinancing deal.
Insurer Showdown: A Desperate Fee Gambit
In October 2024, Healthscope attempted to claw back revenue by imposing a “hospital facility fee” of up to A$100 per admission on insured patients. Private insurers cried foul, claiming the levy breached contractual agreements under private health cover. One major fund took Healthscope to court, prompting the hospital operator to tear up its insurance contracts entirely—a move that inflamed tensions and alienated its core payers.
Regulatory and Political Fallout
The collapse has spurred immediate political reactions. In New South Wales, Premier Chris Minns signaled that future public hospitals will never again be outsourced to private operators. “This is not a model of health care we should ever be doing in NSW ever again,” Health Minister Ryan Park declared, advancing “Joe’s Law” to protect critical services from private-sector mismanagement. Similar debates are stirring in Victoria and Queensland, where Healthscope provided sole mental health services in many regions.
The Human Cost: Staff, Patients and Communities
Healthscope treats some 650 000 patients annually and employs nearly 19 000 staff across Australia. While the receiver has assured that hospitals will remain open in the short term, workforce morale is at rock bottom after months of false starts on rent relief and insurer negotiations. Patients face uncertainty over elective surgery wait times, and vulnerable rural communities—such as Darwin, where Healthscope runs the only private hospital—brace for potential service reductions.
Expert Analysis: “A Sorry History of Contracts Gone Wrong”
Stephen Duckett, honorary professor at the University of Melbourne, argues that governments repeatedly over-trusted private operators and signed overly generous contracts. “They’ve trashed the joint and dropped the keys,” he says, noting that private equity firms often overestimate their ability to extract profit from healthcare. Economists warn that as costs rise, private hospitals may shutter unprofitable units, forcing more pressure onto public hospitals already stretched to the limit.
READ MORE: Healthscope Collapse Sparks Alarm Over Private Hospital Viability
Buyers on the Horizon: Break-Up and Asset Fire-Sale?
Receivers are weighing whether to sell Healthscope as a single entity or break it into regional clusters. HMC’s David Di Pilla reportedly pitched a bid for the entire portfolio even before receivership, while private health insurers—traditionally downstream payers—may see an opportunity to vertically integrate by acquiring selected hospitals. Such consolidation, however, raises competition and clinical governance concerns.
Lessons Learned: Aligning Profit Motives with Community Needs
The Healthscope saga underscores the delicate balance between shareholder returns and community welfare. Experts call for tighter regulation of rent-separate property trusts, mandatory minimum staffing ratios, and firmer oversight of fee structures. They also urge governments to build contractual safeguards preventing debt over-leverage and ensuring public interest overrides profit extraction.
What’s Next for Australia’s Private Hospital Sector?
Although Healthscope’s receivership marks its lowest point, the private hospital system in Australia—responsible for over two-thirds of elective surgeries—remains integral to national health care. Policymakers and industry stakeholders must collaborate on sustainable funding models, fair insurer-hospital contract negotiations, and judicious use of public-private partnerships. Only by learning from Healthscope’s high-stakes gamble and subsequent “trashing” can Australia safeguard private care’s role alongside its cherished public health system.
