HSO takeover offer will be huge for Ramsay, page-115

Maybe Credit Suisse has something to do with the RHC SP decline:
See Article in The Australian titled "Surgeons’ fees one reason why consumers are fleeing private health: Credit Suisse
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Credit Suisse highlighted that anaesthetic charges were calculated on a unit basis, based on complexity and time factors. The analysts said that similar to the surgeon’s cost, the industry standard unit fee for anaesthetic fees had grown ahead of Medicare and health fund rebates and was 4.2 times the Medicare rate and 2.5 times the average health fund rebate.
“In our view, the market is underestimating the declining utilisation of private health insurance and the rate at which out-of-pocket surgery costs should continue to grow without government reforms, driving more patients into the public system,” the Credit Suisse team said in the client note.
The investment bank also said the proportion of people with exclusionary health insurance policies had risen to 42 per cent in the first quarter of 2018 and that the proportion of people with a policy containing an excess reached 85 per cent.
“This decline in health cover results in privately insured people not being covered for all surgeries, forcing some patients into the public system for high-end elective surgeries,” the analysts said.
“In our view, this has been a key reason for the deterioration in the casemix for private hospital operators.”
The analysts added that more recently, at the margin, private patients were opting to use their insurance in an elective setting by joining public hospital waiting lists rather than undergoing their procedure in the private sector because public hospitals cover certain costs.
The private healthcare sector and the federal government have raised concerns about the increase in private patients being treated in a public setting and the pressure that would put on public hospital waiting lists.
The Credit Suisse report noted that its analysts had assessed the capacity of Australia’s public hospital system to meet the increased demand from switching private patients.
“Under base case assumptions, we calculate a 3 per cent bed deficit by 2022-2023. This is unlikely large enough to incite any significant reforms in the near-to-medium term, causing increasing pressure on public elective surgical waiting lists,” the analyst said.
“The federal government is concerned about the rise in private patients being treated by public hospitals …. but there have been no government policies put in place to stop or limit the shift of private patients into public hospitals.”
The healthcare analysts said the structural decline in patients being treated in a private hospital should continue to weigh on private hospitals’ revenue and margin performance, adding that the market was underestimating the long-term downside to Ramsay Healthcare and Healthscope.
Credit Suisse has downgraded its rating on Ramsay to underperform, from neutral, and reduced its target price to $56.50 from $68.60.
“While we do see Ramsay being able to continue to attract a more complex case mix versus other private hospital operators, in our view, it would not be immune to the structural slowdown,” the report said.