Ann: Trading update, page-2

Oh dear... this is getting ugly. Their #1 problem going forward as I mentioned in past posts is likely to be GP recruitment and retention. They started the year lower than expected as they recruited and retained less than expected. Lower retention would not be surprising given the tax dramas they had in the last year, which would have left a sour taste for a lot of their GPs, notwithstanding the eventual settlement. Forget the references to Medicare rebate freezes - the rebates have barely moved in years, as revenue growth is more dependent on volume growth which is dependent on GPs seeing more patients (and working more productively), and fundamentally before this, this is about having enough GPs in consulting rooms to see those patients (as there is really no shortage of patients getting older and getting sicker). Unfortunately less GPs seeing less patients (and working less productively) then has downstream effects on pathology and radiology. So in some ways it is not surprising to see all three go down in tandem, notwithstanding their references to item number changes and regulatory uncertainty. How flexible their flexible recruitment strategy really is will be crucial in any potential turnaround... though this could be sometime away.