Jessica Fox & Holly Bailey on sport, leadership, and redefining 'playing like a girl'. Listen now
A panel of our industry leaders was convened to discuss the key issues that need to be considered by each subsector:
There has been a recent rapid transformation in primary healthcare, driven by technology, AI, and telehealth. The fast development of AI tools like ‘Heidi Health’ is automating doctor's transcription, and therefore freeing up doctors to focus on patient services. Digital platforms and telehealth are enabling easier access to healthcare, especially for managing chronic diseases and for people in rural areas. Consolidation is strong in the market, with private equity firms looking to invest in the sector. Valuation metrics for medical practices go beyond financial performance and include billing mix, patient loyalty, practitioner productivity, and sustainability. Government policies, particularly Medicare bulk billing incentives, play a crucial role in shaping the sector.
The rising cost of living is having an impact on GP visits, and there is flow-on effect into specialist practices and private hospitals. There is a noticeable overall reduction in GP visits, leading to fewer specialist referrals and subsequent hospital procedures. Private hospital closures are increasing and are being driven by demographic factors and changes in private health insurer behaviours. There is a shift towards day procedures and in-home rehab, which is more profitable for some hospitals. The sector faces challenges from increasing costs, labour shortages, and the need for efficient use of technology. A key shift in the sector is the move towards “consumables” supply financing for advanced diagnostic equipment, resulting in higher debt positions for practices. Lenders need to be conscious of these arrangements in considering debt exposures.
The pharmaceuticals sector in on notice that consolidation is more likely, highlighted by the recent merger between Chemist Warehouse Group and Sigma Healthcare Limited. Successful pharmacies benefit from co-location with GP practices and other amenities that attract older Australians. Increasingly, wholesale suppliers are having greater influence over products being sold, leading to greater market power.
Diagnostic services face challenges from the financing of expensive equipment and keeping up with technological innovations.
The dental sector is experiencing consolidation, with larger providers looking to acquire smaller practices. Older Australians are increasingly skipping dental appointments, which may be due to social isolation and difficulty accessing services. There is potential for dental health to be included in Medicare, which could provide a boost to the sector.
Allied health practices are of interest to consolidators, however the exposure to the NDIS and resulting price setting, has dampened profitability a little.
The Aged Care sector has been experiencing significant reforms such as the new Aged Care Act set to take effect from July 2025¹. Key changes include larger means-tested contributions from new residents, higher maximum room prices, and retention of a portion of accommodation deposits by providers. The Aged Care Financial and Prudential Standards 2025 introduce a mandated minimum liquidity requirement, which has been criticised for not accurately reflecting financial risk. The draft standards are being reviewed in light of this consultation and feedback, with a revised approach about to be released. The ‘Support at Home’ program aims to simplify access to home care services but faces challenges in implementation, with consumers needing to be consulted on the changes they are facing, software vendors having to adapt their products in short timeframes and impacts on financial performance. Workforce shortages and increasing costs remain significant issues, although government funding for pay rises is expected to improve retention.
Within the specialist disability accommodation (SDA) and the broader disability sector there are a raft of risks, but also opportunities for astute bankers. SDA investments are lucrative but face challenges from tenancy risk and the need for efficient service delivery. The broader service sector is experiencing margin compression, requiring providers to be highly efficient and to leverage technology for operational excellence. Recent high profile failures should not be taken as the norm for sustainable businesses in this sector.
Lenders are faced with multiple concerns when providing financial products to health service and aged care providers. There is increasing importance for lenders to understand the intricacies of each of the sub-sectors and how best to leverage internal and external expertise for successful lending and investment. The sector is undergoing significant change, presenting both challenges and opportunities for lenders, service providers and investors – let us help you explore the benefits for your business.
¹On 5 June 2025, Minister Butler announced the deferral of the implementation of the new Act until November 2025.
