Funding changes a threat for Primary Health
The Age
Friday March 12, 2010
INVESTORS in Primary Health Care are still reeling from a December half where it underperformed in all three of its major divisions. Now, research from Royal Bank of Scotland suggests that its largest business unit €” medical centres €” faces a new threat from likely Medicare funding changes.Enlisting nurses to take on some of the more straightforward responsibilities of doctors in medical clinics looks set to be the next government measure to cut the cost of primary care. This would see GPs focused on more complex patients, while a resulting reduction in the short appointments would reduce average Medicare fees earned by GPs.Any move to change the reimbursement structure of medical centres would follow reductions late last year in funding for a range of pathology services, highlighting the risks inherent in investing in medical businesses reliant on a particular funding regime.Healthcare analyst at RBS David Stanton has noted that the government recently introduced changes into Parliament to enable eligible nurse practitioners and midwives access to the Medicare Benefits Scheme and Pharmaceutical Benefits Scheme for the first time €” a necessary step if nurses are to bulk bill patients in medical centres.These proposed changes dovetail with a Rudd government commitment to establish 31 GP super clinics across the country over four years with a greater focus on illness prevention.Super clinics will offer privately practising GPs, together with allied health professionals and consulting suites for visiting specialists.Pharmacy and imaging services would either be co-located or available nearby.An increased role for nurses at these clinics could be part of the government's plan.While detail of any planned changes is yet to be released, Stanton is sufficiently concerned by the issue to reduce RBS's target price for Primary Health by 5 per cent.Never a dull momentEVEN the doubters have had trouble ignoring the coal seam gas (CSG) industry following Royal Dutch Shell and PetroChina's $3.3 billion takeover approach for Arrow Energy's domestic operations.But as if to prove that there's rarely a dull moment in the business of extracting energy from marginal coal seams, some forward-thinking analysts are already encouraging investors to keep an eye on technology that could largely displace the Queensland CSG industry €” underground coal gasification (UCG). According to a pre-Christmas note from Southern Cross Equities: "UCG is in its launch phase, however don't delay as lift-off is not too far away."Talk of the looming demise of CSG may seem premature given that the sector has existed for less than a decade, and the first CSG for LNG plant is yet to be constructed in Gladstone. Nevertheless, Stephen Bartrop, director of Lime Street Capital, sees a big shift towards UCG just around the corner.UCG is suited to the same coal tenements as CSG, but offers a more efficient process, extracting about 95 per cent of the energy in coal by burning coal with oxygen and steam below the ground. According to Bartrop, the UCG process "delivers 20 times the energy out of a coal seam than CSG technology".While UCG is increasingly garnering interest from investment markets as pioneers prove the viability of the technology, the Queensland licensing regime creates challenges for its rapid deployment. CSG extraction is permitted under petroleum licences while UCG requires a coalmining licence. The major gas companies that have been acquiring or joint-venturing tenements across Queensland typically own only petroleum licences, while coal licences over the same tenements may be owned by third parties.At present the Queensland government is giving priority to CSG operations, but this could change quickly if the owners of petroleum licences turn their attention to the UCG potential of their tenements and start striking deals with the coal licence owners.Leaders in the development of UCG include Linc Energy, Cougar Energy and Carbon Energy, with a combined market capitalisation of about $1.1 billion. Developments within each of these companies this year may underpin confidence in UCG technology, making it difficult for the CSG players to ignore the potential untapped energy that they would otherwise leave behind.Floats on holdWHEN Archer Capital delayed the float of the Rebel Sport chain in January, the official line was that private equiteers were waiting for retailers to release their summer sales figures before deciding whether to proceed with a stock exchange listing.Despite a reasonable reporting season that saw the likes of Super Cheap Auto Group and JB Hi-Fi turn in strong results, while Myer's profit beat expectations yesterday and Kathmandu Holdings is finally trading above its issue price from late last year, the word from the investment banks is that retail floats remain off the agenda.While private equity firms are uniformly keen to achieve exits from their investments made three to five years ago, it seems that retail conditions remain too uncertain for the market to support floats just yet. As a result, leading retail float candidates including Rebel Sport and Redbook, owner of the Borders and Angus & Robertson chains, won't be coming to market until late this year at the earliest.dsymons@fairfaxmedia.com.au
© 2010 The Age
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