Pathology is the biggest revenue earner for Primary, delivering $785 million 56% of this year’s revenue – up 5.7% from last year’s result.
The company continued to cut costs and capital expenditure in 2011-12. It only opened one new medical centre, however it continued its program of buying small general practices. Its goal is to buy 130 a year; it spent $50 million buying 105 general practices over the period.
Primary’s model is to buy small practices with a big upfront payment (typically around $500,000) and then for the GPs to work in the business for the next five years, receiving a percentage of their billings.
The company’s largest medical centres grew fastest – across its 57 large centres the growth rate was 12%. Its 19 small-scales centres – the results of its $2.2 billion purchase of rival Symbion in March 2008 – has been much slower, at 5%.
When Primary merged with Symbion Health in 2008, Symbion had revenue of $3.8 billion, 14 times the size of Primary’s.
The merger put Primary into the big league, adding 80 pathology labs, 54 medical centres and 130 radiology sites. Although Bateman immediately turned around and sold off two divisions, which generated an estimated $2.8 billion revenue for $1.065 billion, and had had to close some sites and rationalise other. The move put Primary into serious contention as a rival to listed hospital manager, Healthscope, which was overthrown in its bid to buy Symbion in a bitter, year-long struggle against Bateman.
Bateman’s model has always drawn criticism from doctors, who say it is too focused on billing and not enough on patient care. Bateman has always disputed this, saying Primary releases doctors from the business demands of practice so they can focus on patients. In support of his case, Bateman quotes a retention rate of 93% of GPs in the large practices. He also points out that small practices are increasingly unprofitable, driving doctors who are nearing retirement to sell.
Bateman has proved his ability to manage his now-enormous health care business, stare down doubters and solve problems as they arise. Now all he has to do is do it again this year.
