👉 Background: Healthscope is one of Australia’s biggest private hospital operators, with over 37 hospitals and over 19,000 staff. While Healthscope was previously listed on the ASX, it was acquired by private equity giant Brookfield in 2019 for a lazy $4.1 billion.

👉 What happened: Now, Healthscope has gone into receivership as it struggled to keep its finances afloat. It blamed three key issues:

• It was carrying too much debt - we’re talking $1.4 billion
• It was paying huge rents on the hospital premises
• It claimed that the amount private health insurers pay to private hospitals is too low
  

Next minute, Healthscope appointed receivers to sell off the 37 hospitals.

👉 What else: In the meantime, CommBank has thrown Healthscope an extra $100 million to keep the lights on and the scalpels clean. The Federal government has said that a bailout isn't going to happen under any conditions - particularly because these are private hospitals owned by a private equity giant.

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What's the key learning?

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💡When private equity enters sectors like healthcare, education or aged care, things can get messy because the goal of private equity is about maximising financial returns.

💡The typical private equity play is:

• Buy a company (often with a lot of debt)
• Try to make the company more profitable through cost-cutting or price rises or restructuring
• Sell the company for a gain

💡When you apply that profit-focused model to healthcare, things can start to unravel, because healthcare should be focused primarily on better patient outcomes. Thankfully, Healthscope's receivers say there are up to 10 companies already sending offers to the receivers.