Wakefield Health produced a solid result for the year ended March 2012 but its long-term future will be highly dependent on its ability to attract private patients.

The company’s recently released FY12 result showed that revenue increased by 5.3%, from $36.7m in the March 2011 period to $38.7m in the latest period. Its revenue is made up of approximately 30% ACC and DHB work and 70% private which reveals its heavy reliance on private patient funding.

The hospital operator’s adjusted net profit rose by 27.1%, from $5.1m to $6.5m.

One of the challenges facing the company is that private health insurance numbers are falling.

In December 2006, New Zealand had a population of 4.03 million, of which 1.37 million or 34.0% had private health insurance. In December 2011, the private health insurance number had dropped to 1.35 million or only 30.7% of the population. If this trend of decline in private health insurance continues, it will not be a good sign for private health providers in NZ.

Since the end of 2006 Australian private health insurance members have risen from 8.9 million or 43.4% of the population to 12.1 million or 53.1% of the population at present.  This figure is higher in Australia because of the tax rebate incentives.

It would be great to see some incentives for private health insurance introduced in this weeks budget but this looks unlikely with the NZ Government’s current cost-cutting measures.

Victoria Harris

Disclosure of Interest: Milford Funds own shares in Wakefield Health.