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Ramsay Health Care Limited (ASX:RHC) shares are down over 5% this week

It has been another disappointing week for the Ramsay Health Care Limited (ASX: RHC) share price.

With the private hospital operator’s shares down 2% today, its week-to-date decline is now 5.5%.

Why are Ramsay Health Care’s shares on the decline?

Investors have been heading to the exits in their droves this week after one of its rivals in the UK warned about tough trading conditions.

Overnight on Monday the shares of UK private hospital group Spire Healthcare fell sharply after it warned that its earnings were going to be materially lower this year because of National Health Service spending cuts.

According to the Financial Times, private hospitals in the country have been struggling from NHS cutbacks and the relaxation of rules on patient waiting times.

NHS hospitals are no longer being fined for failing to treat patients within 18 weeks. This has resulted in a meaningful decline in the number of people referred to the private sector.

In addition to this, insurers have been restricting claims to cut costs and, like in Australia, weakness in private health insurance participation levels has weighed on the market.

Should you buy the dip?

While Ramsay’s UK business is only a small part of its overall revenue, this weakness is yet another thing that could drag on its performance over the medium term.

Because of this I am sceptical that it will be able to generate enough growth to justify the premium that its shares are trading at today. And while it could generate growth organically through brownfield expansions or acquisitions, I don’t think it will be enough to offset the underperformance of its core Australian business.

In light of this, I would suggest investors skip Ramsay and focus on other healthcare shares such as Cochlear Limited (ASX: COH) and CSL Limited (ASX: CSL).

Alternatively, these top growth shares could be even better investments in FY 2019.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Cochlear Ltd. and Ramsay Health Care Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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