The Ramsay Health Care Limited (ASX: RHC) share price was out of form on Wednesday.
Although the S&P/ASX 200 Index (ASX: XJO) raced higher, the private hospital operator’s shares tumbled sharply lower.
Ramsay’s shares were as much as 8.5% lower at one stage before finishing the day down 4% to $50.52.
Why did the Ramsay share price tumble lower?
After a positive start to the day, Ramsay’s shares started to tumble after it became apparent that the government would soon stop elective surgeries.
Elective surgery is hospital surgery that is scheduled in advance because it does not involve a medical emergency.
According to the ABC, non-urgent elective surgeries in Australia’s public and private hospitals will be banned from midnight on Wednesday in a bid to preserve the healthcare system to respond to the coronavirus pandemic.
This comes at a time when hospitals across Australia prepare for an influx of patients infected with the coronavirus.
The media outlet understands that staff at a major Sydney hospital have been learning how to use ventilators and mechanical ventilation devices through online training modules in preparation.
In addition to this, the government is drafting in help from all corners of the healthcare sector to deal with what could soon be a widespread emergency. Physiotherapists are understood to be being re-trained in critical care procedures and general practitioners are being placed into special COVID-19 response teams.
What does this mean for Ramsay?
Elective surgeries are the bread and butter of the private hospital industry. So, the temporary ban on non-urgent elective surgeries could hit the company’s bottom line in the short term.
Though, the company did warn that this could be the case last week when it released a trading update and withdrew its guidance.
Managing director Craig McNally explained: “As the number of COVID-19 cases continues to escalate, we will see an impact on private volumes for the short term. However, in some cases, we are seeing decisions to fast-track elective surgery in order to minimise any future potential disruption.”
“As in other regions, Ramsay’s Australian hospitals are also willing to assist the public health sector in each jurisdiction, to ease the surgical burden on the public health system, to undertake urgent and elective surgery, as well as provide capacity to cater for COVID-19 patients if required,” it added.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended 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.