Ramsay Health Care share price jumps on government guarantee news

The Ramsay Health Care Limited (ASX: RHC) share price has jumped on news the Australian Government has offered a viability guarantee to the private health sector during the coronavirus pandemic.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Ramsay Health Care Limited (ASX: RHC) share price has jumped more than 4% at the time of writing, after the private healthcare provider reported the Australian Government has offered a viability guarantee to the private health sector during the coronavirus pandemic.

Private hospitals to fight COVID-19

Private hospitals have suffered with the cancellation of elective surgeries, but are now being drafted into the government's COVID-19 response plan. The Australian Government has agreed to guarantee the viability of private hospitals in return for their assistance in managing the coronavirus outbreak. Ramsay Health Care has confirmed it is in discussions with Australian Governments regarding the provision of support for government coronavirus responses.

All states and territories will complete COVID-19 partnership agreements with private hospitals, which outline activity requirements. The Australian Government will contribute 50% of funding towards this activity. Private hospitals are expected to retain capacity for responding to the pandemic with the expectation they will resume normal operations when the pandemic ends. 

Private hospitals will be required to retain workforces for the operation of their facilities and for redeployment across the health system at the direction of government. The viability guarantee also requires private hospitals to make infrastructure, equipment, supplies, and other capabilities fully available to Australian governments for use in the COVID-19 response and non-COVID-19 activities. 

Ramsay shares jump on federal financial assistance 

Financial assistance provided by the federal government to private hospitals will take into account payments from states and territories and for privately funded services. The agreement is intended to contribute to the ongoing viability of private hospitals, not profits or debt repayments. 

Private hospitals will also be required to integrate with state and territory health systems for use in the COVID-19 response, as directed by state and territory or Commonwealth health ministers. The guarantee is designed to ensure continuity of private hospital capacity during the pandemic and enable the sector to resume business as usual activities once the pandemic has ended. 

The Ramsay Health Care share price is currently up by 4.78% to $61.12 per share at the time of writing.

Previous impacts

Ramsay Health previously withdrew its full year earnings guidance as a result of uncertainty surrounding the impacts of coronavirus. The spread of coronavirus in Europe has required surgeries to be deferred as governments seek extraordinary support from private operators such as Ramsay to deal with capacity requirements.

Previously, elective surgeries had been fast-tracked to minimise potential future disruption, but have since been cancelled in a number of jurisdictions. Ramsay Health Care has reassured the market that it has headroom in existing debt facilities, with the earliest not due to expire until October 2022.

Now the private hospital operator looks set to be drafted into the coronavirus fight, but will benefit from government backing.

Motley Fool contributor Kate O'Brien 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.

More on Coronavirus News

Man with his hand on his face looking at a falling share price chart on a tablet.
Share Market News

ASX 200 stocks dive 2.4% in worst trading day since Ukraine crisis hit

It's not a good start to the week for the market.

Read more »

A woman looks nervous and uncertain holding a hand to her chin while looking at a paper cut out of a plane that she's holding in her other hand. representing the falling Air New Zealand share price today
Travel Shares

Borders just reopened so why is the Flight Centre (ASX:FLT) share price falling today?

Experts believe it may take several years for tourism levels to rebound to pre-pandemic numbers.

Read more »

A worker in hi vis gear holds his hand up saying no.
Coronavirus News

Own BHP (ASX:BHP) shares? Here's how the ASX 200 miner is battling COVID

Mining unions have not generally supported mandatory vaccinations.

Read more »

Female worker sitting desk with head in hand and looking fed up
Coronavirus News

Here's what Rio Tinto (ASX:RIO) boss says is 'causing some challenges' right now

The Omicron variant is spreading in Western Australia.

Read more »

A man wearing a mask punches the air with joy after getting a negative COVID result on a rapid antigen test.
Coronavirus News

Why are ASX COVID test shares climbing today?

COVID-19 tests are in focus again today.

Read more »

a girl stands in an apple orchard holding two red apples in raised arms with a happy, celebratory look on her face with a large smile and a pretty country background to the picture.
Economy

CBA reveals the Australian economy's leading state amid COVID surge

The states and territories have all been impacted by the pandemic.

Read more »

Rapid Antigen Test taking place.
Share Market News

Why is Ellume hitting headlines today?

Brisbane-based diagnostics developer Ellume is back in the headlines.

Read more »

A woman looks quizzical as she looks at a graph of the share market.
Share Market News

Inghams (ASX:ING) share price sinks as Omicron bites

Inghams shares are down as COVID hurts its operations.

Read more »