Healthscope healthy over the long term

Founder and Chief Investment Officer of Montgomery Investment Management
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Australia’s population is ageing, yet the public and private hospital systems are growing at very different speeds. Public hospital beds grew by 1% each year between 2010 and 2014, compared to 3% annual growth in the private system. Increasing demand for hospital care will flow to operators that are expanding capacity, which means that major private hospital companies like Healthscope (ASX: HSO) and Ramsay Health Care (ASX: RHC) are well placed to grow earnings over the long term.

Ramsay Health Care is the larger and more profitable operator of the two companies, but Healthscope is a quality operator in its own right. The market may not fully appreciate this though because of the company’s chequered history.

Healthscope previously tried to position itself as a healthcare conglomerate. The group had interests in hospitals, pathology and medical centres, and also tried to enter the aged care market but the attempt was blocked by shareholders.

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