The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

DOCTORS Hospital is eying a $1 million hit to its bottom line if health care remains exempt from Value-Added-Tax (VAT), its chief financial officer telling Tribune Business yesterday there was “no getting around” an overall increase in healthcare costs.

Joanne Lowe told Tribune Business: “Prices will increase, there is no getting around that. What the percentage will be we don’t know until we get more details about the tax.

“Being VAT ‘exempt’ would mean almost $1 million in expenses that would go to our bottom line and we would have to increase fees to cover it. That $1 million does not take into account all of the vendors that we deal with and how much their prices are going to go up.”

The BISX-listed healthcare provider’s chief financial officer added: “Seventy per cent of that would be services like lawyers fees, all of the utilities and any outsourcing of services like security, bank charges, audit fees.”

With ‘health and education services’ having been proposed as VAT exempt, it would mean that Doctors Hospital and other health-care providers will not be charging the tax on their patient billings. But, on the down side, they will be unable to recover the VAT paid on their inputs, hence the rise in Doctors Hospital’s costs.

It remains to be seen what changes the Government ultimately makes to the VAT legislation. Tax experts from New Zealand recently suggested a ‘one rate’ no exemptions’ framework to keep the rate as low as possible, and the tax base as broad as possible.

Ms Lowe questioned whether the state-funded Princess Margaret Hospital would also incur similar costs as private healthcare providers under VAT.

“If the intention of the Government is not to increase the cost of healthcare, I’m not sure what they would do, but it’s definitely going to go up, which means your insurance would go up which is already high” she said.

Mrs Lowe said business volumes at Doctors Hospital were down roughly 10 per cent compared to last year. “We’re slow. We’re probably about 10 per cent below last year overallm,” she told Tribune Business.

“We’re finding that in the critical areas, the patients just don’t seem to be there. We just think it’s an issue where people are not that sick. We are definitely lower than last year. The winter season is usually the season where people get sicker, but that doesn’t seem to be the case this year.”