The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Doctors Hospital has written-off $573,000 in architectural drawing fees after deciding not to proceed with a “major renovation” investment at its main Collins Avenue facility.

The BISX-listed healthcare provider’s 2016 annual report reveals that it has “permanently put this project on hold”, given that it was “not feasible at this time”.

The newly-released annual report provides no details on the ‘renovation investment’, but it indicates the project has been on the so-called drawing board for at least six years.

“Architectural drawing fees in the amount of $573,000 that were completed in 2010, and held in ‘work in progress’ pending the major renovation, were written-off,” Doctors Hospital wrote under the heading ‘loss on disposal of fixed asset’.

“It was decided to permanently put this project on hold as the investment to expand is not feasible at this time.”

Tribune Business’s files suggest this likely refers to plans that potentially involved adding a further two stories to Doctors Hospital’s main Collins Avenue facility.

Barry Rassin, the company’s then-president, told this newspaper in a January 2011 interview that the expansion/renovation would not proceed until the Bahamian and world economy was “back on track”.

He explained that the BISX-listed healthcare provider’s strategy for its proposed expansion was to complete the architectural and engineering plans, get the financing in place, obtain all government approvals, and have the construction contract out to bid, then wait for the economy to recover.

Doctors Hospital’s 2016 annual report gave no explanation for why the company has chosen to place such a “major renovation” on permanent hold, but some observers are likely to interpret it as a further sign of ‘no confidence’ in the Bahamas’ economic prospects.

There was better news, though, for Doctors Hospital shareholders, as the company’s performance for the 12 months to end-January 2016 produced a $1.463 million ‘swing’ into profitability.

The BISX-listed firm generated consolidated net income of $702,790, or $0.07 per share, compared to a loss of $759,573 or $0.08 per share for the year-before period.

The improvement was driven by an improved showing from its main Collins Avenue facility, held under Doctors Hospital (Bahamas), where net income more than doubled year-over-year.

Profits grew by 165.7 per cent, rising from $698,428 to $1.856 million, which was more than enough to offset the latest loss from the company’s Blake Road-based Bahamas Medical Centre.

That facility, featuring specialist procedures targeted at the medical tourism/international patient market, cut its losses by 21 per cent year-over-year - down from $1.458 million to $1.153 million.

While some shareholders may view the Bahamas Medical Centre as a drain on their returns, this has largely been due to the long wait/delays for Government approvals for the various surgeries it wishes to offer.

Joe Krukowski, Doctors Hospital’s chairman, told investors that the company’s joint venture with the UK-based Taymount Clinic had enabled it in 2015 to add a treatment programme for gastrointestinal and neurological conditions.

“Doctors Hospital Health Systems has a number of other exciting programmes set to commence in the coming year, having gone through the necessary series of approvals,” he wrote in the annual report.

“With our International Patient Programme housed at Bahamas Medical Centre, we continue to explore opportunities to add programmes that will not only serve the local patient community, but attract patients from overseas.”

However, the annual report’s ‘management analysis’ revealed the extent to which approval delays have impacted the Bahamas Medical Centre’s patient offerings and financial performance.

Referring to the Taymount Clinic joint venture, it said: “Approval for the FMT (Fecal Microbiota Transplant) programme was finally received in November, two months prior to year-end.

“Therefore, expected revenues did not materialise. Provisional approval was officially received in April 2016 for specific stem cell therapy, and is expected to impact revenue numbers next year.

“There are two more stem cell programmes awaiting the June 2016 meeting of the Government committee, and a new cancer programme awaiting approval.”

Thus better days potentially lie ahead for Doctors Hospital and its Blake Road facility, which saw its total revenues for the 12 months to end-January 2016 grow by 2.9 per cent to $1.434 million.

The Bahamas Medical Centre’s expenses were down year-over-year by $266,390 or 8.6 per cent, falling from $3.085 million to $2.819 million, due to “a concentrated effort to reduce operating costs until planned revenues can be realised”.

Mr Krukowski, meanwhile, said Doctors Hospital Health Systems (DHHS) “foresee some interesting opportunities” ahead stemming from the Government’s proposed National Health Insurance (NHI) scheme.

While providing no specifics on these “opportunities”, Mr Krukowski added that Value-Added Tax (VAT) had forced Doctors Hospital to “redefine” its billing process, including the ‘unbundling’ of its fees from those charged by physicians.

“The introduction of VAT in 2015 required Doctors Hospital Health Systems to redefine our billing process,” he wrote.

“In addition to the new challenges most businesses faced in ensuring VAT compliance, VAT dictated that we could no longer continue to bundle our billing to include our fees as well as those of the physicians who provide services at our facilities.

“Our finance team and our physician community were able to accomplish this major change in operations with no disruption to our patients.”

Doctors Hospital is planning $4 million worth of capital expenditure in its upcoming 2017 financial year, which will be allocated towards equipment replacement and facilities improvement.

Looking back at 2016, revenues at the company’s core Collins Avenue facilities increased by 4.9 per cent or $2.238 million, providing a key boost that drove the return to profitability.

“Patient days increased by 6.9 per cent from the previous year. Increases in the Intensive and Intermediary Care Units accounted for 91 per cent of the change,” Doctors Hospital’s annual report said.

“Total admissions to the facility were 4,063 in fiscal 2016 compared to 4,061 in fiscal 2015. The flat admission numbers and increased patient days are indicative of the higher utilisation of the Intensive Care Units.

“The average daily census increased to 31.2 patients per days from 29.2 in the previous year.”

Doctors Hospital saw its total expenses increase by 2.4 per cent or $1.103 million in financial year 2016.

That figure was exceeded by the $1.502 million rise in salaries and benefits, some 73 per cent of which was for the hiring of radiologists. Medical supplies costs jumped by 6.5 per cent or $439,848 last year, due to increased volumes.

Doctors Hospital attributed an increase in self-paying patients, requiring critical care, to the rise in bad debt expense during the 2016 financial year.

“Bad debt expense, as a percentage of patient service revenues, increased to 3.4 per cent for the year ended January 31, 2016, compared to 2.9 per cent the previous year,” the annual report said. “This represented an increase of $ 317,454, or 23.3 per cent.

“The number of days revenue in accounts receivable at year-end (AR Days) for fiscal 2016 stand at 43 compared with fiscal 2015 at 44 days, and net receivables as a percentage of net patient revenue decreased slightly to 11.77 per cent from 12.13 per cent.”

Doctors Hospital employed some $2.9 million worth of net cash for investment purposes in financial year 2016, compared to $2.5 million the year before.