The Tribune

• Hospital sees ‘strong returns’ on $6.6m investments

• COVID care end drops profits 94% or by near-$27m

• But efficiency rate now ‘trending north of 10%’ in ‘24

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Doctors Hospital yesterday predicted it will “double” total pre-COVID revenues to around $120m during its current financial year after enjoying “instant payback” on $6.6m in healthcare investments.

Dennis Deveaux, the BISX-listed company’s chief financial officer, told Tribune Business it is already generating “strong” returns on facilities such as its new clinics in Carmichael and Eight Mile Rock, plus The Pointe’s pharmacy, which he described as a “resounding vote of confidence” in its drive to expand quality healthcare throughout The Bahamas.

Speaking after Doctors Hospital’s results for the 12 months to end-January 2023 revealed a 93.5 percent profits decline, as the boost provided by COVID-related care came to an end, he nevertheless added that net income “would have more than doubled compared to pre-pandemic” if the “one-off” investments associated with new facilities were stripped out of the figures.

Mr Deveaux told this newspaper that the healthcare provider’s main efficiency benchmark, the return on sales that measures how much of each dollar in revenue drops to the bottom line, was “trending north of 10 percent” during the first quarter of its current 2024 financial year as compared to the 6.8 percent achieved pre-COVID.

Pointing out that Doctors Hospital had also achieved its target of containing staff salaries and benefits to 40 percent or less of total revenues, he added that the EY (Ernst & Young) accounting firm had also “helped us with some significant productivity improvements” that will boost the company’s operations and results moving forward.

And, reaffirming that the healthcare provider is on track to open its $25m-$30m Grand Bahama hospital by fall 2024 at latest, Mr Deveaux said shareholders can take confidence from the company’s expectation that “we expect to deliver the construction part on budget” with just shy of $10m invested to-date.

“What I can foreshadow is that we think is 2024, the current financial year we’re in, is going to represent a doubling of the size of Doctors Hospital relative to its pre-COVID revenue statement,” the chief financial officer told Tribune Business. “Without giving concrete details, I think we can kind of foreshadow what our expectations are for the full year. That’s a strong signal to the market regarding the uptick in our services.”

“We expect a very, very strong 2024, and revenues are likely to be twice what they were compared to the pre-COVID baseline. I think that would represent a doubling of our size, and there’s nothing we see to suggest that is not likely.”

Mr Deveaux said Doctors Hospital’s annual revenues pre-COVID had reached $60.8m, meaning that the projected “doubling” would take this year’s top-line to around $120m even in the absence of pandemic-related care that provided a major boost to the company’s financial performance during the two financial years prior to 2023.

With COVID testing no longer mandatory, and its Bahamas Medical Centre facility at Blake Road no longer required for the treatment of virus-stricken patients, Doctors Hospital’s profits declined by almost $27m year-over-year - falling to $1.855m from $28.671m. This was driven entirely by the decline in total revenues, which fell by 21.2 percent year-over-year from $128.362m to $101.203m, as expenses actually dropped by almost $650,000.

“Our top-line reflects a return to post-COVID normality,” Mr Deveaux said of the 2023 results, “but our bottom line reflects a period of significant investment in the future of healthcare in the country with $6.6m invested in fiscal 2023. We thought it was important to put back into the future infrastructure of Doctors Hospital.

“A couple of them, which will feature in the annual report, is we’ve invested in a new electronic health record system so that wherever people are in the country, and they go into a Doctors Hospital facility, we’re able to find out what is happening to them and can see what is happening to them.

“We’ve opened our inaugural facility in Grand Bahama in fiscal 2023, the Kavala Medical Centre in Eight Mile Rock. We established a new clinic in Carmichael, we put a brand new pharmacy in at The Pointe in anticipation of the new cruise port, and we put a clinic in the basement at Baha Mar to serve the needs of guests and staff. It’s part of the core infrastructure for Baha Mar,” he added.

“Our fiscal 2023 revenue is north of $100m, and pre-COVID it was $60.8m. It’s a fairly significant jump, post-COVID versus pre-COVID, based on the investments we have made. The most important is the electronic health record. Our timeline to fairly robust revenues has been, in all our facilities, almost instant. As an example, at The Pointe, our revenue curve was almost instant.

“We see demand for our services continuing to grow, and we are seeing an immediate response in terms of usage of these facilities right when they’ve opened, so the return on investment has been strong and the payback time really short. It’s a validation of the investments themselves, and it’s something we’re going to double down on going into 2024 and beyond,” Mr Deveaux continued.

“It is definitely exceeding the projections we would have had initially, and just tying that to higher demand for healthcare services. We believe it’s a resounding vote of confidence in Doctor’s Hospital and what it has done to invest in private, quality medicine in the country.”

Mr Deveaux revealed that Doctors Hospital had last week opened an “urgent care facility” on Freeport’s West Mall Drive to serve the downtown area as a seven-day operation that will meet healthcare demand ahead of the opening of Grand Bahama’s new hospital.

Turning to the hospital, which will be located in Freeport’s First Commercial Centre, he told Tribune Business: “We continue to plug along. We want to foreshadow that the opening of the Grand Bahama Hospital will take place in the summer or fall of next year, likely in the fall.

“Importantly, we are on budget, although we have made concessions to the schedule. The project itself is on budget because of the significant investment we did in planning on the front-end. We took about 18 months to plan that hospital with Veritas and The Architects Incorporated. Our latest projection is that we estimate the hospital is right on budget.

“The budget for the whole hospital is between $25m-$30m, and we continue to hold to that. We’re approaching roughly $10m invested to-date; it’s not an exact figure, and is probably a little lower than that, but it’s approximately a $10m investment in construction and equipment,” Mr Deveaux said.

“The construction part, we expect to deliver that on budget. That’s important for the confidence of the shareholders. Investors want to know that, for a big project, you are able to deliver it within a reasonable range of what it costs and all indications point to us being able to do that.”

Doctors Hospital’s financial chief said that if all the “one-off”, non-recurring spending associated with its $6.6m investments was removed from the 2023 financials “our actual profit level would have more than doubled compared to pre-COVID”.

He added: “The return on sales is just under 8.4-8.5 percent. This demonstrates a level of efficiency relative to pre-COVID. We’ve grown the top-line from $60m to north of $100m, and when you pull-out the one-time expenditures we’ve grown our efficiency. 

“My measure of efficiency is return on sales; for every dollar of revenue, what do you net in profit? Pre-COVID we were just north of 6.8 percent. If you look at our post-COVID, we’re now well north of 8.3 percent. Our efficiency rate in the 2024 first quarter is trending north of 10 percent if we measure efficiency with return on sales.”

Mr Deveaux added that Doctors Hospital has largely been able to contain inflationary pressures apart from food costs, as it has absorbed some of the price increases to avoid passing these on to staff in their daily meals. As for staff wages and benefits, these fell by $4.65m year-over-year from $43.369m in 2022 to $39.004m, inside the target ‘40 percent of sales’ ratio.

“We continue to hold the line,” he said. “Our target is to be at or above the market in terms of wages. We continue to assess our salary scales throughout the year. It’s not done annually; it’s done throughout the year, and we make adjustments appropriately based on what is happening in the market.

“A key metric for us is keeping salaries and personnel costs at less than 40 percent of revenues. We also engaged EY, and they helped us with some significant productivity improvements. I think wage inflation is one side of the story, and you have to be competitive, and the other side is productivity. We have to look at both.”