Stories
The Blackrock Clinic, which Larry Goodman took full control over last year, is in rude financial health.
In accounts recently filed for 2019 the hospital earned €8.9 million on €136 million of revenue.
By comparison, in its most recent 2018 accounts, St Vincent’s private hospital in South Dublin (Ireland’s biggest by revenue) had €448 million in revenue but earned only €1.5 million in profit.
St Vincent’s tight margins would be typical of the Irish private hospital industry. Of the big seven hospital companies, the average net margin is a negative 1.2 per cent.
The Goodman-owned hospitals are generally the most profitable. Blackrock has the biggest net margin (6.5 per cent in 2019). The Galway Clinic has the second biggest net margin (5.3 per cent). And the Hermitage ranks fourth (0.9 per cent).
The Blackrock Clinic does well judged by the absolute level of profit it made in 2019, and by its margin. Another way of looking at it is cash — how much cash did the operating business generate? In the case of Blackrock, the number is quite a bit higher than its net profit. That’s because, hospitals being expensive to build and maintain, there’s a lot of capex to be done. Since 2009, the Blackrock Clinic has invested €152 million. The company says its increased profits this year are a result of increased capacity after investments in previous years.
This shows up as depreciation on the income statement. If you leave out non-cash charges (mainly depreciation), Blackrock generated €17.8 million in operating cash flow in 2019. That’s more than at any other hospital company in Ireland, despite Blackrock being the third biggest by revenue.
The only issue with The Blackrock Clinic’s 2019 accounts is its pension liability. The company ran a defined-benefit pension up to 2006, in which it guaranteed its employees a fixed sum in retirement. Every three years, the company reassesses the size of that pension liability, and it did so in 2019. The new pension liability shakes out as an €8.8 million charge on the income statement, which isn’t included in the €8.9 million net income figure.
In a note, The Blackrock Clinic explained its role in dealing with Covid after March of this year. Under the deal struck between the Private Hospital Association and the HSE, The Blackrock Clinic gave over its full capacity for three months. It handled acute surgeries on behalf of the public hospitals, leaving them free to deal with Covid.
Bigger, more profitable
My colleague Tom Lyons reported two weeks ago that Goodman is beginning the process of formally combining the three hospitals. He has formed a new board to oversee them. It’s to be chaired by former Blackrock Clinic CEO Bryan Harty, and Dr Caroline Whelan will serve as CEO.
The consolidation has been made possible because Goodman took full control over the Blackrock Clinic, Galway Clinic and Hermitage hospitals in the last year. In late 2019 he bought the remaining stake in the Galway Clinic, and in July of this year he took full control of the Hermitage and Blackrock Clinics. This followed a long court battle between Larry Goodman and Joseph Sheehan, one of the hospital’s co-founders, over control of the company.
Combining the hospitals should make them more profitable. The following chart from Citi Healthcare shows operating margins at hospital groups of different sizes. The bigger the hospital group, the bigger the margin. Though the combined Goodman hospital group would have revenue of around $380 million, so it has a long way to go yet.
In a statement, the group said: “Alongside the Galway Clinic, this now means that Parma Investments holds three of Ireland’s leading private hospitals, providing world-class healthcare in state-of-the-art facilities. It is intended to bring these three hospitals together as one private hospital group creating scale, efficiency and expertise. Most importantly, it will enhance the group’s ability to deliver cutting-edge technology, research and patient-centred care to our valued patients.”
Further reading
Leaving Luxembourg: Larry Goodman’s €3.3bn exit to the Channel Island of Jersey
The King of M&A and the beef baron: Inside Larry Goodman’s ABP boardroom
