Ramsay Health Care Limited (RHC) Earnings Call Transcript & Summary

I'd like to acknowledge the Gadigal people of the Eora Nation as the traditional custodians of the country we are meeting on today. We recognize their continuing connection to the land and waters, and thank them for protecting this coastline and its ecosystems since time immemorial. We pay our respects to elders past, present and emerging, and extend that respect to all First Nations people present today. I'd also like to take the opportunity to start to thank Kelly Hibbins, who's done an enormous amount of work to be able to put this together for today and for Monday. So thank you, Kelly. Today, Martyn and I are going to outline the overarching strategic direction for the group, and that's been refined in conjunction with the Board and leaders across the business over the last 18 months. We'll then hand over to the CEO of our Australian business, Carmel Monaghan. And Carmel will run through how these themes will be taken forward by the Australian business. There'll be plenty of opportunity for questions at the end of today's session with a range of executives from the business. For those in the room, we hope you can also join us for a bite to eat at the end of the session. On Monday evening, we'll hear from our European CEO, Pascal Roche; and the CEO of our U.K. business, Dr. Andy Jones. And that will also be followed by a Q&A session. So as many of you know, Ramsay Health Care was founded in 1964 by Paul Ramsay. We listed in '97. We've grown rapidly both organically and via acquisitions since that date. The group now delivers a wide range of acute and primary health care services from over 460 locations across 10 countries. From the groups very early days, Paul's mantra of, "If we look after our people and look after our patients, then the business will look after itself." And that's been led by our purpose of People Caring for People. And this has never been more true in today's environment. And it underpins our vision to be a leading healthcare provider of the future, and our mission, to change what is possible for your health, placing the patient at the center of everything we do. The expansion of the group has created a global business model with strong positions in the delivery of healthcare services in each of the markets we operate in. This scale delivers a number of strengths in areas, including procurement, operational efficiencies, clinical excellence, and research and development. The refinement of our strategy emphasises a greater focus on the areas where we can achieve benefits from our scale, whilst also ensuring that our regions remain salient to the communities in which we operate. You may have noticed that we're not covering our Asian joint venture, Ramsay Sime Darby today, and that simply reflects the time available, and the relative size of the business, but the joint venture does continue to pursue the elements of the strategy that we'll outline today. The process of advancing our strategy has involved understanding the likely evolution of health care systems, and that's drawing from our experiences across regions and defining a vision for the organization, including a set of strategic themes and initiatives to prioritize. During this process, a number of key trends were identified as driving the evolution of health care landscapes over the longer term. These include changing patient and doctor expectations, particularly around convenience and support across broader pathways; involves digitization of care, which is driving convenience, continuous and enhanced care coordination and with a potentially lower cost of delivery. Also the emergence of new nontraditional data-driven competitors in some parts of the market. In clinical innovation, which continues to drive trends which support both hospital-based services and nonhospital-based services. And then the evolution of reimbursement structures and payer mix with a greater focus on outcomes and value-based models. We believe that Ramsay is uniquely positioned to take advantage of these key trends, building upon our global platform, our enviable culture, and the strategic relationships we have, to become a leading integrated healthcare provider of the future. While hospital-based care is expected to remain at the core of what we do, our vision is to leverage our physical footprint, strong patient and doctor relationships, and clinical expertise to expand along the patient pathway, delivering a more convenient, integrated and efficient healthcare services platform and improved health outcomes for our patients. To realize this ambition, and deliver for all our stakeholders, we'll focus on strategically growing our existing market share through organic growth, brownfield and greenfield investment and strategic acquisitions. And leveraging the existing core business to extend our service offering further along the patient pathway, both in and out of hospitals, with everything centered around the patient, and their experience. And we'll explore new funding models, new payers and enhance existing relationships that have formed over the course of COVID. And while we continue to offer services across all the therapeutic areas, we'll concentrate investment in key areas including mental health, cancer, cardiology and orthopedics, and explore the global potential of these services. And then rather than attempting to do this just on our own, and control everything in-house, we'll identify partners and partnership models to accelerate the execution of the strategy. We'll continue to optimize the business processes to drive cost out of the business, optimizing local and potential enterprise resources such as research and development and procurement activity. We'll generate the greatest value as we look at the operating model and patient pathways. Our strategy will be underpinned by focus on critical elements, including digital and data investment continuing to ensure global standards of clinical care, developing leaders through our leadership programs, and attracting the best talent to deliver on the strategy. All the while, ensuring our Ramsay Cares sustainability agenda is strong. We will continue to drive organic growth from our hospital network, which is expected to be underpinned by the aging demographics in the markets in which we operate in and clinical innovation and investment into new health care technologies. We will continue to invest in the size and scale of our core hospital footprint by brownfield developments, select greenfields and bolt-on acquisitions. Brownfield investment will include making them more accessible and improve the amenity for doctors and patients and ensuring that our facilities are designed to meet the changing markets. Our move into new and adjacent services will focus on moving along the patient pathway, retaining that relationship, providing coordinated care using our data and digital capabilities to improve the experience for our patients and clinicians. Digitizing the patient and clinical pathway will be an enabler to our success, delivering more services across a broader range of health care settings will allow us to lead the way and outcome-focused integrated care. We also look at the potential of new payer models and we'll seek to influence reforms in value-based models. Each region is at a different phase along this journey. And we will adapt the strategy to suit the local market structure and our current position in the market. We will invest in additional resources in achieving operational excellence, and we'll work more closely across the regions on areas that support the business where we can leverage our scale, including areas of research and development, clinical excellence and improving patient outcomes. Strategic sourcing will continue to be one of the key areas of focus. And while the strategy has been evolving for some time, we believe there is more that we can do, and that will be to improve our supply chain, minimize risk and maximize value. To underpin our strategy and ensure we leverage our scale, we will continue to invest in our key organizational foundations. This will include investing in creating an ecosystem of intelligence utilizing our data and insight, leveraging our understanding of our patients, and work workflow automation. Remaining a leader in clinical excellence with integrated research and education, and building a high engagement, strong talent proposition and an enterprise-wide transformational leadership capability. And continuing to develop our organizational capabilities to improve our market intelligence and execution. And we will invest in supporting the delivery of our vision and plan, and put sustainability at the heart of our plan to ensure we continue to attract talent and investment to build resilience. Turning to digital and data, which we see as a critical enabler to deliver on our strategy. Be fair to say that at the current time, we have different levels of digital and data maturity across our regions driven by varying market dynamics, business models, and service priorities. And I'm going to say legacy systems that we have. Overall, Ramsay Santé and Ramsay Sime Darby are further ahead in digital maturity, in the markets in which we operate, and within Ramsay. Followed by the U.K., we've just executed the implementation of a electronic patient record system, that's just happened in the last couple of weeks. And then in Australia, we are continuing to invest in discrete areas, such as patient and clinician experiences, where we undertake a full-scale review and design the future digital and data strategy. The investment in digital and data across Ramsay has to date been relatively siloed within the regions. However, there's an appetite to leverage our experience and understanding across the business. While we do not see value in full digital standardization across the markets, we are exploring our global data options. Given the current investment and existing platforms across the group, we'll adopt a two-pronged approach to our roadmap. A digital, we'll look to benefit from greater cross regional collaboration and partnering. All regions need to build out the full suite of foundational capabilities and capture quick wins. The more advanced regions can pave the way for others, and this can be achieved through building scalable solutions with interoperability, where it adds value. The data, we have an opportunity to start the journey by taking an enterprise-lead approach. It sets the global strategy and standards for how Ramsay acquire, consume, store, manage, use and protect data. This has the potential to be a differentiator for Ramsay as a global operator. We have recently appointed a chief digital and data officer, who just commence with us on Monday this week, and who will lead the program of work in Australia, and will also be responsible for building our global digital and data roadmap. Recruitment and retention remains a challenge across health care around the world. Ramsay's people strategy is focused on attracting, developing and retaining industry-leading talent, to support our growth and culture. The strategy is broadly built under 3 pillars: developing the capabilities required to deliver our strategy, evolving our culture to ensure it remains salient and foundational, and establishing contemporary and competitive market frameworks to attract industry-leading talent. We have a range of initiatives to address our global workforce challenges. In the short-term, the regions have in place a number of immediate initiatives that they will outline. From a global perspective, we'll work on initiatives that include developing a world-class global employee value proposition with regional variations to reflect local market conditions. A global EVP will retain the Ramsay way as our bedrock, and we'll evolve our culture through diversity, inclusion and flexibility. Secondly, formally defining the characteristics of a Ramsay leader. We want to employ people who align with The Ramsay Way, and who will ambitiously drive a transformation agenda. And we will establish a formal Ramsay Alumni program with a view to maintaining the candidate pool for rehiring or referrals. Our longer-term priorities include further developing our leadership academy, combining the expertise and strengths of our regional leadership and trading programs, which would provide attractive global opportunities for Ramsay recruits, and increasing engagement with a range of multi-national industry and academic partners. And investing in global tech platforms, which will allow us to leverage data, to provide insight and support in multi-generational recruitment and retention programs. A Ramsay strategy for sustainability came together with input from Ramsay people across all of our regions. And the strategy comes to life through 3 expressions of care: caring for our people, our planet and our communities. Our goals and targets cover a wide range of social and environmental issues, such as diversity and inclusivity, mental health and wellbeing, reducing our carbon footprint and waste, and responsible sourcing across our medical supply chains. Our commitment to sustainability is also embedded in our debt facilities through sustainability-linked loans. Our strategy contributes to the UN's Sustainable Development Goals, and we have become a participant of the UN Global Compact. We're also part of the Climate Leaders Coalition in Australia. And we have joined the 40:40 Vision, an investor-led initiative to achieve executive gender balance in Australia's largest listed companies. Our future focus is on attracting and retaining industry-leading talent, boosting our employees' mental health and wellbeing, reducing our environmental footprint, developing our climate resilience, enhancing our reporting framework and engaging with our supply chain on social and environmental issues. Our global sustainability committee oversees teams in each region to drive our sustainability initiatives and identify risks and opportunities. And that committee will review goals and target on an annual basis. In our first pillar, People Caring for People, we are proud of the progress. We've made in maintaining our focus on high quality care and patient experience, with high NPS scores across the regions. We have achieved gender balance with women representing 45% of senior leaders. And we have invested in a range of programs to develop our people, including nursing apprenticeships and nursing leader programs. This year, we also welcomed our first cohort in the new global corporate graduate program. And we've just completed a global employment engagement survey of our 80,000-strong workforce. In these challenging times we know, the wellbeing of our people is paramount. And we're focused on practical, local, mental health and wellbeing support, and ensuring we recognize our people for their outstanding work. The second pillar, we know that health care sector has a significant environmental footprint, and our people are eager to drive sustainable change. Environmental initiatives introduced already include reducing single-use plastics, where it's safe to do so, and increased recycling of waste. We acknowledge the importance for the business to be resilient in a changing climate. We are working to understand the short- and medium-term risks and opportunities across our existing buildings, future developments and supply chains. As part of this, we have commenced aligning our reporting with the task force for climate-related disclosure recommendations. We have set foundational targets to reduce energy use at facility level and help cut our greenhouse gas emission intensity. As part of this, a major investment in solar energy is being rolled out over the next five years across Australia and the U.K. The links between climate and health are clear, and we will monitor the longer term implications for our people and patients. To support our approach, greenhouse gas emissions reduction targets have been included in the FY '22 scorecards for our executive management. And the third pillar, caring for our community. Ramsay's long-held values, motivate us constantly to improve and find new and better ways of caring. That's why we support a wide range of clinical trials and health research aimed at improving the wellbeing of our patients and society as a whole. To be truly sustainable, we cannot work in isolation. So we are focusing and boosting our focus on responsible sourcing. We're developing a global responsible sourcing framework and have recently appointed a global responsible sourcing manager. Our goal is to ensure suppliers that make up 80% of our spend, have an independent sustainability assessment, and we'll work with other suppliers on improving their performance. A focus on sustainability across our value chain will be key in ensuring business resilience to the challenges ahead. Our people have been paramount in championing initiatives in all of our regions. Ramsay wants to take a leading role in the healthcare sector and drive action to deliver more sustainable and reliable health care outcomes. Through this, we know that even small changes can make a big difference, and we look forward to updating you on our progress. Finally, reflecting the importance we've placed on our updated strategy, we've established a global transformation office, tasked with aligning our regional business transformation strategies, pursuing new business opportunities across the patient journey, and leveraging Ramsay's strengths and expertise to grow our market share. I'm pleased to announce that Dr. Andy Jones, who many of you'll know, as the CEO of our Ramsay U.K. business, has been appointed our first Group Chief Growth Officer with responsibility for Ramsay's strategic transformation agenda. As part of this role, Andy, will also be working on strategic partnerships to support our business. And Andy will work closely with our global heads of digital and data and clinical excellence, our regional CEOs and leadership teams to progress our strategy. This role will be report directly to me, and be part of the global executive committee. I'll now hand you to our CFO, Martyn Roberts, who'll speak around capital allocation across the group. Thank you.

Thanks so much, Craig. And good morning, everybody. Great to see so many people in-person here, and hello to everybody online. Firstly, I thought we'd run through the leverage and capital parameters of the group given the consolidated view doesn't really give you the whole picture. As you can see on this slide, the consolidated group represented in our statutory accounts includes the consolidation of our majority owned subsidiary, Ramsay Santé and an after-tax accounted contribution from our joint venture Ramsay Sime Darby. As you can see on the diagram, the funding group that supports our borrowing capacity, only includes all the Australian and U.K. subsidiaries other than our retail pharmacy franchisees and U.K. day hospital joint ventures. And the recent Fitch credit rating that we received only applies to that funding group. Ramsay Santé have their own debt funding structure and covenants, which are nonrecourse to the Ramsay funding group. Investments made by the European region are in the main funded by its own balance sheet and return hurdles are approved by the senior management team and the Ramsay Santé Board, on which Ramsay holds 5 seats out of 10, including myself and Craig, who is the Chair. Larger investments have in the past required the Ramsay funding group and Crédit Agricole to inject equity into the Ramsay Santé balance sheet. For example, the Capio acquisition was partly funded by equity injections from ourselves and Crédit Agricole. At the 30th of June this year, our leverage and return metrics were artificially impacted by the money held on escrow to fund the proposed Spire Healthcare transaction. Given the transaction did not proceed, the $1.96 billion in funds held on escrow have now being repaid back to us. Leverage at the consolidated level on a pro forma basis, assuming the Spire transaction was not at the 30th of June, basically was 3.7% compared to 4.4x in the PCP. There are no restrictions as such on the leverage at the consolidated group level. The ceiling is in effect determined by the covenants that sit within the funding group facilities and within Ramsay Santé's debt facilities. The funding group leveraged on a proforma basis at 30th of June was 0.7x, below historical levels. FFO adjusted leverage on a pro forma basis at 30th of June was 2.39x, below the FFO leverage target of 4x that is consistent with the investment grade rating granted earlier this year. The pro forma headroom at 30th of June to this ceiling was $1.4 billion. At the 30th of June, on a pro forma basis, the undrawn capacity under the funding group's debt facilities was $2.4 billion. Over the last 12 months, the funding group and Ramsay Santé have commenced the process of extending the duration and diversifying the sources of our debt. Over the next 12 months, we expect to take advantage of our investment grade credit rating to go over the public debt markets, refinancing the debt due in FY '24 and FY '25. Regarding capital allocation. This slide shows our post-tax ROIC earned over the last 10 years at the consolidated group level, based on both a historic core net profit and statutory net profit. These metrics are calculated on a AASB117 basis for consistency, and the outcome on a AASB16 basis in FY '20 and FY '21 footnoted on the slide. The calculation is the same formulas that used in the calculation of the ROIC gateway, and the LTI Awards introduced in FY '21. ROIC fell below Ramsay's cost of capital FY '20 due to the financial impact of the first wave of COVID, and was impacted again in FY '21 due to COVID. We do acknowledge that at the current level, we have significant level of capital available on our balance sheet, and we continue to look at acquisition opportunities across our regions, with the aim of increasing our scale and returns and moving into adjacencies to complement the existing footprint of the business consistent with our strategy. We will also continue to assess opportunities for the recycling of assets, where this provides shareholder value. Following the introduction of the new leasing standard, AASB16, we've changed our internal investment parameters for new investments, including brownfields. We've changed it to a cash flow based post-tax ROIC metric, which replaces the pre-tax return on capital employed metric used in the past. We also have investment hurdles of an IRR above 10% and EPS accretion. I would note that at the discretion of the Ramsay Board, where investments are considered to be strategically important, new investment can have IRR and cash ROIC less than 10%, but they do need to be above our WACC. As we announced at the FY '21 full-year results, we expect capital expenditure for the next few years to be elevated above historic levels. Principally, as a result of investment in brownfield developments, particularly in Australia and other elements of our strategy, including the digital and data strategy that Craig talked about before. The timing of CapEx, in particular, brownfield investment may change depending on development approval processes and building schedules. So with that, I'd like to thank you. And now, I hand over to the CEO of our Australian business, Carmel Monaghan, to run through how our strategy translates the Australian business, before we'll then have a break and move on to Q&A, Carmel.

Thanks Martyn. Going to put my timer on because I'll talk too long. Right, thank you. And great to be here with you today to talk about the Ramsay Australian business. And I'm joined here by Doug Meagher, our Chief Financial Officer, who will be on stage later also to answer any of the difficult questions. For those of you who I haven't met, I've been with the company for 23 years. I've been 28 years in health care, and this is my first year coming up, just past my anniversary of one year as CEO. And it has been a very interesting time in health care. So obviously, interesting time to take over. We've had some significant challenges managing COVID, weekly meetings with our medical advisory committees around the country, fit testing, PPE testing, infection control, as you would imagine, a huge amount of regulations coming from state and federal governments, managing COVID patients. Lots of our staff, and I know Craig's talked about it in the past, but about 700 Ramsay staff assisted in New South Wales alone with vaccination hubs. And then we assisted in other states. We went to Queensland and said, "tell us how many nurses you need," we will supply them to help vaccinate because we didn't want to see the same elective surgery restrictions we've had in New South Wales and Victoria, happen in Queensland. So we've been really at the forefront of assisting in the COVID crisis and that's been a wonderful thing to be able to help. It obviously impacted, as you've seen, but it was important for us to do. And as with all adversity, it often makes you discover who you really are. And what we discovered was -- what we confirmed was that Ramsay is a really indeed a strong health care company. We were sustainable right through. We kept all of our staff employed. We didn't draw down much on the package that was offered, in fact, only $11 million last year. So we did a marvelous thing to help the community and we came out stronger for it. In the end, we're a stronger company. We spent the year looking at our strategy as well, and so we didn't lose sight of where we need to go. And so we'd spent the year looking at that and that's been a really positive year. I'm going to go through some of that strategy today. And this is a deep dive on the strategy. I'm not going to get too much detail about what's passed because I know you had that update in October. And I'll talk about the current private health care dynamics in the country. I've got a lot to get through, so I'm going to talk fast, and I'm going to skip some slides and you can come back and ask me questions if there's specific things that I missed for you. I don't really need to remind you that Ramsay is the largest private hospital operator, obviously, in the country, and we've got strong and growing market share in all of our major states, thanks to good geographic location and constant investment in those facilities through the brownfield and greenfield development programs. And we're increasingly operating businesses outside of hospitals as well, so you're aware of our full range of pharmacy, which has been successful. We've had 60 pharmacies today, community pharmacies and growing, and we have 40 pharmacies within our hospitals dispensing medications. But we also have a big allied health business, delivering allied health and psychology services through 32 sites, which I'll go through later, and 40 of our sites are now referring to our Hospital in the Home program through our joint venture with AU. Ramsay has a strong record in delivering growth for shareholders. And we've been proud of that, but I'm not going to update you much on quarter 1, as I said, you've gone through that suffice to say that in quarter 1, we obviously experienced significant financial impacts from COVID, and that continued into October as forecast by Craig and Martyn at the quarter 1 results update. Elective surgery restrictions were lifted in November, so mid-November in Sydney. And Victoria has lifted restrictions from 29th of November to the capped rate of 75%, which we think will probably continue through December. So we don't see that coming up. I know you'd be interested and you're going to ask me later, so I'll preempt that, for December we are seeing increased return, obviously, to surgery rates and our theater utilization is up in the 90% mark for New South Wales. So that's good, but it is really too soon to draw any conclusions from that. It's not a trend, it's not a consistent picture across the country. It's certainly -- it's good. We know there's a backlog of surgery. We know surgeons want to operate a lot and we're trying to help that and smooth that way through, but we also expect the situation to remain volatile. And we do have staff fatigue, doctors wanting to take leave. Like all of you, everyone's tired. So we do expect that there'll be some leave taken over December, January. And so the picture is going to remain a bit uncertain for some time to come. On the nonsurgical side, growth has been subdued, obviously, with the lack of elective surgery as well, which you're aware of. In terms of industry trends in Australia. Despite the COVID impacts, the underlying industry fundamentals, aging population, increased chronic disease, obviously, are still good. And that's driving the hospitalizations and we'll continue some time to come and you'll see later we're focusing much more in cancer and those areas which are very much growth areas. We've been pleased that private health insurance has turned around. We've had those 5 quarters of growth now in private health insurance numbers after 15 quarters of decline. And so that's been a positive trend in all age groups in private health insurance. So that's good. Obviously, the pressure on the public sector remains, and we expect that to remain for some time. Percentage of elective surgery, waiting lists, admitted within clinically appropriate times has dropped over the last few years and that will continue, and that's in all states. Probably the last graph here in the corner at the bottom is a concern for us, and we've had negative net migration for a couple of years, and that is going to impact workforce and create a competitive live market, and I'll talk to some of the workforce challenges a little later. I'm going to skip over this slide and you can ask me questions later, just suffice to say that, as always, Ramsay continues to have favorable market share growth, according to the APRA data in terms of admissions, and that was for the last 12 months to the end of September, and in the first quarter, with the exception of New South Wales, which was to be expected because we had 7 hospitals closed. So obviously we had some unfavorable growth in New South Wales. But generally speaking, very favorable growth and that's ongoing. In terms of regulations. We do have, obviously, healthcare is a market where there's lots of regulation and that's consistent. There's been no change over 20 years. There's always something happening in health care, that's new legislation and new areas. I'm not going to go through all of this slide. You can see, read through yourselves as to how we are quite adept at being responsive and we work together with all stakeholders to get the right outcome. A lot of this is covered on other slides, but I will call out the prostheses reforms, because I know you are interested in that. And we have been working with the government on this for a few months. Everyone wants reduced prostheses pricing, there's no argument there. So doctors, hospitals, patients, private health insurers, all want to see public pricing in prostheses. And that's what we've been advocating for. Generally, there's a large prostheses reforms that Hunt is trying to get through, and that's a good thing. And hopefully that leads to premium reduction from private health insurers. And actually a lot of things that Hunt has done over the last couple of years have reduced that premium index growth, which you saw on the last slide. And so that's been positive. What we were concerned about from private hospital's perspective was the general miscellaneous prostheses reforms, and the idea that the department was pushing to get rid of the general miscellaneous list. We've been advocating to both minister's office and the department, and we think the outcome will be positive in that regard, that there will be a pricing mechanism that will look at public reference pricing, and we'll work towards a bundle model, which will help with our volume control for the health insurers. So that's the outcome and that's a positive outcome if that's what happens across the prostheses issue. On everything else, I'll cover those items in future slides. Just from an infrastructure point of view, we've had a strong track record in fixing up our facilities. We obviously invest heavily in our facilities. We have 64 hospitals, as you can see on this slide, and 7 stand-alone day surgery units and 1 infusion center. And we continue to invest in those facilities and improving them for the experience for private health patients. One of the areas that we've really concentrated on is single room accommodations. So that is a really, really important, obviously, for our customers, and you'll see we've grown up to 81% now, and that includes public hospitals. So if you remove the public hospitals from that, they'd be much higher in the private sector. So we have done really well at doing that. In terms of regional areas, I've been really pleased that we've invested a lot in regional areas over the last few years, about 30% of our brownfield spend since 2018 has been in regional areas. And just in the last year, that's jumped quite dramatically. And that reflects the demand in regional Australia. As I travel around to those regional hospitals, we are seeing growth, there's growth in population. It's one of the differentiators for Ramsay. We are heavily a -- we started in regional Australia in medical surgical business, and we have a differentiated portfolio in that regional mix and that's a really positive thing. And as we see population growth and doctors wanting to move to regional locations, we'll continue to see investor in those facilities. So from the ground up, we are seeing a lot of investment there. In terms of activity and what we're seeing in activity, obviously COVID made things more volatile, as I've said, and it's difficult to predict going forward, but there's a few things on this slide that are important to call out. We've certainly seen growth in day admissions more than overnight, and that's obvious, not unexpected, given nonsurgical activity, overnight activity in psych and rehab were really heavily affected through COVID, through visitor restrictions, elective surgery restrictions, so there was no joint replacements going to rehab. And hospitals like our rehab facilities in Illawarra were taken over for the COVID response, Mount Wilga, et cetera. So we fully expected that growth has been less. So it's something that is reflected on that slide. Births surged during COVID. And you can see we were up quite a bit in the first quarter. However, forward bookings look like that will normalize in time. So we think births will go back to normal. On a public admission front, we did experience a 68% increase in public admissions during FY '21 on FY '19. And we saw increases in mostly our non-traditional markets of New South Wales and Victoria, obviously off a low base, but that's continued into October as well. The public activity under the COVID agreement was done at cost recovery, but the relationships were built. We have built really significant relationships with the public sector, and I think that will continue into the future. So we will see more pockets of less public resistance. The public sector actually realized that the private sector exists, and that was a good thing through COVID. We've won a few contracts. We have doing up to 50 cardiac surgery cases at Wollongong Private for the public sector. And that's in a very short time and we've had two big mental health contracts that we've won recently as well. So I see that there will be some ongoing discussions with the public sector. We've had positive discussions with Liz Koff and Nick Steele in Queensland, and there is a desire to use the private sector more in small areas. We have to make sure that we continue to differentiate the offering. It's absolutely vital. Private healthcare will still be the main area where we get our business from, but there is the opportunity to look to more public work. And I think that will be in pockets as I said. The bottom right graph is interesting and shows that our investment in emergency departments over the last 7 years has been the right strategy. You can see that inpatient admissions from our ED delivered about 20% of our admissions. And that has really grown at a 9.5% almost CAGR over the last 7 years. And that's through new EDs. So we've had new EDs opened. Lake Macquarie was new, St. Andrews was new, Hollywood was new, and Peninsula. So all of those new EDs have delivered what we thought they would, and Hollywood only just opened and already meeting its business case. So very effective in delivering our patients. We've expanded our emergency centers in Queensland. What we saw through COVID, and you may know this from some of your discussions with other hospitals, it's crazy. Emergency presentations and admissions have really leaped up. And we're not sure why, I can't get to the bottom of why. I think maybe GP is still closed, not seeing patients, certainly not seeing COVID patients or anyone with a respiratory illness. So that's been challenging, so we are seeing this more presentations to ED, public and private sector alike. So that's interesting. We've just recently expanded our Joondalup emergency center as well, and we've got on the radar, a number of other emergency departments, 3 -- 1 that's been approved. So Warringal is underway and you'll see that in a future slide. And we are also looking at Wollongong and Westmead as future emergency departments, along with expansions of some of these existing ones. So that will be an ongoing strategy for the future. I'm going to talk about rehab because I know you are all very keen to understand the impact of rehab at home. And I don't subscribe to the view that rehab at home will replace inpatient rehab. The only thing happening here is health funds inappropriately trying to interfere with clinical admissions to rehab. And the reason why I think that is that we have an aging population. We've predicted for some time that orthopedics, neurology and rehab would grow. It's been on the radar for a long time. And we are seeing that. We have seen a shift to greater acuity in our rehab facility, so that certainly has happened. And you can see on the bottom graph on this slide, the low functioning people -- people with low functioning motor scores have increased in terms of our admissions into Ramsay facilities and people with high functioning scores have decreased. So we have seen that change. And so we've got the higher acuity patients coming through our rehab facilities. We do have increasing demand for reconditioning given the beneficial evidence of that shows for cancer, neurological conditions, Parkinson's, cardiac disease, persistent pain. So we are seeing a slight change from joint replacement into those other areas, but certainly the low functioning joint replacement services are still predominant. And the outcomes that you can achieve with low functioning people through rehab speak for themselves. If you are -- it's very important after surgery that you get on the road to recovery quickly and your rehab is good. And we have potentially now the most comprehensive database of rehab outcomes data based in Australia with about 275,000 clinical data points, 20,000 patients. An example of the outcomes that we look at are the 6-minute walk test. And the smallest improvement considered clinically worthwhile for a rehab patient is to be able to walk 50 meters in 6 minutes. And all of our patients leaving rehab are achieving double that. Really important that you don't go home and you can't walk that 50 meters in 6 minutes, and you haven't had the care to do that because you are not going to be able to keep up with your rehab program and you'll fall behind. You'll be walking half the distance of your husband if you're going to go for a walk in the morning. So it's a really important test that's clinically relevant and very important that you do get back on the road to recovery fast. We have 32 facilities currently offering rehab. And the average age of our patients is in their 70s. We've recently expanded our inpatient beds in 3 sites and our day patient services in 3 other sites. And we also have a number of additional rehab services in the pipeline. So I don't see the demand for this decreasing on the basis of rehabilitation at home. What rehabilitation at home is actually seeing is probably more of the patients that used to go to community physio, and we have those patients coming into our Ramsay Connect service. So we are certainly seeing an increase in those patients, about 5% increase in patients coming out of hospital into those high-functioning motor people going to Ramsay Connect, but it hasn't seen a corresponding decline in our inpatient rehab program. Similarly, with mental health, I thought just do a deep dive in mental health. Mental health was also impacted through COVID, particularly visitor restrictions, social distancing. So not having so many people in a group class, you have to have 8 people instead of 12s. So all of those things were compromised. And so that was difficult through COVID. And concern of psychiatrists. Psychiatrists are probably the most scared through COVID of any of the groups of specialists, so that was an issue, so we've had to deal with those things. However, for the long term, as we're hearing, there will be increase mental health burden, and there's an ongoing demand. There's huge demand in mental health. The only issue that holds us back from assisting more is the workforce. So psychiatrists and psychologists and mental health nursing is an area that we really have to concentrate on and grow. So that's something that we're doing. Ramsay is a leader in mental health delivery, acute mental health private delivery, and will remain so. We've renamed all of our facilities in recent times to Ramsay Clinics, so there'll be Ramsay Clinic New Farm, Ramsay Clinic Northside, as opposed to the individual names and that's to assist the digital front door strategy to assist people to find services they need. We've approved some major developments, including a new Greenfield mental health side at Ipswich, which will be a 40-bed development on a slide later. And we're expanding our Northside Wentworthville facilities from 68 beds to 125. We are seeing a huge need for adolescent mental health. And we opened the first adolescent mental health unit in a private hospital in Sydney at Northside Clinic, and it was full in the first few days, and that remains the case. So big demand. Again, finding psychiatrists that want to do adolescent medicine is an area that we have to focus on, but we do have plans to open further adolescent units both in Northside Wentworthville in this new expansion, but also in Melbourne and Brisbane. So that will be an area. And I'm going to talk later about our psychology services. In terms of outcomes, Ramsay is really a leading brand in the marketplace. I have no doubt of that and it increased through COVID. As I went around to hospitals and talked to doctors and nurses, they all said, "Thank God I worked for Ramsay through this period." We really did keep them safe. We supplied them with all the information they needed. The information flow daily has been incredible and that made them feel very safe and secure in their employment and their work with Ramsay. Our hospitals deliver exceptional services to patients. You can see here, our NPS, which is a measure of whether you would refer a patient to Ramsay Hospital, is 73, that's world class. That is a world class score. And when we talk to hospital groups in the states and overseas, they're quite amazed at that score. And this is a score that we get back from 30,000 patients that we measure quarterly. So 30,000 patients are telling us, "Yes, I would refer someone here and this is a good facility." And that's a great score. So we're very proud of that. We also joined the Commission survey this year, and that's a new national survey which measures a whole range of 12 questions and a whole range of other factors. And we scored 96.2 on very good or good in that survey. So it's a further validation of just how good our facilities are. Any business would love those figures. And I think that's been a good thing. Our team has been enhanced by a Chief Nurse and Chief Medical Officer. I often say to the team, we have the best nurse and the best doctor working for us. They've come out of the public sector, so it's surprising that they're that good, but they are good and they are brilliant. So they have great ties with the public sector, but they also are just delivering extraordinary outcomes in terms of clinical governance, patient care, safety, outcomes, research. And so, we're really lucky to have those people in our team. We have 15 [ clinical trials ] delivering amazing clinical trials. Clinical trials are absolutely imperative. Patients with cancer want to be on a clinical trial. And so we've really driven hard on this area over the last few years and we have 250 active clinical trials. We've already finished a whole heap of them, but there's a lot of clinical trials. So if you've got melanoma and you want to be treated with the best drug, you will go to Greenslopes Hospital and you will get the best, newest clinical trial treatments. And so, it's imperative that we keep going and keep investing in that area. And now there is clinical trials in mental health. You might have seen Albert Road Clinic launched a new depression drug or nasal spray or something. So lots of new treatments for patients through clinical trials and that's a good thing. And we've got a whole range of other research. One of the things that I'm really passionate about is registries and participation in registries. Australia has some of the best registries in the world. Monash University has great record of keeping registries. Through registries, we scientifically validate whether we are good, and we are good. So we have lots of cardiac surgery registries and neurosurgery, stroke, infection control, ICU, lots of different registries where we can measure against everyone that participates in those. And so we do really well in all those areas. I'll skip through this slide. I don't know how long I've gone. I've got plenty of time? Oh, good. Okay. So we're concentrating in some of the major areas: cancer, orthopedics, cardiology, mental health. We're really leaders in these areas in the country. In cancer, we've appointed 14 cancer care navigators. One of the things about the private sector is we've been a bit behind in cancer in terms of some of the extras that you may get through the public sector. And so we've really launched ourselves into this space and increased our services. And so having cancer care navigators that can help you through the journey and help you into some of our programs for after that journey, is something that we've really concentrated on. Also, looking at multidisciplinary teams, clinical information systems, really investing in this area around cancer and how we can deliver a better experience for cancer patients so they really feel managed through a journey that's quite complex and quite harrowing. In orthopedics, we're a leading supply of joint replacing surgery. We -- Public, private alike, we're doing about 20% of all orthopedic joint replacements in this country. And so we are a leading provider of that service. We've invested in 23 robots this year. So lots of new robots, new toys for doctors coming out. We've got 29 robots now across all of our facilities, and this is a good thing. This keeps doctors sticky. This is not what you'll get in a little day surgery. These robots are really important for doctors, and this is what they want to do now and it's increasingly improving outcomes for patients. In cardiology, we've got 8 hospitals now undertaking TAVI, and probably Wollongong will be next, so we'll have 9. And that's a new heart valve replacement service. And there'll be plenty of more of those come down the road. We'll have MitraClips, TriClips, there's so many more new cardiac procedures coming down the line that prevents you from having to have that major bypass surgery. So that's really important. And as I said, we opened the first new private mental health facility for adolescents in Sydney. Right, so onto strategy. And I'll just -- I'm going to run through some big items. But first, just to let you know, from an organizational structure point of view, we did put in a new organizational structure when I started last year, and we've only just filled the last role. So it took a year to find the Chief Digital Officer, but she's brilliant. So I'm glad we took the time, and we interviewed everyone in the world for that job, so I'm glad we found Rachna. So now we have the full team on board. As I said, Chief Medical Officer, Chief Nurse, brilliant. Their strategies are to drive medical recruitment, doctor recruitment, nurse recruitment, as well as a whole range of other things and doing a great job. Look after our clinical governance, make sure the patients are safe. They're doing that. The Chief Nurse was a really important factor. You will ask me no doubt about workforce later, and I'm going to talk to it. One of the areas that we are concerned about is the future workforce and how we keep our nurses sticky. Colleen does a great job on the HR side from looking at expanding our programs and how we deliver our management programs. But equally we have to get these nurses in, and there's not nurses there. We have to grow our own. And so, we haven't got this migrating workforce that we've always had, and Sydney and Perth particularly have relied on that migrating workforce. So they're not there at the moment and we're going to have a bit of a time over the next few years, we're going to have to grow our own. So we've really invested hard in those workforce programs, which I'll talk on a little later. Chief Operating Officer for Out of Hospital is a new role. This is the area that will concentrate on all of those areas outside of hospitals, pharmacy, allied health, all the ambulatory care centers that we might do, any doctor ventures, blah, blah, blah, psychology. So Andrew Smith has come over from CBHS. He was the CEO of CBHS Insurance, private health insurance. He's been a CEO in the past, and he's running that strategy and doing a good job in that area. We've got a new Chief People Officer and our payer relations functions, obviously, very important and something that we've really built a lot this year is our relationships with the health insurers and how we work with them on innovative programs around the hospital. Okay. So strategy-wise. These are the key growth areas that we see as important. Hospitals hasn't changed, but we've probably ramped it up a bit. I'm going to go through day surgeries, any of the out of hospital stuff, mental health, and further adjacencies down the line. In terms of organic growth, as I said, we're a world-class hospital network. We have strategically located hospitals, delivering the best services in our regions. Our focus is on doctor recruitment and doctor engagement, capacity expansion, planning, developing relationships with local government. All of those things won't change. And we are consistent in driving that organic growth in our local hospital network and will remain so. From a capacity expansion point of view, our successful brownfield program will continue and probably is ramping up. And I know Craig told you at the end-of-year results release that this is something that we are ramping up, and we will see a lot more -- and we've got a lot in the pipeline. We have got a lot of expansions going on. So in FY '21, we spent about $324 million approved, $325 million on hospitals expansions. And we expect that level investment to continue. Our FY '22 approvals so far are tracking at $129 million, including 132 beds and 7 theaters. And we've got a lot more to come to Craig and Martyn, over the next little while. And subsequently the Board. Currently, we have about $700 million of projects already approved and underway. So these are projects that are underway. We've opened blue, red, green slopes in Hollywood just, not all of Hollywood. I think 2/3 of the beds, but the emergency center, as I said, is open. And so those projects were completed in the first half. Into the second half, we'll be opening Westmead, further theaters at Greenslopes and North Shore, and a major development at Pindara. So that will be the second half features and obviously a pipeline of significant projects. With Warringal being our biggest brownfield we've ever approved, so in terms of quantum of dollars spent, that won't open to FY '24. And along with the Northern Hospital on here, that Northern corridor of Melbourne will be significantly Ramsay by FY '24. And Warringal's a great, no-regret investment hospital. Greenslopes, just some pictures and a bit more detail, opened 64 beds and 3 more operating theaters, ICU expansion, et cetera. Greenslopes is a massive hospital. It's where I started, I love Greenslopes. It's good site, ongoing. Doctor interest in being in that campus really changed in the last 5 to 10 years. From veteran hospital to private hospital. [indiscernible] hospitals, Hollywood and Greenslopes 700 bed-plus hospitals. And they are big significant hospitals that deliver some of the best work in the country. Hollywood is the leading orthopedic hospital in the country. No other hospital is close to it in terms of the orthopedic procedures that delivers. And Greenslopes will get there. They are the best in cardiology. Their orthopedic services are growing significantly. Well managed facilities. Warringal has been a bit of a dog's breakfast in terms of what it looks like. It's a fantastic hospital, lots of great services offered out of it. We've expanded it over the years, but it needs some more work. And so this significant expansion, as I said, the largest we've ever approved, will deliver a fantastic hospital across the road from the Austin in a huge medical precinct. So these are no-regret facilities. As I said, greenfield projects currently under development: the Northern Private Hospital in Epping, in Melbourne; and Ramsay Clinic in Ipswich, which will be a site clinic across the road from our very good San Andrew's private hospital. And now we've interviewed every psychiatrist in Ipswich and they all want a private hospital, there's a huge demand and so that I've got no doubt will be a good facility as well. Major developments in the pipeline. And Henrietta does not want me to talk too much about things that hasn't been approved yet, but these are developments that we have got on the agenda for the second half of this year for approval to the Board, again, major developments. So it's just a select few. Lake Macquarie in Newcastle is an amazing hospital. Hasn't missed a beat through COVID and has an excellent ICU, great cardiac services, great orthopedic services. And so an investment in this hospital is necessary. It's old, tired, again, another [indiscernible] we have to invest in it, and we also want to stick a day surgery here. So the picture of that on the slide is the day services center that we will build in that facility. Joondalup Private, you all aware we have Joondalup Health Campus in Perth. We have a private hospital on the campus, but it doesn't have theaters of its own accord. It shares the theaters with the public. We are looking to expand Joondalup Private. And this is, I don't know, who's been to Perth recently, gone up to Northern corridor Perth, but it's huge and growing, and one of the fastest growing corridors in the country and an amazing area. We will put a big private hospital on this campus, expand what we've got, stick in some theaters, day services, et cetera. And I've got no doubt that this will be successful. We've talked to all the doctors and there's high demand, and it's a great growing area. So this will be one that we bring to the board early next year. And in Wollongong Private, going great guns. This was our last greenfield site that we opened in 2016. And it's been a great hospital, great development. And we are looking to put an emergency department there and expand that side as well. I'll move on to the new and adjacent services. So obviously we are growing our services outside of hospital. And this just gives you a map of all of the areas that we will touch the patient in on that journey. And I think we'll talk through all of the different components of this as we go through. First though on day surgery. This is another focus area. I know you are all interested in this space, and I am happy to answer questions on all of that. But just to let you know, first thing, we deliver day services, day surgery through 52 of our sites, including 7 stand-alone surgery with 62% of all procedures being day surgery. That hasn't changed. We are a significant day surgery -- have a significant day surgery offering, and that's reflected in the APRA data as well, and it's been growing. We are investigating additional community day surgeries and short-stay facilities, and they will be different. They will be low-cost construction, low-cost operating models, highly scalable. So we will look at how we deliver those effectively. They do have a lower return. So we will be looking at how we do that in an effective way. And we will use digital systems to enrich the customer experience, the doctor experience, et cetera. So we are investigating how we look at these purpose-built surgical centers in some locations. But as I said, we have a strong record in day surgery. I'll preempt your questions about Medibank's day surgery strategy. And I've seen that conjecture that Medibank Strategy is going to negatively impact on private hospitals. And I don't concur. So doctors need facilities where you can do both, high complex and low complex work. And they like that ability to be able to go between those cases. And so we haven't seen many of our doctors significantly interested in those ventures. The ones that are maybe interested are those that are maybe looking to retire, invest money and get out, but good luck to them because not lot of money to be made in day surgery. So it'll be an interesting model. We already provide day surgeries, as I say, in our existing facilities and short-stay surgery and priority access will be given to the doctors that work with us and that we will provide ongoing support, ongoing equipment and all the nurses, et cetera, that they require. So we consider that we will continue to be a leader in this market, despite what happens in that space. On mental health. As I said, we're a leader in acute private provision and mental services, but we'll be leveraging our out-of-hospital services and community based services in this space. So we're looking to grow a model right across the journey for mental health. We have a great acute provision, but there are opportunities to grow outside of that as well. One of the areas that we are concentrating on is establishing psychology services out in the community, and we have a number at the moment and we'll have quite a number over the next 3 years. And we will corportize, look to corportize those psychology services. And that's been quite popular at the moment. As I said, we recently were successful in getting 2 public contracts for mental health, one in New South Wales and one in Victoria. And they are early signs and early stages of what we see possible in mental health. There is an alarming shortage of psychiatry beds in the public sector and psychiatry services. So in eating disorders and all those areas, it's an area that the private sector can help with. And so we've won 2 big contracts to do just that in Macarthur in Sydney and Albert Road in Melbourne. And the Melbourne one came out of the Royal commission's recommendations that the public sector needs to use the private sector more. And this is the first stage. So, that's been a good thing. Obviously, we've got hospital growth. I talked about adolescents. We are looking at new models of engagement with our psychiatrists to assist them grow the business with us. And we're actively exploring lots of academic partnerships. So there's a lot going on in mental health. And I think in time to offer a broader mental health offering, where you can offer community, outpatient, inpatient, day patient services will be a really exciting thing for Ramsay, and that's what we're driving. On our outpatient and community care strategy, these are the main areas of concentration. Obviously, you're aware that we started the Ramsay Connect business with AU in March '20. It's pretty hard time to start, right at the beginning of COVID, but we now have 40 Ramsay facilities referring to those at-home services. So we've delivered services to about 2,500 patients. And we've secured -- as we've grown with that service, we've secured new funding partnerships with funders, and we're expanding that across the state. So that's an ongoing discussion with those health funds as we come up for negotiation. And it's really forming part of our comprehensive cancer pathway as well. So all of those activate services and special rehab services for cancer, both prehab and post cancer provision are really launching well, so they're good. We are opening with Ramsay Connect a virtual hospital in virtual care capabilities in Joondalup, in Perth. So we've got a trial going on with that and that started last month. Ramsay Health Plus has 28 clinics and they delivered 40,000 services in FY '21. We have a lot -- we have 1,400 allied health staff working across our facilities. As they work, they can work in and out of hospital and we're expanding how they work outside the hospital, in the community, offering programs, et cetera, lots of programs offered through that service. Our pharmacy service is growing. They're really concentrating now on healthcare. We're not a discount pharmacist. We're not in toilet paper and fragrances. We are a proper health care providing pharmacy service. And we will concentrate on hospitals, on aged care, on provision of services. They've delivered 20,000 COVID vaccines. So, that's the area pharmacy we are in. We're not a price line that's -- it's a little bit different. So, that's home medication reviews. All of those areas of pharmacy will be where we concentrate. In terms of psychology, as I said, we are expanding our psychology services. We have 4 psychology centers now in New South Wales, we'll have 11 by the end of the year. And we have over the next 3 years, I see 300 psychologists working for us. We already have psychologists in our facilities, our hospital facilities, these will be community-based psychology services. And as they open, of course, as you would expect, huge demand for these services. All of these businesses are low-margin services. They're low margin areas, but they are essential to helping us grow outside of the hospital, and that's something that we will continue to do. In terms of adjacencies such as radiology, pathology, radiation oncology, these providers have traditionally engaged with us at a local level. So hospitals have engaged with the local pathology company and the local radiology company, et cetera. We've taken this year to get to the bottom of all of our leases and service level agreements within our hospitals. And to look at how we can leverage our scale to achieve better outcomes from these services and for our patients. Historical arrangements will not be the way we move forward. And particularly given the consolidation of the industry and some potential for channel conflict, I see this as a moving space. And so as lease renewal dates ensue, we'll make sure that the offerings are in line with our strategy. And so we think there's a range of options that remain open to Ramsay in regards to integration of those adjacent services in time. I won't talk too much to this slide. How much time I've got? I'm good? Okay. All right. So on procurement, in an environment where we've been supply constraints and supply cost increases during COVID, we've been really fortunate to have a global procurement strategy and a global procurement relationship. So that's held us in good stead. We aren't seeing any particular supply constraints at this time. So we're pretty confident at the moment. And we really have strong relationships with suppliers. In fact, across one of the things that I've really tried to drive across the Australian business is to develop those relationships much stronger, and that's what we're doing. We think there's more we can do. There's certainly always more you can do in procurement. And we've driven -- historically, our procurement focus has been on medical. We've expanded the procurement team to cover everything from IT and all the other areas, professional services. So there will be an expansion of this team into that space. And we will always seek more value out of our procurement team, obviously, driving the sourcing and sustainability agenda as well. Workforce. We are -- as I said in the beginning, it's an area that we see will be increasingly competitive. And it's important that we do as much as possible to grow our workforce. So we have a great organization, great staff culture. And so we have been able to retain. We do have an excellent retention of graduates that start with us. And so that's an area of concentration. At the start of this year, we launched 4 new programs, and I'll just go to those. 4 new nursing programs have been launched. Once -- we've always had a graduate nurse program, but we've changed it, expanded it, made it better. We will increase our number of graduates by 25% in February, and we will continue to increase the number of graduates we take in. We've made it a 2-year program. We've put post-certification opportunities in there for mental health, et cetera, so people can specialize. So far more attractive, and working really hard on retaining those people both before they start and then after they commence. So been a lot of work on the -- on reengineering our nurse fellowship program. Also investing in our leaders. Our nurse leaders are critical to retaining the staff. And so we have -- directors of clinical services are imperatives to running the hospital well. We're investing in programs for that group of leaders. But also our nurse unit managers of all the people in a hospital that make it successful, it's the nurse unit manager on the ward. And so they are the most important workforce of all. And so we started Nurse Leaders of Tomorrow Program to really help that level of nurses through management, leadership on to DCS, et cetera. But by keeping them and making them better, nurse unit managers, we will see that, that attracts other nurses and makes it more of an aspirational career. And in the back to the bedside program, the biggest feedback we get as nurses are increasingly administration there's increased amount administration, increasing amount of work, paperwork, et cetera. So how do we get them back to the bedside? We started a robotic process automation program through our financial services last year and have saved about 4,000 hours in 1 year across -- by putting bots out and doing invoicing and all the things that they do. And we see the opportunity in nursing that we can do this as well. We've had -- we've been working with the company. They've identified 300 pilots. We will drive out these bots across our nursing profession to see if that can't help get nurses back to the bedside. And so that will be an area of focus for us. Just further on the workforce side, we've locked away 3 EBAs for -- in the first quarter of this year, and we've got 1 to go. So we hope that, that goes some way to making it. We know what our budget is in that regard. And we're rolling out a whole range of employee value propositions via Colleen and the team. And so there's a lot of areas of focus. We are excellent at workplace health and safety. And some of you might know that we joined Comcare from first of December last year, and we're on track and on budget through that program. We've outperformed the scheme as I thought we would because we have an excellent team in this area. And so we're really leaders in the space and Comcare is delighted with how that's going, and so are our staff. So it's been a really win-win. Lastly, on Ramsay Cares. Craig talked about this. I won't go into a lot of detail. Suffice to say, we -- some of the areas of focus, we've launched a mental health first aid training program. We've had 132 staff go through that program. They love it. It's about making sure that you identify mental health issues in the workplace. And that's been a great program. We'll continue. And I think we've got 1,000 staff to train over 3 years. And in terms of the planet initiatives, we have -- we are rolling out our solar panel installation. We've had about 5 hospitals now undertake -- install solar, a little bit delayed because of some COVID issues and construction and all those things, but we're on track. And we've had a really big emphasis on removing single-use plastic items. Hospital's a big waste producers, and so we recognize that. So we've reduced 24 million pieces of single-use plastics. And we've also taken out water bottles. So there's no water bottles in our hospitals anymore. We went through 6 million a year. So we've taken out 6 million water bottles across the country. And hopefully, that also helps to drive down the number of plastics going into the environment. So there have been things that we're proud to have done and the staff have really been behind that. A lot of -- the caring for the planet stuff is imperative from a staff perspective. That's what they want to see you doing and that's what we are doing. So it's been great. We have a great committee working through those projects. That's it. Did I get in the time? All right. So that scared me so much. Okay. So there is 10 minutes break, which you can get water. Toilets are out to the right, and then we'll see you back for questions. Thank you.

Before I hand it to Craig, just a few housekeeping issues around asking questions. [Operator Instructions] We'll take questions from the floor first, and then go to verbal questions and then written questions. Craig?

Thanks, Kelly. It's my pleasure to introduce the team. They're up on the stage. So I'll start on my right, Professor Edward Byrne, he is our Global Chief Medical Officer, and Ed joined us earlier this year in February. He's had an illustrious career across Australia and the U.K. in all facets of health care. So we're really fortunate to have Ed on the term. Colleen Harris is our Group Chief People Officer, and also responsible for our ESG program, and Colleen is doing a magnificent job across workforce. Martyn, you all know, Martyn Roberts, our CFO. Carmel, you've just seen and met, and Carmel is doing it -- from a long career in Ramsay, stepping up to be the CEO of Australia. She's doing a fantastic job. And then we've got Doug Meagher. Doug is the CFO for Ramsay Australia. And in a period where we're doing lots particularly around systems and structures, Doug and his team are doing a fantastic job. And Henrietta Rowe. Henrietta is our Group General Counsel and Company Secretary, and is a whizz at corporate governance. So thank you all. Happy to take the questions.

Andrew Goodsall from MST Marquee. Following up on presentation, just the expansion into non-hospital services. Just trying to understand how you're thinking about adequacy of reimbursement and what the margin effect is in terms of perhaps the Australian margin in terms of the blended effect?

Yes. Am I on?

Yes.

Thanks, Andrew. I'll hand -- I'll talk -- answer the margin question. Basically, we are -- we've been expanding into these areas for some time. And they will be low-margin businesses. But the idea is that you can offer -- start to offer more larger contract work. And so when you go to a health fund to negotiate a contract for next contract level, you can start to offer some different programs. They're attractive to them and attractive to patients beyond just the hospital program. So that's something that they're all looking for, and we've had some success in that in recent times with health fund negotiations. So they are looking to these programs that go beyond what the offering is today. Some of that's to get patients out of hospital quicker. And I want to keep them more well for longer, less readmission, all those sort of things. So from the DVA to all the other health funds, they're looking at these programs. And so it will be bundled into some of that self contracting process. Of course, there's lots of payment for these programs, whether it's expanse cover or Medicare funded, psychology will be largely Medicare funded. But what I hope to see in the future is that we can start to look at much larger contracts with different payers. So whether it's public payers or other insurers, there's the opportunity to say we have a program that -- where we can decide right care, right time, right place. And some of that will be in the community. Some of it will be in hospitals, some of it might be day programs, but it's a different offering, rather than just the traditional model we've had. So it's not so much about building these services to create a revenue streamer on its own right, on its own siloed out here. It's about a bigger offering together with our hospitals that I see as being the best outcome in a few years' time, but it's a matter of growing that service. I think definitely with public, with psych and public, there's a big opportunity. And we just have to look at what that might look like. If you can look at the whole population funding like we do in South Australia where we are funded differently there on a population health funded program similar to what we do in Sweden. That's different. You start to say we can look after this population's mental health, and we'll decide where they go, and we have to fit into those buckets.

So just picking up on margin again. Can I be heard? I think I can be heard now. So just picking up on the margin. So yes, as Carmel says, looking at them in isolation as a silo, the margin is a little lower than the other businesses. But we apply the same investment hurdles to these considerations as we do everything else. And when you look at the macro effect, it's around the opportunity for growth and a better integrated care pathway that we look at with them so they complement the existing service offering.

David Low, JPMorgan. Maybe if we can continue on, on that theme. I mean can I get you, Carmel, perhaps to talk to the competitive landscape? And does Ramsay have a differentiated offering from some of the big charitable competitors as yet? Or is that something that we should expect some 5 years into the future?

Yes. I think the biggest issue in this space is workforce like everything else. And -- so if you can attract and retain the workforce, you will have a differentiated offering. And that's the bit that we're concentrating on. So at the moment, we're concentrating on the workforce and what it looks like and the right management structures, the right systems, right tech to make sure that people want to work with us. So if you get that, then you will be successful. We already have, like I said, 1,400 allied health staff. We're a big provider. And as we build up our psychologists and we'll keep building that team out, and we will do it slowly but, surely, in lots of regions we will see that we'll be successful. And we are growing that and being successful so far in terms of our own programs. So Ramsay Connect is looking after Ramsay hospital patients. But eventually, there's a market to look at other payers and other providers. So yes, we will. But we're just being specific in what areas we're looking at. But like the NDIS is, they are -- there's no supply. There's just not the workforce. So it's #1 getting the workforce right, and that's what we're concentrating on.

Funny you mentioned that, workforce was the other question I did want to touch.

Yes.

I mean we're hearing about it on a global basis around nursing workforce and healthcare workers generally. You signed the EBAs, and I'm not expecting you to disclose the detail. But how does this workforce issue manifest itself through the financial outcomes. I mean it seems to me that costs of providing health services is starting to go up. And that's -- you've obviously got payers that you need to bring along in that discussion as well. So just perhaps near term, like the next year or 2 and longer term, how do you think you'll see that come through in the financial results?

Yes. Look, we've had good health fund rate increases recently in the 3 health fund negotiations that we've done. And I'm very mindful of making sure that they stay above our EBA increases. So that's we're very mindful of that, and we will and we have. But it's -- there's no doubt cost of doing business is going up. You know and Craig has talked to you about the cost of doing business during COVID, we haven't finished that yet. We're still trying to normalize, and that's an issue. At the moment, workforce is okay, but I foresee some challenges. I don't think we're going to escape that. All industries are going to go through some workforce pressures and inflation and all those things. We are working hard to lock in the EBAs now in light of that.

One last question on this topic. I mean agency, if we go back, I've followed Ramsay for too long. I remember the days when agency costs were one of the first questions we asked, and they were going up and then they came under control. I mean do you see much risk that that's going to happen? I mean, it seems to be happening in the U.S.?

Yes. There's no agency out there to get, so the cost isn't going up at the moment. But as we haven't been increasing agency costs just yet.

No significant change.

Not a significant change, no.

But have the same challenges with the workers [indiscernible]

Yes.

David Stanton from Jefferies. Just a follow-up on David's question there. If you can't get agency and you've got challenges with nursing stuff. Does that sort of put a dampener again from a financial point of view in terms of your volume growth going forward [indiscernible]?

Yes. Look, we haven't -- we're not seeing any service -- much service disruption now. So as of today, no. And so at this point in time, we are able to deliver all the services we need to with the workforce that we have. And I see that continuing. We will have some staff fatigue like I said, and equally doctors will go and leave. And so over in the course of these next couple of months, I see that playing out. And then we'll have to relook at where we stand. But no, I don't see it being an issue. We've got 600 nurses starting in February under the graduate nurse program, and we've got an active EN program that we're looking to ramp up as well. So we just have to continue to invest in those programs and make sure that we don't hit those hurdles, but yes, not yet.

Understood. And then my question. COVID costs, I see in the presentation, you talked of thinking that will decline in the second half. And two, could you talk to [indiscernible], but how that's -- how you see that rolling out over the next 12 months of work?

Might let Doug answer.

Yes. So I think you'll recall, look, I think, when we first mentioned those, we were running at $8 million a month, or close to $8 million a month, and then that's then come down to around $4 million to $5 million a month. We're still experiencing that at the moment. We're certainly hoping that, that will take us through the second half. But we're not expecting a really significant change in that for a little while yet.

It's Lyanne Harrison here from Bank of America. I'd like to move away from nursing for a little bit and talk about your transformational digital and data programs. Can you give us an indication of time frame? What sort of costs and benefits you're taking into account? And what we could expect from that over the next 3 years?

I'll take that. So costs aren't finalized yet, but as I said in my presentation where we are in terms of the rollout of the evolution of the digital and data strategy varies by region. And so there's been a reasonable cost incurred over the last few years to get to where we got to. With the chief digital and data officer coming on board this week, focus over the next 3 months is to nail down the priorities in that digital and data road map and then we'll put some costs against it. But everything -- we've always been a cautious investor in that business technology. We've always been on the front foot in terms of clinical technology. And so I think we're always going to take a conservative position. But in saying that, we know where we need to get to. We're prepared to invest in that. And we'll look at a 3- to 5-year horizon rather than what we do next year. And just to make sure that we make small steps, and I think in all industries, you're now seeing that the advancements in technology have made them more accessible and cheaper. So being a laggard in the industry and helping laggard across industries, we are probably in a good place to sort of leap ahead with not a massive capital investment, but will come into the new year, and we'll be clear on what that looks like.

And just to summarize that. So what you're seeing is that you're still in investment program probably over the next 3 years, and we're unlikely to see any sort of margin expansion until the [indiscernible].

You'll see bits of it. Carmel talked about the creditor automation. So there's benefits that will come through. But there'll be project-specific and geographically specific. We'll see in the U.K. now that the ePR rollout was -- it was just in the last couple of weeks. We're confident in the next 12 months, we'll start to see benefits that will flow to the bottom line on that. So it's not as though everything waits until the end of the program. Because it isn't -- it won't be one massive initiative, we will do a series of smaller initiatives that will order.

You talked about the ability to get PHI outcomes above the EBA. Is there any sort of realistic scenario where that doesn't happen in the future?

Yes.

Look, I think we just all...

No, I think it's something that we -- inflation in workforce salaries is already happening. We're seeing in all industries, there will be some challenges. But I think health funds are in a good place. And the negotiations have been smoother. And so we'll -- and we're in a good position to demand a quality price, so...

It's about where the environment is at the time of the negotiation. And so we think, as Carmel said, our recent experience has been a lot more positive than it probably has been for 5 years. The health funds are in much better financial position than they have been. And so that does make the negotiation easier. Yes, we have a view about what cost escalation looks like, and we take that into negotiation, which very much depends on when the timing of that negotiation is.

John Deakin-Bell here. Just interested in that margin question again. And around the addition of theaters, I think. We said that there were 30 -- in that $700 million of CapEx is 30 theaters. So I think you'd come up [indiscernible] or something. So 6% to 7% theaters over 3 years does not sound a lot. What percentage the theater increase per annum is likely over the next 5 years? And is the increment of return on that, that's higher than the overall margin in the Australian business?

Just to clarify that those are approvals that are currently in the system. So -- but there are stack of other things coming down the line that could be other theaters to come on in that next 3 years or so. So just to clarify that they're approved, right. But there is a whole lot that will be approved over the next year that could come on in the next 2 years or 1 year or whatever. As you add theaters, it's pretty simple to open those up. So in that way, I expect to be higher than 30-odd.

And as a general rule of thumb, that incremental volume should drop down at a higher margin than the existing business. But it's not linear. It goes in steps depending on what the fixed cost space you need to put in for the extra capacity that we've put on board. But when we look at the makeup of the brownfield spent, it isn't just about heathers peers and certainly not just about beds. Its got throughput and there's a range of things that we spend it on, consulting suites get a lot more of a proportion of the brownfield spend at the moment. So -- But simple rule, more volume, we should drop that down at the high margin.

So all things being equal, if you've got kind of higher margin but some elevated costs, at the worst your margin should be stable going forward. Is that...

I mean for us, I think we've been pretty transparent about. That's our objective. Stable margin. We don't get too aggressive one margin growth, even though over the years, we've had some solid margin growth, but the objective is to maintain margin. And whilst the nonhospital-based businesses are small, they are structurally dilutive to margin.

And, Sir Ed, perhaps I can ask a question o you. In your capacity, the elevated PPE use for the pandemic. How long do you think it's going to go on for? And how much extra cost do we need to laid in for that? Is it going to be there forever? Or it is going to disappear?

I mean, this pandemic has surprised us at each step of the journey, and we have Omicron coming through now. But, in general, I've been very involved in this in the U.K. before coming back. So I know quite a bit about it. I'm pretty sure the worst of it is well and truly past us. We're now in the endemic phase, which will go on for quite a while, and it will equilibrate across different countries, and we have to live with it. But we know where that's going to be. I mean in health care, basically, it's going to increase the overall health care load a bit because there will be a lot of COVID in the background in hospital, and elsewhere in the system with long COVID. But the hospital rates won't be anything like we've experienced in the worst parts of the world. Long COVID will put a little bit of extra stress on, but the system has expanded a bit to allow for this. And this gives a lot more opportunity for private provision. One thing that's been clear in every country, including Australia, is that public provision, acting in isolation, can't cope that well with this type of crisis situation. But when the private sector steps up alongside then the 2 sectors work together in synchrony, which we've really seen here, you manage. So the -- going ahead, there will be a more and more possibilities for the private sector to engage in different areas, both in terms of its share of non-COVID work. And certainly in an outpatient setting, perhaps helping with some of the long COVID management.

Just an example on, yes, a small item, like gloves. We're hearing from our procurement manager yesterday that they were $0.03 to buy before COVID, they went up to $0.18 through last COVID, and that's a lot of dollars when you use other gloves. So -- and they've come back down to $0.07. We've just been out of negotiations. So we're going to see some price reduction as well as the supply increases. And so that's -- I think we'll see some retraction of those costs in time.

Just to add to that, we were very cautious as we went through COVID. So we stocked up on PPE substantially. So we're still working through some of the stuff that we acquired at the big challenge [indiscernible] take a while to get through the [ registration ] system.

It's Gretel Janu, Crédit Suisse. I just wanted to go back to the margin topic and day hospitals, in particular. So a stand-alone day hospitals, they're able to earn a greater margin as opposed to when it's combined with your overnight hospitals.

I'll answer for the higher level. Short answer is no. They -- depending on the case mix of them. And so stand-alone day hospitals tend to have a lower acuity. With that lower acuity, you have a lower cost base. So theoretically, you should -- and given the way that the reimbursement mechanisms work, we should be able to operate on the same margin regardless of the [ budget ], but overall, what we see is low margins in those, and lower returns of their capital investment, particularly around compliance for those facilities has always made the economics difficult.

Understood. And then in terms of the adjacencies, looking into radiology, pathology, radiation, is the ultimate aim is just to acquire a provider and then roll it out to all your hospital network? What are the other range of options that you talked about in the slides?

Okay. I'll answer that one. We won't be specific about that, but we do have a range of options. We have a lot of diagnostic service providers based on our campuses. And I've said for a number of years that, over time, I think they should be more integrated into the hospital services. There's good providers and not-so-good providers, and so we don't want to take the risk on that whole patient experience and the integration. So there will be a range of models that will come through and will have different partnership models with different providers, and we may own some ourselves, but too early to say exactly what [indiscernible].

It's Saul Hadassin of Barrenjoey. A couple of questions. On returns. Maybe, Martyn, question for you, but rather margin-focused ROIC-focused with those adjacencies in maybe the out-of-hospital care. I'm assuming it's low capital intensive, albeit lower margin. Is that -- do you see it as accretive to the group ROIC building up that offering.

Well, if it wasn't, we probably wouldn't do it. So as we said, we've moved to cash ROIC to get away from all the rubbish with AASB 16 and accounting and just focus on cash returns. It's pretty similar, one we used to say the investments needed to be 15% return on capital employed after year 3, but 10% cash ROIC, it's kind of the same number, but in a cash number. We're working through the business models now in the day surgeries. That's why Carmel said that they will have to be very low-cost build efficient processes digitize so that the -- sort of from a workforce perspective, it's lower cost to be able to get those kind of returns. And so we're going through that now. But those business cases, we'll have to meet with the hurdles that I talked about earlier.

And the health -- the Ramsay Connect and the Health Plus, again are they high-returning opportunities?

I will let Doug talk about that.

Ramsay Connect to joint venture with AU, as Carmel said. So obviously, our investment of that is relatively small, but it's a very offer we can do together. In terms of the Ramsay Health Plus, it's a very low investment. So the return on that is reasonably good. But again, it's a very small part of the business.

Just one on day surgery, particularly standalone. Just, your decision to pour dollar into community-based standalone facilities as opposed to building out an offering on your own campus, is it more just your geographic footprint where you might have lack of exposure that drives that decision? And what specialties are you particularly interested in? What makes sense economically in the day surgery provision?

Yes. So just to confirm something, it doesn't mean that we're not investing in our day surgery on our campus, that's #1 priority. So a lot of that brownfield spend is in improving the day surgery experience on our campuses, whether that's day of surgery, sort of admission, et cetera, et cetera. So there's like 10 hospitals at the moment that are broadening their offer, expanding their day surgery offer. Within the Joondalup development. There will be a big day surgery provision. So that's not changing. We are investing in those services. On the community stand-alone sites, where we think there's a place to be, we'll be in, yes, you're right, new geographic locations also Western Sydney, Western Melbourne, lots of pockets in Queensland. So we've got mostly to look at where we can look at holes and what we can do extra in those holes. And doctors are looking at new markets. So doctors that work with us today and our bigger hospitals also want to look at new marketplaces. Largely, day surgeries are gastroenterology,, plastic surgery, dermatology, those sort of areas with a smattering of urology, et cetera. It doesn't mean in the future that there won't be cardiology, more orthopedics. There could be. But largely, I still see those services being offered at our big campuses because they want the backup of the ICUs and services that back them up. But there is -- there will be a tendency to have some services done in those smaller day surgeon units. And we -- so we are future-proofing when we're planning for those day surgery units. They'll be future-proofed to plan for what might come down the line.

I'll just add to that. When we look at the growth opportunities, growth corridors, developing markets, we'll just look at what model gives us -- what footprint we should have in that and whether it's starting with something small, so that we can scale it. We took a decision on the northern corridor of Melbourne, as Carmel pointed out, so the Northern Hospital, but because the opportunity really was for a more co-located facility that putting something more substantial into that corridor is the way we go. So we just look at the markets, what the growth profile is, where the doctors are, all the things that are going to make [ assessment ] about what we should do.

Are there any other questions from floor before we move to further questions online? Okay. We'll move to the questions online.

We have the first question from David Bailey at Macquarie.

Just following on from some of Saul's questions actually. Talking to day and short-stay hospitals and the move by insurers into this space, I'm just wondering are there any observations on the challenges you see in scaling up this model? And then just some more detail around or commentary in relation to the factors that drive the economics, or return to these businesses would be interesting as well.

I'll start on the last part of the question. The economics are difficult on those things, the capital that we need to invest. Australia is an expensive market in terms of health care building standards, so you haven't seen a massive proliferation of stand-alone day surgeries over the last decade because the economics are very difficult. And so I think when we look at what the -- what are -- we pointed at previously, we have the largest provider of day surgery in the country and will provide more day surgery than all the stand-alone day surgeries doing in aggregate. And so that gives us a great insight into where that do surgery market is. And the scale of the initiatives that people were talking about sort of significant, if you like, the way we look at it. I think Carmel's point earlier about doctor engagement and how doctors want to participate. I think one of the subtle comments she made about our preference will be for doctors who want to work around our campuses. That is a big magnet for doctors to stay with us rather look at some of those other models. There will be people that do that, as Carmel said, but it's not something that we're at all concerned about. It's [indiscernible].

Yes. Got it. Maybe one for Martyn. Sale on leaseback, and there is obviously plenty of appetite for the hospital-type health care assets at the moment. The examples from the [ peers ] where there is minimal tax leakage by various ownership proportions. I mean if you look at -- run a scenario whereby you sell part of your property portfolio, buyback some stock, maybe find some acquisitions, EPS accretion, multiple uplift on the operating business. Is this something that you're looking at a bit more closely in the near term or would consider in the near to medium term?

Yes, David, we've done a lot of work in this area and really sort of run the ruler over it to quite a deep extent with a whole bunch of advisers. Those models, you're talking about the kind of [ 51-49 ] structure, such as Telstra just did with their towers, et cetera. To avoid tax leakage, you need to have a tax base that's above the 49%. We just don't have that. So given the historic nature of the buildup of our hospital network, the tax base for our network on average is way lower than that. And so we don't think it will be a good use of shareholders' funds to pay hundreds of millions of dollars of capital gains tax. So that's a big challenge for us. Would we consider a smaller portfolio where there's a few hospitals with a higher tax cost base and maybe sell a smaller percentage? Possibly. And they might be ones where we've got some of the more significant brownfield investment going forward where we can get investors to co-invest with us. That might be something we might consider, but there's certainly not anything active in the short term. But yes, and the other thing I would say, some others have managed to avoid capital gains tax by virtue of the fact that significant capital losses carried forward, that they've been out offset these against of capital losses to do some leaseback. To Craig and teams' credit, there are not any capital losses for me to use. They haven't stuffed anything up over the years. So there's nothing to be done there. So look, we keep looking at it. We keep investing in it time and effort, considering lots of different. We haven't found one yet that would be satisfactory to do that. And right now, as on today, we don't need the money, obviously, but it could be a good way of diversifying our borrowings in the future. We understand that. But it's a bit of a barrier right now.

Yes. Understood. And just my final question. There was a slide in there today on procurement. Just wondering if there's any update on either the timing or quantum of benefits from the JV with Ascension, NuSoarceGlobal. I haven't heard much on that one for a while.

So I think as we've said for a while, both of our organizations have been focused on COVID. We did prove out the model with a couple of smaller categories. But we've got to do some homework ourselves now to be able to access that properly. Carmel talked about category based buying. That's exactly where we need to move to going back to more national-based contracts with our suppliers. There's quite a lot of work to go through to do that, and we'll come back and revisit that sometime in the future, but there's no update there really. But what I would emphasize again is what Carmel said, we're focusing in other parts of the P&L, so not just medical and supplies. And we're seeing some good benefits from that. So it doesn't stop the work and the focus and the increase in the team that we've got on procuring.

We have the next question from Steve Wheen at Jarden Group.

Can you hear me now?

Yes.

Okay. Sorry about that. This is a question for Martyn. Just on the investment parameters that you've put up. Are you saying that there's no change essentially with the old parameter to the new perimeter based on using the cash ROIC?

It's kind of the same outcome. I mean there will be slight differences. But if you think about a 15% pretax return on capital employed is going to end up being depending on the tax deductibility, et cetera, 10% post-tax ROIC.

Yes, okay. But -- I mean, you do have...

The EPS hurdle were there already.

Sorry, say that again.

ROI hurdle and the EPS hurdles were already there.

Yes. But there would appear to be some more wiggle room, I guess, within those hurdles with the extension to acquisitions being achieving those hurdles in 5 years because it was previously 3. And now there's, I guess, that comment about the strategic investments where you can go below 10%. So that would be the major changes that...

That's the way we've always looked at it anyway. In acquisitions, I think we've said over the last few years that the environment for acquisitions on a global scale has become more competitive and certainly in this low interest rate environment. And so for us to be competitive in those, we needed to revisit that and that's been the case for a few years. So I just think on the strategic side, we've always taken a view that if something was really strategically important that we would we would be flexible on what that return criteria are. So that's not new for us.

So it's not in response to sort of missing out on some transactions more recently just because there's perhaps some more patient capital out there that have lower [ WACC ] than perhaps yourselves?

Yes. I mean that's the reality. And so I think the Spire opportunity is a good example of it. Now just we maintain the discipline about what -- on what we thought value was and what the return profile should be, and we've just didn't chase it by putting more money on the table. But certainly, when you've got infra funds coming into health care assets with a lower cost of capital, it's a more competitive environment, but we still have to maintain the discipline that we have to look at it on a longer-term basis.

So with these changes, would you be able to bid more aggressively for Spire?

No, no, because we're working on this basis anyway in that opportunity, the answer is no.

Understood. Just with regards to the negotiations -- sorry, just with regards to investing, you've got a slide there about adjacencies and integrating various adjacencies within your business -- is that -- what does that entail with regards to the commentary around the leases? Is that sort of taking imaging in-house to run it yourselves? Is that the intention to be able to do that? And do you have the capability to do that without making an acquisition on that front?

Following on from the answer I gave earlier. We'll be flexible about those models and where we have partnerships and Carmel alluded to it, the historical structure for third-party providers to provide particularly diagnostic services, imaging and radiotherapy, nuclear medicine particularly. They're old structures. They are things that sort of are legacy from 20, 30 years ago because they're long-term agreements, and the quality of service agreements that were put in place 10 years ago aren't what they should be today. So Carmel and the team have gone through and looked at what all those arrangements are across the portfolio. and developed a framework for a strategy going forward about how we can integrate those services more. We'll be much more critical on the arrangement with providers. There are some providers who say there are some providers who are better than others. There are some providers who see themselves competing in some of our markets. And so where those relationships are going down the track, we'll be much more critical about. And so they won't be just what they've been in the past. And the models will be different. There will be a mix of JVs, us owning things. And when -- the key on some of those things is the clinical capability that sits with the doctors that are associated with those businesses. That generally comes across. You can't put an imaging service next to Greenslopes and have the complexity of Greenslopes' imaging service. So people are attracted to that. But it will be -- I won't say horses for courses so much, we'll have some particular strategic direction and particular relationships that we want to continue to build on going forward, and some relationships will fall away because they might have missed what we were after.

Okay. And then just lastly for me and perhaps for Carmel...

Sorry. David Low from JPMorgan again. Just touch on these strategic investments. Can you tell us what strategic investments you've made in the past and what you'd consider in the future? And what I was trying to interject with is, was the Spire considered strategic?

It was absolutely considered strategic, but it doesn't mean it...

So you could go outside the criteria?

Yes, but it doesn't mean it's an open checkbook guide. You've got -- looking at what a strategic investment is for us, and we're looking at 5 or 10 years down the track, what we can build, how we can add value to something. One of a great example would be it's a bit old now, but North Shore Private. That was a really difficult business case at the time, it would be even more difficult today, but we always do it. We always take the view that, that's the sort of business that you want to see into the future, even if you're going to take a hit in the short term.

So your expectations would be that in a longer time period, you hit the hurdles you just didn't get them in the timeframe?

Absolutely. There's no point doing something strategically if it's not going to add value.

And if I could just go back to one of the other topics as well. I mean what we see from the Medibank offering is a particular offering on out-of-pocket costs, which has been a very hot topic, perhaps less so in the current environment where private health insurance membership is going up. But do you -- have you seen much pressure from those out-of-pocket cost arguments in business at all?

I'll take it first, and I'll hand it on to Carmel. Whoever takes some initiatives, whatever they may be, that has an influence on controlling out of pocket cost, I think it's a good thing. The whole industry benefits from that. Specifically, are we seeing some impacts? We've got some programs that we've looked at about sort of trying to have not zero out-of-pockets, but known out-of-pockets. So to understand what these limits are, some more successful than others. I think what we're seeing is in our role that we've taken is, one about education about where the market is going and not trying to dictate to the doctors what they should charge. But -- and I think what we're seeing is a lot more questioning at the start of the patient journey. And so before referrals are sort of taking effect, people want to understand what the financial implications are a lot more than they used to.

Yes. Yes. No, we're not seeing too much impact on us from that -- those particular models. So there's a limited number of doctors still that are undertaking those models, so 1, 2, 3 doctors. And then where you have -- where they have been put in place like some obstetric cases, some -- there's been a payment on both sides by the health insurer and the hospital or whatever, that's out. So there's -- there hasn't been a degree of success yet that we've seen from some of those out-of-pocket models and the doctors that are in them, they've come back to us and want more money. So that's the trouble they're going to have a little bit. So doctors might start here, but eventually, they're happy with this, but eventually, there want more. So it's going to be an interesting challenge that anyones that works with doctors, and we've worked with doctors for 60 years. it's a challenging prospect to go into business with them as well and to try and do those arrangements. So good luck, but it's going to be challenging. But as Craig said, absolutely, we're supportive of bringing those costs down. And in cases like Western Sydney, we've worked really closely with the obstetricians and the pediatricians need us to give more transparency at price and that has worked. But what we find is here is the offering at this price and here's the normal offering and still people choose this offering. So it's interesting when you put it in front of them, it's actually just transparency that's more valuable. And that's -- when you put it and say, well, you get this here and you get this here, we'll choose this one. It's still playing out that way at this point.

And if I could just add one more, just the prosthesis. I wasn't sure, Carmel, that I completely followed what you're saying. I mean, I think probably all heard bits and pieces.

Yes, it's a complicated area.

The general miscellaneous part was a bit that I wasn't quite what your expectations are for this.

Yes. So the idea from the department was that they would actually get rid of the general miscellaneous list altogether. So those sutures, staplers, all those little bits and pieces that get covered at the moment by the health insurance, the glues are in general miscellaneous bucket. And so that's currently a pass-through to the health insurer. That's been upsetting the health insurers along with the rest of the prosthesis with pricing on it. Some of those items have been overpriced compared to what they were before they were listed, so there has been some challenges. On the general -- on the big broader prosthesis reforms, that's going down the path of public reference pricing. The general miscellaneous list was being removed altogether. And so that would have required us to negotiate a price with the health insurers and the suppliers and would've left hospitals post COVID lots of challenges, lots of other things on our minds to go into all that negotiation. Now I can back Ramsay to do that. But lots of hospitals out there that have not got the wherewithal to do that. And so as a representative on the APHA and with the CHA, we've worked together with Hunt that's not causable. Yes, that's not fair on hospitals. We've come to all of these challenges. And then the lift is worth about $300 million. So it's tiny in the whole scheme of things, the whole big list. But it's still a significant challenge to hospitals to have covered that. So what we've argued to Hunt is that you need to keep list, and just public reference price like everything else you're doing in prosthesis. And that's what he's accepted as a better option, but we are still waiting to see the fine print and the department still would like to get rid of the list. So there's some challenges still to come, but I think that's where we're hopeful that's where it will land.

It's John again. Just a lot of questions around the return on capital. That Slide 27 is great detail, thanks, and very clear on the criteria. Does -- how does the decision-making process work for existing assets that make a lot less than that hurdle rate? So for example, RGdS, I think, is at 4% return, well less than the 10%. Should we assume that those assets are considered to sale? If -- because obviously, selling them would be returns enhancing for the rest of the business. Or if you don't sell them, should we just assume that at some point, they will hit that hurdle rate and that they'll make 10% [ that's due ]?

What you should assume is that any incremental dollar we invest in those businesses has those hurdles. And so it's not a hurdle for historical activity. Ramsay Santé sits very strategically within our business. We get a lot of those global benefits that we talked about earlier in Craig's slides. It is a substantial part of our business. If you recall, when that business was acquired, a lot of the procurement benefits actually are in the Australian business now. You don't necessarily see it in the Santé business. But it's not a criteria for divestments, but you should be reassured that Ramsay Santé has the same investment hurdles for every incremental dollar they invest in their business. Andrew?

That's a bit better. Just thinking about the public sector, I know they've been engaged with you through COVID, the extent to which they're starting to contemplate how do their waitlist catch up next year and the role that you might play there.

Sorry, was that in wages catch-up?

No, waitlist.

Waiting list catch-up. Right. Yes. I wasn't going to help them with wages catch-up. Yes. Look, I think -- yes. Like I said, there's going to be some time to come before the public sector can return to normal. And there'll be -- I think there will always be challenges around the respiratory illnesses and long COVID effects and all those things, particularly in our overseas markets, probably more so in Australia. But here, I see us -- we are very open to assisting public sector. At the moment, that's challenging because there's a lot of backlog of private work, and so the doctor's going to do that. So the big challenge is around time, the theater and doctor's availability and staff. So that will be a challenge. But in the long term, I think there's going to be a lot more we can do. And they'll be in specific areas like looking at significant longer-term public contracts. And what we say to each of the [ DGs ] in the states is don't just give us this little bit and say, "We want you to do this for 3 months." Let's look at a longer-term contract that's 5 years or a couple of years. And then at least if we have -- if we know and we can budget to do a whole lot of gastro cases over a year, then we can plan it. And we're not trying to fit it in 3 months alongside our private work. So it's more of -- I think that's what we'll see more of. Surgery Connect, obviously, in Queensland is very successful. You don't have it in New South Wales and Victoria as easy. But with the amount of work we've done down here, I think there's an appetite now to look at some of those things, so how do we do it in a better way.

We'll go to the verbal question online.

We have the next question from Steve Wheen at Jarden Group.

Just following on from that question. I was just wanting to get an update. I think, Craig, when we last got a trading update, you were talking about some good progress with the state governments in Queensland and New South Wales, but the pricing in Victoria was somewhat problematic or open to renegotiation, or you were certainly attempting to renegotiate. Any updates as to how much they may have come to the party to allow the private sector to help them with some of their backlog?

So I'll give a bit of detail. I think what we're trying to say was that there was the immediate COVID issues that had to be dealt with. And so they were priced at a certain price point. When we look at longer-term arrangements to deal with longer-term issues and impact on the system, then our view is they need to be and will be for us on a much more commercial basis. And so the bigger the scale and the longer the term, the more likely it is that they'll on a commercial basis. The shorter, more crisis management stuff, you just do what you got to do.

Yes. I would just say on that -- sorry, I'm getting feedback. Look, yes, nothing much to say on that. I don't -- I think we did public work at cost recovery through COVID. So coming out of that, we've now got other contracts going on, and we'll -- and those contracts are all handled at the local health district level within their budget. And so there's a lot of different differences within those. And -- but there's starting to be more discussions at an AMA level about doctor arrangements and how that works. And so we'll start to see a little bit more standardization across some of those health contracts. And we've just engaged a public health contract person to assist us through some of that because we're very adept at the private side, but we need to increase our skills on the other.

And can I just ask you to clarify one thing you mentioned earlier just with regards to your ability for the PHI pricing to be above EBA rates? Is that sort of from this point on? Or is the existing arrangements with PHI like the arrange -- the multiyear agreements with Medibank, are they already -- are you seeing that those rates are above EBA as well?

Well, we never talk about that. But yes, everything is going forward. So when we go to the table next time, we'll look at, as I said, what our view on cost escalation is, and you wrap that into the negotiation. You can't fix grant mechanisms in the existing agreement to change them. So you live through that and whatever they may be. So that's probably all I'll say, Steven.

Yes. Okay. And just timing of the next...

Lyanne Harrison, Bank of America again. Just to follow up on backlog to the waitlist and if you think about the private backlog at Ramsay. How long do you think it takes to work through that, obviously, given the challenges you spoke about, about fatigue and needing to take leave over Christmas and January and also, fingers crossed, that there's no more restrictions on elective surgeries?

Yes. I'm not sure we can give you an answer exactly because we don't have a waiting list in the private sector. The doctor knows what they've got coming down the line, or we can go his anecdote that -- and what they're booking now is -- and what they're telling us is that they're busy and they've got 3, 6 months waiting lists for patients. And it's very site specific as well. So Sydney, we did have -- there's probably not as big a backlog as there is in Victoria for us because some of the other hospitals were able to continue surgery whilst our 7 hospitals were shut. So that was challenging. But in Victoria, there's more significant backlogs. But we can't tell you what that is.

Yes. And I think what we're going to see in terms of profile is what we saw last year. Small spike of increased volume to start with, then it just settles down to a lower level but still at a premium to where it was historically. How long that lasts for? Not sure.

Okay. We just might take a couple of the written questions. A couple from Sean Laaman from Morgan Stanley. Without investment in brownfields, how much runway for gross do you see in our existing Australian network within the limits of the current physical headroom?

Look, we keep getting better at using our facilities efficiently, and the investment in brownfield -- I know you said excluding brownfield, but it's all about getting that throughput capacity increased and getting better processes in place to move people through faster. Length of stay fluctuates. Length of stay for surgical length of stay particularly has sort of been decreasing for some time. But as the patient cohort gets older, we've got more comorbidities. We're going to see an inflection in that. So there's a bit more art than science in the way we look at capacity.

And secondly, how much will brownfields be on an ongoing key picture of sustaining historical prepandemic growth rates?

I mean if we just get out of the pandemic for a moment, the drivers of demand for health care are still there. And so if we're managing our portfolio properly and we're not putting too much capacity in too soon, I think we're going to have a continual stream of brownfield development to keep up with what was that growth in demand. And the style of the brownfields will continue to evolve, but whilst there's growth of demand, there will be opportunity for brownfield.

And thirdly, on the 4.5% admission growth from '21 versus '19, what portion of that growth is from public admissions?

It's very small. Not much.

Small. Yes. Tiny.

Just insignificant.

Okay. And a question from -- a couple of questions from Troy Cairns. There is not a lot of money to be made in day hospitals, Carmel. But at the same time, you recognize that the industry volumes will continue to move that way. What can you do to expand in day surgery and not see a negative impact on Australian hospital margins?

Yes. So as I said, we'll continue to expand to day surgeries on our campuses, which is where we will concentrate and we're continuing to concentrate. So a lot of those investments are in day surgeries on hospital campuses today. And in terms of community day surgeries, we've already got a portfolio. And where it makes sense, we'll continue to look at and investigate other locations for -- and when I say day surgeries, I'm talking about short-stay surgical facilities as well. So there could be opportunities and there are opportunities to look at those. So we will continue to look at those. And they give us a greater geographic portfolio that I think like we said, Australia is -- Ramsay is a leading hospital operator. We have good market share, important that we continue to grow that market share, and we will through looking at new locations.

But just to emphasize that point again, the proportion of the investment into day surgical capacity will be biased towards our campuses. And so the stand-alone piece is going to be the smaller piece of that.

Okay. And another question from Troy. Can we assume Ramsay will be more likely to employ doctors directly in the future given the various strategic areas of expansion? Is it something you've done in the past? Or why now? What are the risks of moving down this path?

Yes. Look, it is a challenge. And I have a personal view that when we get 10 years down the track, there will be a variety of doctor engagement models. It won't be completely in an employed model. There was -- but I think as young doctors are coming through, they're not necessarily looking at their careers from a perspective of operating their own business independently. There will be a mix of people who want to be employees, who want somebody else to manage their business so they can concentrate on the clinical piece. And there will be people who want to do it the way that historically it's been done and operating their business as a small business. We just need to make sure that we're adaptable. I think there's a real challenge in the transition of the way that model will emerge. But it's a longer-term issue. We're not going to see it in the next 3 to 5 years. It's 10 years plus as the next generation are going through.

Great. So there's no other questions.

Anja Samardzic, AllianceBernstein. I just had a little bit of a question around -- you're talking a little bit about there being a backlog in elective surgery. What, I guess, is the biggest rate limiting factor in clearing that backlog? Is it the willingness of doctors to put on extra lists, work weekends? Is it not nursing? Or is it facilities?

Different in every area. But certainly, theater time, nurses, workforce availability would be the key areas, doctors being able to manage it and get through it. So they're the key things.

Yes. The physical constraint is not the most significant one. And then depending on whether you're talking about public patient backlog or private patient backlog, the limiting factor on public is about how much government is prepared to put towards addressing waitlists.

I guess following up on that, is there anything you can do in the short term to address any of those limitations?

We can work weekends, and that's what we're doing. So we're doing a lot as much as we can within those workforce constraints, obviously, and patient safety and making sure we've got everything right. So it's largely a workforce issue.

It's fair to say we're not [ knocking back any volume ] as it comes through.

Just to add to the question before about doctor engagement models, I think one of the things that we do really focus on is making sure that we protect the system that we have in Australia. Australia has a really excellent balanced health care system. And so we talk a lot -- I talk a lot to doctors. And this -- we don't -- for the money that we spend in Australia, which is around 9.5% of GDP on health care, we get a really good outcome. We get excellent outcomes in this country for what we do. So we don't want to move down a U.K. model. We certainly don't want to move down a U.S. model and maintaining the excellent outcomes that we get here. We have the best cancer survival. 5-year cancer survival rate in this country are best in the world. This health system is considered by the Commonwealth Fund and others to be in the top 3 health systems in the world. And so for what we spend, we get great outcomes. So there's a lot of talk about doctor out-of-pockets and all of those things. At the end of the day, we also have to recognize that we get excellent outcomes for what is spent on health care. So it's something that I'm very passionate about making sure we maintain, that we don't move down the model of managed care, more money talks and money directs those patient outcomes. So we have to make sure that that's still here top of mind, that what we have is good, and we need to recognize that.

No questions in the room. I'd like to hand back to Craig for a few closing remarks.

Thanks, Kelly. Thanks, everyone, for taking the time to come this morning and for those people online for taking the time to join. If anybody is available to hang around and catch up and have a chat over a bite, please do. Otherwise, thank you.