A slump in profits at radiology group Capitol Health provides an early warning that government healthcare reviews and rhetoric about waste is deterring patients from tests and scans.
On Monday the diagnostic imaging group, which provides X-rays, ultrasounds, CT scans and MRIs at 70 facilities across Victoria and NSW, reported a 52 per cent drop in underlying net profit to $2.2 million for the six months ended December 31.
The group's shares were smashed, shedding 21 per cent to a 3½ year low of 15.5¢. The stock hit a 12-month high of $1.105 last April.
Capitol Health managing director John Conidi said that the government's Medicare Benefits Schedule review, which has been accompanied by talk of waste and unnecessary procedures, is changing patient behaviour.
"The fundamental problem that we have is a revenue problem. This is all about the negative effect that the government has been spreading with reviews over the last nine months," he said.
"Behavioural patterns have changed and we can't do much about that. The volume of referrals is diminishing. The government has done a great job in decreasing demand for services."
CT scan numbers are down on the same time last year and growth in MRIs was weaker than expected, impacting on margins.
Group revenue rose 57 per cent to $77.4 million, in line with previously announced guidance for revenue 4 to 6 per cent below expectations.
Capitol Health updated the market in December after Treasurer Scott Morrison identified $650 million of savings from axing or reducing bulk-billing incentive payments for things such as blood tests, X-rays and MRIs.
Some providers, including Sonic Healthcare, have pledged to charge patients co-payments.
Mr Conidi said he will wait and see if the bulk-billing cuts are successfully implemented before he considers co-pays.
"A co-payment does add to the burden for patients quite significantly," he said.
"If the bulk-bill incentive does go as the government has planned you will see quite a different industry in 12 months. Under a lower pay environment I just don't think some facilities can survive."
The group said it had suspended its interim dividend "pending capital management activities".
The dip in patient scans and referrals follows a dive in surgical procedures over the last three months, which has been noticed by major private hospital operators.
Slowing growth in surgeries has also been sheeted home to government bluster about waste and uncertainty caused by the spate of federal healthcare reviews.
Medical centre and pathology group Primary Health Care has also noticed the slump, suggesting a tough earnings season could be in store for listed healthcare companies.