Hong Kong private CUHK Medical Centre posts higher-than-expected annual loss of HK$734 million

The medical centre’s worsened deficit was partly because of higher costs of medications and medical supplies.

The loss spilled into the first half of the 2023-24 financial year between July 1 and December 31 last year, reaching HK$170 million before interest, tax, depreciation and amortisation, and was 21 per cent bigger than estimated.

Still, the medical centre said it was confident about making performance improvements on the back of HK$955 million in revenue and its HK$425 million cash balance in the six-month period, which was 1 per cent and 15 per cent above its forecast respectively.

“Inflated prices of medications and medical supplies have led to an increase of about HK$34 million in the operating cost,” the paper said.

“[The hospital] has taken cost control measures and is confident to achieve break even before interest, tax, depreciation and amortisation in the financial year 2024-25 at the earliest, as previously projected by [an independent financial adviser].”

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Opened in September 2021, the non-profit-making centre is the city’s first private teaching hospital wholly owned by a local university. All of its profits go to the hospital’s development and the faculty of medicine for research and teaching.

In 2015, Legco approved a proposal to loan more than HK$4 billion to the centre in 2017. The loan would be interest-free until 2022, and the hospital would then have to pay 10 annual instalments starting in 2023, with the final one due in 2032.

Last year, lawmakers agreed to a five-year loan deferral after the university said it would not be able to sustain operations under the initial repayment schedule as its services were affected by the Covid-19 pandemic, which weakened its liquidity and financial robustness.

Under the renegotiated agreement, the hospital would only be required to pay the first instalment in March 2028 and the last in March 2037. An independent financial adviser estimated the hospital was projected to make a profit starting in 2027.

As part of the plan, monitoring measures were imposed on the hospital, including the appointment of a government-nominated director to its board, and a responsibility for the university to repay the loan should the facility fail.

The repayment plan also required the hospital to provide public medical services throughout the 15-year loan period to make up for the interest of about HK$1.1 billion it originally needed to pay between 2023 and 2028.

It had provided public services equal to about 4,278 inpatient bed days last year, which was 30 per cent higher than the 3,288 agreed to under the plan, the paper said.

According to the paper, the hospital said it strengthened its business strategies in a bid to climb out of the red.

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For example, it said the hospital had seen a “substantial increase” in bed capacity, currently at 297, of which 250 were inpatient beds and 47 were daybeds. In early 2023, it had 215 beds.

The hospital had also signed direct-billing agreements with about 28 insurance companies, as of December. They contributed to a 238 per cent growth in revenue generated from direct billing last year.

“[The medical centre’s] collaborative relationship with insurance companies is expected to attract more potential customers, serving as a key driver for its future business growth,” the paper said.