By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Doctors Hospital’s president has blasted the Value-Added Tax (VAT) Bill’s “discrimination” against private healthcare, adding: “It’s just one more nail in the coffin.”

Barry Rassin told Tribune Business he was unsure whether the BISX-listed healthcare provider and other private practitioners would be able to withstand the negative fall-out from the Government’s VAT policy.

Given the weak economic climate and decline in the number of Bahamians covered by private health insurance, Mr Rassin said the move to ‘exempt’ all government-run healthcare facilities from VAT would inevitably drive patients to their doors.

In contrast, Doctors Hospital and other private doctors/physicians with an annual turnover greater than $100,000 will be required to levy the 7.5 per cent VAT on their patient bills.

While the private healthcare sector will receive some compensation from being ‘VAT-able’, given that it will be able to recover all its VAT input costs, the fear is that increased consumer costs in an expensive sector that is extremely price sensitive will result in declining business.

Mr Rassin told Tribune Business that Doctors Hospital was effectively being hit by a ‘double whammy’, given that the Government’s revised VAT package has also decided to make health insurance premiums ‘VAT-able’.

This means that the 7.5 per cent levy will be applied to both insurance premiums and patient bills, something the Doctors Hospital chief described as ‘double taxation’.

“It’s discriminatory to start with,” Mr Rassin said of the new VAT Bill and accompanying regulations package. “It will cause more people to obtain free healthcare, and therefore to abandon private healthcare. The burden on the Government and taxpayer will go up.”

The Doctors Hospital president said the company was attempting to set-up meetings with government officials to get answers to numerous unanswered questions surrounding VAT.

Among the unresolved issues identified by Mr Rassin were how discounts would be treated under the new tax, plus whether, and how, it would be applied to money that Doctors Hospital collected on behalf of individual doctors.

“We don’t have answers,’ Mr Rassin told Tribune Business. “It’s just one more nail in the coffin I’m afraid. They obviously didn’t understand healthcare when they wrote that next Bill.”

He added that Doctors Hospital expected patient costs to increase by a “minimum” 7.5 per cent once VAT was introduced on January 1, 2015.

This is not good news for the BISX-listed healthcare provider and its shareholders, as it comes against a backdrop of declining patient admissions and rising bad debt expense.

Doctors Hospital’s annual report for the year to end-January 31, 2014, said: “Total admissions dropped by 4.7 per cent - from 4,061 to 3,870. While in-patient care saw an increase in critical care/intermediate care, medical surgical saw a 1.8 per cent drop in activity.”

The outpatient area also saw decreased patient visits “below the level of the past two years”, something Doctors Hospital attributed to persons wanting to both save money and a reduction in numbers covered by private health insurance.

“As the economy continues to struggle, the level of insured individuals able to access private health care is shrinking,” the annual report said.

“Bad debt expense, as a percentage of patient service revenues, increased to 3.9 per cent for the year ended January 31, 2014, compared to 2.9 per cent the previous year. This represented an increase of $457,662 or 34.9 per cent, and is a direct result of increased self-pay patients in the critical care areas.”

The sums owed to Doctors Hospital by patients increased by four percentage points of the total, from 11 per cent to 15 per cent, year-over-year.

All of which could be exacerbated by the Government’s VAT policy towards private healthcare.

Apart from the tax on patient bills, Mr Rassin pointed to the numerous “soft costs” VAT would likely enforce, such as computer and software system upgrades.

Agreeing that the VAT Bill seemed designed to ‘soften up’ Bahamians, and push them towards the Government’s proposed National Health Insurance (NHI) scheme, Mr Rassin told Tribune Business: “Really, it’s double taxation.

“You pay [VAT] on the insurance premium, and then you pay on the bill. It’s going to have a very negative impact on our business.”

He added: “I don’t know if we can withstand it with the economy being down and people losing health insurance.

“I don’t know if we can sustain where we are as a private industry. I’m deeply concerned. I don’t have any good feelings about this.”

The revised VAT regulations make clear that only medical services supplied by a public healthcare facility, such as those coming under the Public Hospitals Authority (PHA) and the Government-run clinics, will be treated as VAT ‘exempt’.

This means they will be unable to recover or ‘net off’ VAT paid on their inputs, but the Bill does restrict those persons to whom ‘exempt services will be provided.

Those eligible to receive ‘exempt’ services are the indigent; children aged under 18; persons 65 and older; government employees’; and those entitled to receive them “under special criteria established by the Ministry of Health”. This so-called ‘criteria’ is not disclosed in the Bill.

Mr Rassin is far from alone in his concerns. Dr Duane Sands, the FNM’s deputy chairman and a well-known surgeon, expressed fears that the VAT Bill would result in “catastrophic disaster”, as it was seemingly designed to drive more Bahamians into an “already over-burdened” public system.

And the Bahamas Insurance Association (BIA) is concerned that the increase in insurance premium costs come July 1 next year will likely cause both individuals and companies to drop their health policy coverage.