GWest directors blame Ministry of Health delays for curtailment in revenue growth

BY DURRANT PATE
Observer Business Writer

Sunday, July 21, 2019

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The directors of the financially strapped commercial property and medical outfit, GWest Corporation, are blaming delays in the accreditation process at the Ministry of Health for the curtailment in its revenue growth.

Having recorded massive losses for a second-straight year, Gwest's independent auditors, Calvert Gordon and Associates, issued a qualified report for its 2018/2019 audited financials, raising concerns about its future. That report, which was made public two weeks ago, showed Gwest chalking up a net loss of $135.87 million for its financial year ended March 2019, and a net loss of $88.10 million in 2017/2018 — the first year as a publicly traded company.

The directors have sought to set the record straight in explaining how the delays in the accreditation process at the Health Ministry have seriously affected the company's bottom line, while responding to the auditors' qualified report.

In their directors' report, dated July 10, signed by chairman, Dr Konrad Kirlew and fellow director, Wayne Gentle, the directors emphasised, “it is a well known fact that the majority of health services are paid for using insurance policies, and the inability to accept insurance cards during the last financial year has hindered the growth in our revenue and expansion plans significantly”.

Revenues from patients' fees was $77 million, a major step up from the $17 million generated in the 2018 fiscal year but well below the forecast for 2019 of $710 million. Overall revenues increased from $66.39 million in 2017/2018 to $129.96 million during 2018/2019.

Some facilities receive MOH accreditation

GWest has since obtained provider status from the Health Ministry in accepting health insurance going forward. The directors reported, “Presently we have received accreditation for two of our facilities, namely the General Practice and the Urgent Care facility, as at May 15, 2019.”

The directors explained that the accreditation at its main facility at Fairview, Montego Bay will allow Gwest provider status in accepting all the major health cards, which is a necessity for their clients. The directors conceded that the accreditation of its laboratory remains outstanding and therefore it is not able to accept insurance cards at this facility.

“We are nonetheless working with the Ministry of Health assiduously to achieve this milestone which is expected to significantly increase the income of the laboratory,” the directors stated in their report.

Interestingly, the directors' report would usually accompany the audited financial statements but in this case it wasn't included. However, from the July 10 dating of the report it is clear that it was written two weeks after the release of the audited financial statements, along with the qualified auditors' report.

Directors respond to

Turning to the qualified auditors' report, Gwest directors zoomed in on note 28, which highlighted the auditors concern about the uncertain future of the company. The directors pointed to certain recent developments which would put the company's future in a more positive light.

These included the recent accreditation status of some of its facilities and the implementation of a number of initiatives to ensure that the business is positioned for future growth. For example, subsequent to the end of the financial year, Gwest carried out a restructuring of its operations by the rationalisation of staff.

This resulted in departure of its Chief Executive Officer Marce Hayles, effective July 5, just six months into the job. “This and other cost-cutting measures are expected to contain the increase in our operating and administrative costs,” the directors explained.

For the just-ended financial year administrative and operating costs increased significantly moving from $166.09 million in 2017/2018 to $276.45 million, which was mainly due to start-up costs at the main medical facility.

The directors also pointed to the fact that the company is now engaged in advance negotiations with its bankers with respect to restructuring existing debt and providing additional financing to carry out Gwest's projected expansion plans.

According to the directors, “thus far these actions have already resulted in successes, and we are confident that the company will continue as a going concern”.


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