NOTES TO THE FINANCIAL STATEMENTS
RESULTS FOR THE YEAR
RAMSAY HEALTH CARE LIMITED
2 Revenue and other income (Continued)
Revenue is recognised and measured at the amount of the consideration received or receivable to the extent that the performance
obligations under contracts have been satisfied and the revenue can be reliably measured. The following specific recognition criteria must
also be met before revenue is recognised:
REVENUE FROM PATIENTS
Revenue from patients is recognised on the date on which the services were provided to the patient.
REVENUE FROM GOVERNMENTS UNDER COVID-19 SUPPORT CONTRACTS
During 2020 and 2021, specific contracts were entered into with various government bodies under which Ramsay made available its
facilities and services, including equipment and staff, to assist with the respective government’s response to the COVID pandemic. Each of
the revenue agreements are specific to each government body as follows:
Agreements with the state governments of NSW, WA, QLD and VIC (each a State) commenced from either 31 March or 1 April 2020.
In return for the commitment to maintain full workforce capacity at the facilities, Ramsay has received, and recognised as revenue, the
net recoverable costs (being recoverable costs less any revenue generated from operations, calculated on an accruals basis (revenue
amounts)) for these services. Recoverable costs include direct operating costs, service costs, corporate overhead costs (to the extent
related to the provision of service), depreciation associated with pre-existing capital, which is owned, and depreciation associated with
amortisation of leases. Interest and debt servicing costs are excluded. The agreements expire on various dates, depending on each
State’s requirements. These end dates are (in most cases) 20 or 30 days after the State gives notice but not before; in the case of VIC, the
temporary restrictions imposed on private hospitals performing category 3 and non-urgent category 2 surgeries have been lifted; in the
case of QLD, the State determines that activation of the Australian Health Sector Emergency Response Plan for Novel Coronavirus 2019
has ceased; and, in the case of NSW, the date notified by the Commonwealth government as being the last date covered by the private
hospital financial viability payment under the National Partnership Agreement.
Recoverable costs and revenue amounts are aggregated quarterly with each quarter considered separately. Where the revenue amounts
exceed recoverable costs the payment for that quarter is deemed to be zero.
VIC and QLD include a “Pause and Restart” mechanism whereby the State can put the agreement on pause allowing the Operator
to return to normal operations and relieves the State of any payment obligations during the pause while allowing the State to restart
the contract to provide COVID pandemic support when necessary. The QLD State government agreed to Ramsay’s request to put the
agreement on hold from 1 July 2020. While the VIC agreement was paused from 30 June 2020, it was restarted with effect from 23 July
2020 to 31 March 2021. The NSW agreement does not have a Pause and Restart mechanism and remains on foot.
The agreement with the State government of WA was terminated with effect from 30 June 2020. However, it included a right for the WA
Department of Health to direct Ramsay for a 12-month period from 30 June 2020 to sign a new agreement on the same terms as the
original agreement, which could be exercised if the Department or Commonwealth government formed the view that this was necessary
to respond successfully to the COVID pandemic.
An agreement with NHS England, commenced on 23 March 2020, to make the Ramsay UK facilities and services available to the NHS
England and its patients. Ramsay received, and recognised as revenue, the net cost of the capacity and services provided, including
operating costs, overheads, use of assets, rent and interest less a deduction for revenue earned through the provision of private, urgent
elective care to patients. The term of the agreement was initially for a minimum of 14 weeks from 23 March 2020 and was then on a rolling
basis, with one month’s notice. This agreement terminated on 31 December 2020. A new, volume based, agreement came into effect on
1 January 2021 and expired on 31 March 2021.
Future events could cause the assumptions on which these revenue accruals are based to change, which could affect the future results of
the Group. As the revenue recognised by the Group in accordance with the contracts is variable, revenue has been recognised only to the
extent that it is highly probable that a significant revenue reversal of the cumulative amount of revenue will not occur when the uncertainty
associated with the variable consideration is resolved.
Rental income is accounted for on a straight-line basis over the lease term. Contingent rental income is recognised as income in
the periods in which it is earned. Lease incentives granted are recognised in the Income Statement as an integral part of the total
REVENUE FROM ANCILLARY SERVICES
Income from ancillary services is recognised on the date the services are provided to the customer.
INCOME FROM SALE OF DEVELOPMENT ASSETS
Income from sale of development assets is recognised when the control of the development asset is transferred to the customer.
Revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of
a financial asset and allocating the interest income over the relevant period using the effective interest rate (EIR), which is the rate
that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the
74 Annual Report 2021