Primary on Friday said it expected underlying net profit for fiscal 2016 to be 5 per cent lower than last year’s results.

It said its medical centres were suffering flat revenue growth because of a freeze on indexation of Medicare rebates and starting the year with lower-than-expected healthcare practitioner numbers.

Medical centres operator Primary Health Care has downgraded its profit forecasts for fiscal 2016 as margins are squeezed and revenue weakens.

Managing director Peter Gregg said medical centres had started the year with lower-than-expected healthcare practitioner numbers and centres were suffering flat revenue growth because of a freeze on indexation of Medicare rebates.

“The concurrence of disappointing operating performance in our medical centres, subdued market conditions in our pathology and diagnostic imaging businesses and the time frame required to deliver the benefits from our strategic review initiatives, has led to a revised outlook for financial year 2016,” Gregg said.

Pathology revenue growth rates were lower than expected and performance has continued to be affected by cost growth associated with collection centres.

The group has closed 48 collection centres and expects to close more.

Meanwhile, diagnostics imaging has suffered subdued revenue growth as regulatory uncertainty and referral patterns affect the business.

Gregg said healthcare practitioner numbers were expected to improve and the company had made good progress in strengthening its balance sheet with the sale of its shareholding in Vision Eye Institute.

The company aims to drive growth by becoming the partner of choice for healthcare practitioners, Gregg said.

Primary’s shares were 46 cents, or 12.8 per cent, lower at $13.14 at 1100 AEDT following the profit warning.