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News & Trends - MedTech & Diagnostics

Government commissions review as 70% of private hospitals face financial crisis

Health Industry Hub | June 14, 2024 |

MedTech & Diagnostics News: Despite playing a crucial role in providing acute care and surgical services, a staggering 70% of private hospitals in Australia are either operating at a loss or barely staying afloat. This alarming trend has prompted the Department of Health and Aged Care to commission a review into the viability of private hospitals.

The private hospital sector, valued at $22 billion, comprises 36% of all hospital beds in Australia, delivering 40% of acute care services and handling 60% of surgeries. However, financial strains are tightening, with the revenue-cost gap narrowing to just 0.8% in 2021-22.

According to the Australian Private Hospitals Association (APHA), “The cost of food, power, medical supplies, and medical technology have increased by an estimated 10% to 15% in the last year. At the same time, health insurance companies are only offering hospitals increased payments in the order of 2% – 3%.”

A planned review, dubbed a “financial health check,” will be conducted by senior health department officials Brian Kelleher and Emily Lancsar, alongside former Independent Hospital Pricing Authority chief executive James Downie.

Following the review’s low-key launch, Federal Health Minister Mark Butler MP emphasised the importance of understanding the sector’s viability.

“Private hospitals are an important part of the Australian health system, and an important partner for public health service providers,” he stated. “Reports about the sustainability of some private hospitals are concerning, particularly those in regional areas where they play an essential role in the local community.”

James Stevens MP, Liberal Party member in South Australia, said “I’m very concerned about the overall sustainability of the [private hospital] system and whether or not the payments to private hospitals are rising appropriately. Given that private health insurance is increasing fairly significantly, are those increases to private insurance premiums flowing to increases from the insurers to the people providing the service? We’ll be in big trouble in this country if we see the private hospital system continue to deteriorate.”

Last year, the Australian Medical Association (AMA) held a workshop with sector leaders, including representatives from the DoH and the minister’s office. Attendees discussed the challenges facing private hospitals, sharing first-hand experiences and insights.

The AMA has proposed several measures to improve the situation, including making private health insurance more affordable, enhancing its value for consumers and the health system, and securing the future of the private health sector.

One key proposal is the establishment of a new independent body, the Private Health System Authority, which could ensure a cohesive regulatory model that safeguards patient choice.

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