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News & Trends - MedTech & Diagnostics

Government’s Private Hospital Health Check dismissed as ‘window dressing’ and ‘box-ticking’, fuelling sector division

Health Industry Hub | October 25, 2024 |

MedTech & Diagnostics News: A timely and thought-provoking panel discussion on the future of the private healthcare sector unfolded at the Medical Technology Association of Australia (MTAA) MedTech conference yesterday, moderated by Paul Dale, Director of Policy at MTAA.

Stakeholders are awaiting the imminent release of the Private Hospital Sector Financial Health Check report from the Department of Health, which sparked strong opinions from the panellists.

Ramsay Health Care’s Chief Policy Officer, Dean Breckenridge, labelled the health check as “window dressing,” while HCF’s General Manager of Member Health Strategy and Planning, Andrea Caton, criticised it as merely “ticking the box,” exacerbating already divisive interactions in the sector.

Breckenridge provided a detailed analysis of the private hospital funding model, stressing the need for modernisation.

“On the private hospital funding model piece, rather than fee for service every day, it’s about bundling risk at the hospital side that we think we can mitigate. The second part of how we’re funded is through the indexation. We might negotiate $1,000 for an endoscopy this year, and as costs go up, we have to negotiate indexation to cover the cost inflation,” he said.

He highlighted the challenge of dealing with cost increases, explaining that while health insurance premiums rise by 3% – 4%, the actual inflation rate for hospital costs is closer to 6%. This discrepancy leads to significant shortfalls, forcing hospitals to reassess how they operate.

“The reality we’re facing is that the costing studies or the cost of procedures we refer to are 20-30 years old. When the aggregate margin for the whole sector is only 1%, there’s not enough profitable stuff to offset the unprofitable stuff,” he explained.

Catholic Health Australia’s Director of Health Policy, Dr Katharine Bassett, stated “We look at profit differently. When we have issues with contract negotiation with insurers, it means that what health insurers put on the table will not cover the cost of delivering care.”

Caton touched on the broader implications of the recently announced NSW Health levy on hospital viability, warning of a delicate balance that must be struck.

“For every percentage that we increase our premium rates, it would result in a 70,000-member dropout that will then put further pressure upon the viability of the hospitals,” she said, emphasising the need for a sustainable approach.

The conversation then shifted to the growing strain on public hospitals and the untapped capacity in the private sector. Dr Bassett pointed out, “We have quite a lot of empty mental health beds. Yet, in the public sector, there are patients waiting over 36 hours in an ED, and that’s probably not the best place for them.” This inefficiency in resource allocation, she argued, could be mitigated by incentivising the private sector to manage more public patients, easing the pressure on public facilities.

Breckenridge reinforced this point by addressing bottlenecks in the healthcare system. He said, “There is a bottleneck from patients accessing GPs to specialist hospital treatment… Why not incentivise latent private capacity to do more public patients, which is cheaper and more efficient than spending $6 billion to build more beds?”

Caton, however, cautioned that the system itself is no longer fit for purpose. She noted, “The foundational elements as to how the system was set decades ago is not fit for today. The bed blocking in the public system, the workforce constraints and the cost of providing services are compounding that problem.”

Looking toward solutions, the panellists differed on the question of a national private price model akin to the national efficient price (NEP) in the public system. Dr Bassett proposed it as a potential solution, but Breckenridge strongly opposed the idea, stating, “More government interventions to set the price to the lowest common denominator does not fix market value.”

Caton was similarly skeptical, asserting, “More regulation and oversight is not the answer. The introduction of a national efficient price is not the answer. We cannot, as health funds, have any more of that competition taken away from us.”

The panel concluded with some actionable suggestions. Breckenridge called for a “remediation at a whole-of-industry level – which is somewhere between half a billion and a billion dollars – to make the private hospital sector profitable, sustainable, and investable.”

Dr Bassett emphasised the barriers to the medtech industry, noting that high evidence requirements are delaying the listing of innovative medical devices, which in turn hampers patient care.

“We’ve got doctors treating a patient in a private hospital, and they can’t get the device because it’s not available. They shift a private patient into the public hospital just to get access to that device, and that just doesn’t make sense,” she said.

In their closing remarks, Dr Bassett urged, “Let’s stop talking about the problem. Let’s focus on a solution.”

Breckenridge suggested offering tax incentives for digital investment, while Caton strongly advocated for “an independent advisory body – not authority -” to guide government reform efforts, ensuring all stakeholders are considered.

Dale wrapped up the session by calling on stakeholders to “get serious about making the Prescribed List (PL) work.”

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