Health insurers bleeding private hospitals dry: New campaign to expose funding crisis

MedTech & Diagnostics News: Australia’s second largest private hospital group is challenging the nation’s biggest health insurers, accusing them of short-changing hospitals and jeopardising care for hundreds of thousands of patients.

Healthscope will communicate the “dire situation” about some insurers’ underfunding with patients across its 38 hospitals and advertise nationally on radio and in newspapers to highlight their refusal to pay their fair share to improve hospitals.

Bupa and the Australian Health Service Alliance which includes insurers such as Australian Unity, are refusing to meet the rising costs of patient care, including for cancer treatment, maternity and mental health, while hoarding super profits and surpluses. Local hospitals may reduce services, or close all together, if these insurers don’t release more funding.

Greg Horan, CEO of Healthscope, said “Bupa and the Alliance insurers including Australian Unity are bleeding local private hospitals dry. Without an improvement to industry funding arrangements, there will be catastrophic impacts to the entire health system.

“A strong private hospital sector supports our hardworking public system. Regional private hospitals are also at risk, which will mean patients will have to travel further for care they should be entitled to in their local community.

Patients may also face significantly higher medical bills after the country’s largest private hospital operator, Ramsay Health Care, said it would refuse to deal with insurers that did not agree to cover a bigger portion of unexpected cost surges in the future.

Ramsay, with 70 hospitals across the country, said it has put on hold plans to build or buy any more centres, citing low returns, and warns that even patients with insurance are turning to the public system because of big out-of-pocket bills.

Almost three-quarters of private hospitals in Australia are losing money, as costs have risen. By contrast, insurers have recorded record profits ($2.2 billion in FY23) and have paid out less funds for members’ care. Bupa paid out 81 cents in the dollar in FY23, while Australian Unity paid just 70 cents in the dollar, compared to an industry average of 83 cents in FY23, down from 88 cents pre-pandemic.

Private hospital earnings are in the spotlight as Federal Health Minister Mark Butler completes a review of the sector. But, health insurers said they should not have to bail out an inefficient private hospital system.

The preliminary findings of the review obtained by The Australian Financial Review found that private hospitals were “un-investable” and more will close in the next 12 months.

“While there is substantial variability in earnings, profitability of the sector has declined over recent years. Average returns in the Hospital Sample may not support continued investment,” the review, led by Health Department secretary Blair Comley, found.

Horan added, “Hospitals, and the fantastic doctors and nurses on the front line, will not compromise on patient care and safety. If the funding from Bupa and the Alliance health funds like Australian Unity, doesn’t cover private hospitals’ costs, further cuts to services, higher out-of-pocket costs for patients or indeed hospital closures will become inevitable. This is unsustainable and without urgent action, ordinary Australians will suffer.

“Consumers pay their insurance premiums with the expectation they will have access to privately funded care at their local private hospital. Without hospitals, the private insurance that 46% of all Australians pay handsomely for is virtually worthless.”

Australian private hospitals provide:

• 2 out of every 5 patient admissions
• 2 out of every 3 elective surgeries
• 1 out of every 3 specialist mental health beds
• 1 out of every 2 same day chemotherapy treatments

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