Private Healthcare Australia deflecting blame: ‘Poor policy and inadequate regulation of medical technology is driving low-value care’

MedTech & Diagnostics News: In a perspective piece unveiled last week, Dr Rachel David, CEO of Private Healthcare Australia, raised grave concerns about the prevalence of low-value care within Australia’s private health system. David asserts that subpar policies and inadequate oversight of medical technology are propelling this alarming trend, despite strong opposition by the Royal Australasian College of Surgeons (RACS) and Medical Technology Association of Australia (MTAA).

Australia’s private health system serves as a vital pillar of healthcare delivery, catering to the needs of over 12 million Australians with health insurance covering hospital services. This accounts for a significant portion, approximately 45%, of the nation’s population. With private hospitals conducting a substantial proportion of medical procedures, including 61% of surgeries, 23% of childbirths, and 62% of inpatient mental health care, the stakes are high.

Despite this, Australia’s private hospitals are facing a crisis of sustainability, with a staggering 70% of private hospitals bleeding money or barely staying afloat.

The Australian Private Hospitals Association (APHA) has voiced grave concerns about the current state of affairs.

“The cost of food, power, medical supplies, and medical technology have increased by an estimated 10% to 15% in the last year,” said APHA CEO, Michael Roff. “At the same time, health insurance companies are only offering hospitals increased payments in the order of 2% – 3%.”

According to David’s piece published in the Australian Health Review, key factors contributing to low-value care include deficiencies in regulating the Prescribed List (PL), gaps in ensuring the quality and safety of medical devices, and the influence of marketing strategies and conflicts of interest. Addressing these issues, she argues, is imperative to safeguard consumers and ensure optimal utilisation of limited healthcare resources.

The RACS has firmly rejected allegations made by Dr David suggesting that surgeons play an intentional role in the delivery of low value care through poor patient selection and medtech influence.

Despite this, David refers to the various forms of low-value care, ranging from “paying too much for medical equipment and technology used in their treatment, receiving devices that lack high-quality evidence showing they are safe and effective, or receiving devices shown to be ineffective or inferior to others.”

Contentiously, an unpublished analysis conducted by Private Healthcare Australia revealed that medical devices utilised in the private system were priced $3000–5000 higher and exhibited higher failure rates compared to their counterparts in the public sector.

David blames the “dual role for medical device company representatives with potentially conflicting interests: working as a commissioned sales representative while also providing advice on medical treatment.”

She suggests a paradigm shift from the fee-per-item reimbursement system towards bundling benefits for medical implants and surgical supplies within the Medicare Benefits Schedule (MBS). This approach, favours in comparable economies, offers a more transparent and regulated framework.

However, more comprehensive calls for reform are growing louder. The Australian Medical Association (AMA) has proposed the establishment of an independent Private Health System Authority to oversee the private healthcare sector. The MTAA has thrown its weight behind the proposition along with other stakeholders including the APHA.

While Medicare, the public insurer, boasts administrative costs of 3.4%, private health insurers have seen their administrative expenses skyrocket in recent years, reaching 21.75% in 2021-22. Top executives of private health insurers are earning over $1 million a year each, and CEOs well over $3 million. For example, Medibank’s top four executives were paid $17.45 million package in total in 2022 with much of their pay is linked to company profit and share price.

“Private health policy has been on the ‘set and forget’ mode for some time now, meaning the system is falling behind changing customer needs and demographics,” AMA President Professor Steve Robson said.

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