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News & Trends - MedTech & Diagnostics

Private health insurance push for vertical integration: A distraction from real healthcare reform, says APHA CEO

Health Industry Hub | June 1, 2023 |

MedTech & Diagnostics News: In a recent development, private health insurance organisations have come under scrutiny for their latest endeavour towards vertical integration, which has drawn criticism from the Australian Private Hospitals Association (APHA). According to APHA CEO Michael Roff, this focus on vertical integration deflects attention from the crucial work needed for healthcare reform that would genuinely benefit patients.

Mr Roff’s remarks came in response to the release of a report titled ‘There’s no place like home: Reforming out-of-hospital care’ by Private Healthcare Australia (PHA) yesterday. While private hospitals appreciate health insurance companies’ newfound interest in funding out-of-hospital care, Mr Roff argued that these companies already possess the capability to do so but actively choose not to.

He pointed to the 2018 report from the Improved Models of Care Working Group, which explored the expansion of non-hospital services covered by health insurance and provided recommendations for government reforms. The report concluded that there were no regulatory obstacles to alternatives to traditional in-hospital care. However, private hospitals that have developed innovative out-of-hospital care models catering to their patients’ needs have faced significant resistance from private health funds in terms of support and funding. Ironically, insurance companies readily pay for similar services that they themselves own and operate.

“It appears this report is a shameless attempt for health insurance companies to expand vertical integration, where they pay themselves for providing services to their members. At the same time, they deny their members choice of service provider which is one of the key reasons people take out health insurance,” Mr Roff asserted.

According to PHA, the proposed reforms outlined in the report will not only enhance healthcare accessibility but also alleviate the strain on hospitals and the public health system. These changes are expected to generate savings of $1.8 billion, ultimately reducing the burden on private health insurance premiums.

At present, private health insurance involvement in out-of-hospital care is confined to limited funding or provision of hospital-substitute and chronic disease management programs, as stipulated by the Private Health Insurance Act 2007. This restricts patients’ access to high-quality care and limits their choices regarding where they can receive services.

PHA CEO Dr Rachel David emphasised that Australia is lagging behind comparable health systems when it comes to delivering out-of-hospital care. Despite mounting evidence demonstrating the advantages of out-of-hospital care models in terms of efficiency, quality, and reduced adverse events, Australia’s utilisation of such services remains meagre, accounting for <1-10% of total activity across various care models.

For instance, in the case of short-stay surgical models, the average length of hospital stay for elective surgery joint replacements is 5.4 days in Australia’s private system, compared to 1.9-2.8 days in countries like Canada, the US, the UK, and Scandinavia. Moreover, in Australia, only 10% of end-of-life care is provided in the home, whereas the figures rise to 41% in the US and 56 percent in the UK.

Mr Roff cautioned against vertical integration by health insurance companies, citing the risks encountered by banks that owned wealth management funds. The Hayne Royal Commission’s investigation into the banking sector revealed that vertical integration, marketed as a “one-stop shop” solution, did not serve consumers’ best interests. Mr Roff argued that a similar scenario could arise if insurers pursued vertical integration.

He concurred that Australia has the potential to deliver more out-of-hospital care and highlighted private hospitals as well-positioned to provide such services. Mr Roff underscored that health insurance companies could enable their members to access innovative out-of-hospital care immediately but opt not to do so. Instead of funding innovative out-of-hospital services provided by private hospitals, the lobby group’s report seems to disregard their role as valid service providers.

“It is frustrating to once again see the health insurance lobby put the financial interests of their member companies ahead of the interests of the Australians who buy their products to access high quality care,” Mr Roff stated.

As the debate on vertical integration in the private health insurance sector unfolds, the spotlight is now firmly on the potential impact on patients and the overall healthcare landscape. The concerns raised by the APHA and its CEO highlight the need for a comprehensive approach to healthcare reform that prioritises patient choice and equitable access to quality care.

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