Private hospitals reject ‘desperate’ insurer bailout

Private hospital operators have rejected the one-off “hardship package” proposed by health insurers during the Private Health CEO Forum on Friday.

The proposal, spearheaded by Private Healthcare Australia (PHA), aims to offer short-term financial relief to hospitals that “open their books and can demonstrate a genuine need for short-term funding assistance in areas where there are no other private hospital services nearby”.

Supported by major insurers like Medibank Private, Bupa, and NIB, the plan hinges on a condition: reforms must be implemented to curb the costs of medical devices and surgical supplies in private hospitals, which are currently subject to a 7-20% government-imposed surcharge. Insurers are pushing to redirect this surcharge – estimated at $84-120 million – away from medical device companies and instead funnel it directly to private hospitals from July 1.

However, Australian Private Hospitals Association (APHA) CEO Brett Heffernan dismissed the proposal as desperate, labelling it nonsensical and likely to be summarily rejected.

“Mandating at least 88 cents in the dollar be returned to hospitals is a serious solution that costs taxpayers and patients nothing. It simply makes the insurers pay their way.

“The federal health minister’s public commitment to addressing the year-on-year shortfall in funding by insurers and ending their dominance in contracting over hospitals is the core issue that is causing the viability crisis impacting hospitals, their services and, ultimately, patients. Nothing less will do,” Heffernan argued.

Ian Burgess, CEO of Medical Technology Association of Australia (MTAA), stated “The large corporate insurers’ share prices are climbing because of their bumper profits. The Minister for Health has called out their price gouging, and now insurers want to gouge even more by further cutting benefits for life-saving medical devices. 

“In contrast, despite MedTech only accounting for 8% of insurers’ revenue, our industry has more than done its part, enduring significant cuts and delivering savings totalling almost $290 million in the last two years alone – savings that insurers have simply pocketed. It’s well time health insurers paid their fair share.” 

Federal Health Minister Mark Butler is seeking counsel from the ACCC and APRA regarding potential regulatory interventions should health insurers and private hospitals fail to find common ground. This urgency comes amidst the financial turmoil at Healthscope, Australia’s second largest private hospital operator, grappling with a staggering $1.6 billion debt since its acquisition by Canadian private equity giant Brookfield in 2019, prompting the hiring of KordaMentha to devise contingency plans.

Catholic Health Australia (CHA) Director of Health Policy, Dr Katharine Bassett, said “The Prescribed List (PL) is not the place to look for more savings. We’ve already seen significant reductions in benefits paid for medical devices, yet those savings were not passed on to patients. Instead, insurers pocketed the difference. 

“It’s clear insurers are prioritising their profits over patients. The way we fund care in the private sector needs to be reformed so private health insurers can’t continue to siphon money away from hospitals and patient care.” 

Calls for an oversight body, such as an Independent Private Health System Authority, have also intensified. The Australian Medical Association (AMA), alongside stakeholders like APHA and Australian Society of Ophthalmologists (ASO), is advocating for comprehensive reforms to safeguard the private health sector’s sustainability and ensure consumer-focused insurance products and services.

“Our health system relies on the private system, where the overwhelming majority of our elective surgery is done. Our public hospitals don’t have the spare capacity to cope with a deluge of urgent patients if the private system falters,” AMA President Dr Danielle McMullen warned.

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