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News & Trends - MedTech & Diagnostics

Private hospitals slam Labor government’s piecemeal reforms as core viability issues ignored

Health Industry Hub | January 30, 2025 |

Critical questions remain over the Department of Health’s latest consultation paper, which proposes a series of short-term reform options aimed at easing the financial strain on private hospitals. With a timeline set for ‘immediate’ action at the CEO Forum in March, the looming question is whether these reforms will be pushed through before the election or left to languish in bureaucratic inertia.

Brett Heffernan, CEO of the Australian Private Hospitals Association (APHA), did not mince words, calling out the government’s inaction.

“It is bewildering to see this consultation issued after two years of extensive briefings. Despite in-depth data, independent research papers and unprecedented financial information afforded by our members to the Federal Government, the government has done nothing, and seemingly intends to do nothing to address the immediate issues impacting the sector, its patients and employees,” Heffernan told Health Industry Hub.

He dismissed the Department of Health’s proposed short-term measures as “piecemeal”, arguing they fail to prevent further hospital closures or stop the decline of essential services across the country.

The consultation paper proposes reforms such as health insurers increasing funding for hospital-in-the-home programs, expanding access to “affordable” maternity cover beyond Gold-level policies, and enhancing second-tier default benefits to support regional hospitals. While these proposals appear constructive on the surface, they fail to address systemic financial shortfalls plaguing the private hospital sector.

The Australian Medical Association (AMA) President Dr Danielle McMullen recently highlighted a critical flaw in the system, stating that Australia’s lack of regulations on private out-of-hospital care limits patient access to innovative models such as hospital-in-the-home. She warned that private health insurers currently design their own models based on cost-cutting rather than patient choice.

Catholic Health Australia CEO, Jason Kara, echoed these concerns, stating, “Treatments like chemotherapy, dialysis, wound care, palliative care and post-surgical rehab can be conducted safely at home with better outcomes – but millions of patients are missing out. We urgently need reforms that allow patients and their doctors to choose where they receive their care, rather than having that choice dictated by insurers.”

The Department of Health consultation paper also proposes placing mental health services in the risk equalisation pool, which would make it easier for insurers to offer mental health coverage. Currently, mental health is excluded from this arrangement.

Yet, Heffernan remains sharply critical of the government’s approach, arguing that the proposed reforms fail to reflect “any consideration of the data or recommendations” provided in APHA’s private hospital viability options paper submitted to the government last year.

Heffernan asserted, “None of the measures flagged for discussion [at the upcoming CEO Forum] address the core issue affecting private hospital viability – that being the failure of private health insurers to pay hospitals in full for the treatments and services they provide to insured patients.”

He pointed to Australian Prudential Regulatory Authority (APRA) data showing that over the past three years, this funding shortfall has blown out to more than $3 billion.

“Clearly, this is not sustainable,” he warned.

Jane Griffiths, CEO of Day Hospitals Australia told Health Industry Hub, “Disappointingly there was little provided in the Department of Health’s private health reform options for day hospital. It is suggested that the proposed reforms will take at least 6 months to implement, with little relief for the day hospitals – the most cost effective hospitals in the private hospital sector. Action is needed now.”

Private Healthcare Australia (PHA) has raised its own alarm, warning that the Department of Health reform proposals could drive up private health insurance costs.

“We must have detailed modelling to show how much these measures will cost before proceeding. Health funds cannot support any proposals that will put upward pressure on premiums unless that expenditure is offset in other ways. There are many ways to cut costs in the private health sector that will benefit consumers, including slashing the cost of medical devices via reforms to the Prescribed List,” PHA stated on social media.

However, Ian Burgess, CEO of the Medical Technology Association of Australia (MTAA), pushed back against this argument, stating, “Medical devices are the only part of our health system where costs have actually fallen. The reductions in the Prescribed List (PL) benefits have driven more than $2.5 billion in savings for private health insurers since 2017.

“Medical devices aren’t driving private health insurance premiums, and in fact, that $2.5 billion reduction in revenue for the medtech industry hasn’t been passed on by insurers to consumers. The latest APRA data for the 2024 year shows that private health insurance profits were still 60% higher than two years ago.”

As the private health sector remains in a holding pattern, Heffernan issued a stark warning: “That the federal election is likely to be called well before the next scheduled meeting of the CEO Forum speaks volumes to the indifference the government has to the crisis endured by private hospitals, their patients and employees for two long years.”

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