Private hospitals struggle despite surge in admissions: Financial crisis worsens as inflation outpaces benefits

MedTech & Diagnostics News: Private hospital admissions are on the rise, but this uptick is not enough to counter the ongoing viability crisis facing the sector, according to the recently appointed President of the Australian Private Hospitals Association (APHA), Christine Gee AM.

Recent data from the Australian Prudential Regulation Authority (APRA) reveals that private hospitals recorded 1,059,451 episodes of care between April and June 2024, a notable increase from pre-COVID-19 levels.

While Gee acknowledged the positive trend, she highlighted that the financial benefits have not kept pace with inflation.

“The amount of episodes is just above the number we would have seen in 2019, pre-COVID-19, so it’s good to see a bump in episodes of care,” Gee stated. “However, those increases still amount to a loss for the private hospital sector as the dollar value of benefits has lagged significantly behind the rate of inflation over time.”

Federal Health Minister Mark Butler has ruled out any taxpayer-funded bailouts for private hospitals, emphasising that the sector must navigate its own path through the current financial turmoil.

“The sector itself is going to have to provide that leadership. There is no one answer to a sector that’s facing a whole myriad of diverse challenges,” Minister Butler stated.

“This has always been a sector where these operators, many of them quite big, pretty influential, powerful operators, play it hard and they negotiate hard. And that’s not particularly surprising given the nature of these commercial relationships.”

The APHA President explained that the 13.3% growth in episodes from June 2019 to June 2024 has translated to only a 5.03% increase in income. This discrepancy is significantly below the eight percentage points needed to sustain revenue levels.

“Growth in benefits per episode is eight percentage points lower than it should be to maintain the profitability of June 2019,” Gee noted.

“On a per episode count, hospitals were paid today’s equivalent of $3,210.39 in June 2019 and $2,975.94 in June 2024 – a 7.30% real decline in benefits paid per episode.”

She also pointed out that while nominal dollar amounts show a 12.1% growth in benefits per episode from June 2019 to June 2024, this growth is overshadowed by a 20.9% rise in the Consumer Price Index (CPI) during the same period.

“When we compare this to the private health insurance sector we can see how out of balance the private system is. APRA data showed that the profit after tax of the private health industry grew from $382 million in the third quarter of 2023 to $800 million in the first quarter of 2024,” she emphasised.

As the debate between private hospitals and health insurers over the funding crisis intensifies, the impact is being felt by patients, private hospital workforce, and the medtech industry. The escalating crisis threatens to extend its reach into the public health system, affecting a broader spectrum of stakeholders.

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