Bitter stoush between private hospitals and health insurers escalates as consumers suffer cost hikes

As the increasingly bitter standoff between private hospital operators and private health insurers threatens to boil over, Australians who just want a fair price for their health cover are the ones set to draw the shortest straw. Soaring costs and high inflation have private hospitals claiming they are turning less profit, prompting some to cut back services or close their doors entirely. Private health insurers have maintained they won’t foot the bill for increasing costs, citing the need to keep customer premiums down. It’s put both parties at loggerheads for months, culminating in some providers walking away from their deals with insurers and others threatening to follow suit. Healthscope on Friday announced it was ripping up its contracts with Bupa and Australian Health Service Alliance funds in what marks a major escalation in the ongoing stoush. The only Healthscope hospital in WA is the Mount Hospital. The shock move was just weeks after the private hospital operator announced it would be introducing an out-of-pocket fee up to $100 for Bupa and AHSA members from November 26 because of “insurers’ failure to sustainably cover the cost of patient care in our hospitals”. But chief executive Greg Horan said the insurers’ response had left Healthscope “no choice” but to shred the deals, which were due to continue for a further two years. “In the absence of fair funding, this fee was Healthscope’s best option,” Mr Horan said. “The response from the insurers was lawfare, and we are not prepared to engage in protracted and expensive legal challenges. “In order for us to remain viable, we are left with no choice but to terminate the contracts.” Bupa’s Asia Pacific chief executive Nick Stone said the insurer was “shocked and deeply disappointed” by the drastic move. “They appear to be disregarding the interests of our shared patients and customers by seeking to impact their access to healthcare,” Mr Stone said. “We are concerned that Healthscope’s actions will cause undue stress to patients and customers looking to access private healthcare at a time when we should be working together to build trust in the private health system and take pressure off hospitals and their frontline teams.” The contracts will cease from February 20 for Bupa customers and March 4 for AHSA funds, including HIF, CBHS, and HBF, in a sensational blow to the more than 6 million members across Bupa and the 26 alliance funds. It’s a thorny issue Australians are being forced to become more aware of as premiums spike amid a cost-of-living crisis. Premiums could be up to double this year’s rate when the Government releases its annual price review as early as December. This year’s average hike was capped at 3 per cent, despite some insurers requesting as much as 6 per cent. Private Healthcare Australia said the next hike can be expected to match health inflation, as the rate sits at 4.2 per cent in Perth and 4.8 per cent nationally. It paints a grim picture for Aussies trying to navigate complex policies across multiple providers as they try and find the best value for money. Health Consumers’ Council executive director Clare Mullen said the current system is confusing, expensive and lacks transparency. “I think it’s grossly unfair that it’s generally quite difficult for consumers to get fully informed about the out-of-pocket costs they might face when seeking private healthcare,” Ms Mullen said. “I’m not aware of many other markets where the customer is told, each element of the experience will be billed separately, and we can’t tell you up front what some of those costs will be.” Government figures show about 400,000 consumers downgraded their level of health coverage between 2020 and 2023, and a growing number are delaying healthcare entirely due to cost of living. Retirees Amina and Paul Schipp are among those considering their options after being with the same insurer for more than three decades. They pay more than $200 a fortnight for top health cover but feel like they are paying more in out-of-pocket costs than ever. “I’m very disappointed with the fact that every time I go to make a claim the rebates get lower and lower,” Mrs Schipp said. “I’ve tried the comparison (between insurers and policies), but don’t feel like there was much difference. So, we’re kind of stuck.” Mrs Schipp said it’s started to weigh on her mind more as to whether she should change insurers. “It’s a real concern as you get older when it comes to your health and costs (of healthcare) . . . you do start to worry,” she said. “The whole private health system needs to be looked at.” The Australian Bureau of Statistics found three in 10 people delayed or didn’t see their GP when they needed to in 2022-23 — double the year prior. “At a time when many people in the community are tightening their belts to the degree that they’re opting to delay healthcare because of costs, it’s pretty unedifying to witness the finger-pointing between different groups of people with financial interests in healthcare that’s going on while some care is being priced out of reach for the average person,” Ms Mullen said. While skyrocketing costs have impacted hospitals’ bottom lines, it doesn’t mean they’re going bust. Australia’s largest private hospital operator Ramsay Health Care posted $6 billion in revenue — a 6.3 per cent increase on last year, while St John of God Health Care Group reported a $2.2b revenue, up 7 per cent. Insurers have also acknowledged sky-high costs, but it hasn’t stopped them reporting significant profit margins in the same breath. NIB chairman David Gordon last week told investors it had been a “difficult” past financial year amid increased medical costs and “sustained household cost of living pressures” — before posting a 100.6 per cent increase in the insurance arm’s underlying profit at $220.1m. It was a similar story for Bupa, which reported a 46 per cent spike in its underlying profit to $407.2m and a net profit of $304.4m, up 31 per cent. Medibank insurance reported a milder increase of six per cent, reporting an underlying profit for the year of $692.3m. The Australian Competition and Consumer Commission’s upcoming annual report on the private health sector will be a telling indicator of how much insurers really are unable to trump up the cash to help their hospital counterparts. Last year’s report found the industry’s net profit increased by 110 per cent. “I’m interested to understand where private healthcare providers and insurers think the money is coming from for private health,” Ms Mullen said. “Unless there’s a funding pot I’m not aware of, this whole discussion seems to be about how patients pay, rather than who pays. “The community either pays in increased premiums or increased out of pocket costs. Or increasingly — they pay by missing out on healthcare all together. “Either way, I’m not seeing anything in this discussion that improves the impact on patients.” But Private Healthcare Australia insists insurers are always looking for ways to make “logical savings that don’t impact our customers” in heavily regulated and scrutinised sector. “In terms of transparency, I have to say it’s not just the most transparent sector in health, it’s actually the most transparent sector in terms of financial service,” PHA chief executive Rachel David said. Dr David said lower premiums would put an “enormous amount of pressure” on insurers to reduce costs, meaning “more friction with hospitals”. And while Federal Health Minister Mark Butler’s recent review of the sector acknowledged concerns about the impact reduced financial viability could have on patients and the broader healthcare system, it stopped short of any further funding commitments to the sector. It also found private hospitals are opting for same-day patients over overnight patients, with three in four patients staying less than 24 hours. It’s a sign providers are trying to recoup costs as quickly as possible as they work against an ageing population due to drive up operational costs in a sector that already covers more than 40 per cent of all hospital admissions and 70 per cent of elective surgeries. “There will be no silver bullet from Canberra or funding solution from taxpayers to deal with what are essentially private pressures in this system,” Mr Butler said. Instead, the Private Health CEO Forum was born, which will bring together leaders from private hospitals, insurers, medical groups and independent experts to develop strategies for reform. But it hasn’t convinced everyone. Australian Medical Association vice president and private specialist Associate Professor Julian Rait said there was a clear need for an independent regulator to guarantee sustainability. “The AMA has long been calling for a stakeholder-led reform body as part of our advocacy for an independent Private Health System Authority,” Assoc. Prof. Rait said.