Millions of Australians to lose cover at 38 private hospitals
More than 6 million Australians face hefty out-of-pocket fees at 38 private hospitals after the country’s second-largest hospital operator pulled out of agreements with dozens of funds, including major health insurer Bupa.
In a dramatic escalation of the funding stoush between private hospitals and health insurers, Healthscope announced on Friday that it would be terminating its contracts with Bupa and 22 smaller not-for-profit funds represented by the Australian Health Services Alliance (AHSA).
Healthscope chief Greg Horan says private hospitals face a “viability crisis” and some insurers have refused to pay for rising healthcare costs.Credit: Oscar Colman
Healthscope chief executive Greg Horan said the company had been left with no choice but to cancel the agreements after the insurers threatened legal action against its decision in October to impose up to $100 out-of-pocket fees on Bupa and AHSA members using their facilities.
“In the absence of fair funding, this fee was Healthscope’s best option,” Horan said in a statement. “The response from the insurers was lawfare, and we are not prepared to engage in protracted and expensive legal challenges.”
Bupa released a statement on Friday reassuring its customers they would be fully covered until February 20, when the contract terminates, and services commenced or booked before that date, such as maternity and cancer treatment, would not be affected.
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“We are shocked and deeply disappointed by Healthscope’s action ... 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,” chief executive Nick Stone said.
AHSA chief executive Andrew Sando said Healthscope’s decision was driven by concern for investors, not patients.
“Gouging the Australian public to generate profits for their private equity owners is not in the national interest, and flies in the face of compassionate, equitable and sustainable healthcare,” Sando said.
In Sydney, Healthscope operates Norwest, Prince of Wales, Campbelltown and Nepean private hospitals, as well as the private arm of Northern Beaches Hospital. In Melbourne, Healthscope runs La Trobe, Melbourne, Knox and John Fawkner private hospitals.
The decision presents a particular headache for fund members already booked in for surgeries or procedures at Healthscope hospitals.
From February 20, Bupa’s 4 million customers will be forced to move health funds, choose a different hospital, or stump up massive out-of-pocket fees to be treated at Healthscope hospitals. Healthscope’s agreement with the AHSA funds will end on March 4.
Horan said Australia’s private hospitals were haemorrhaging money and struggling to attract new investment, and the health funds had so far refused to alter their contracts to factor in higher costs.
“There is a viability crisis impacting private hospitals across the country,” Horan said.
“In an environment of rising costs and private hospital closures, it is unacceptable for insurers to fail their core purpose – funding the care of their members.”
The cost of providing healthcare has risen 5.7 per cent in the last year, which the Australian Bureau of Statistics said was due to a 6.7 per cent increase in the cost of medical and hospital services.
A federal government review of the financial health of private hospitals, released earlier this month, found rising costs had halved their margins in the five years to 2022.
Healthscope is also facing an industrial dispute with its NSW nurses, who have walked off the job three times this month demanding a 15 per cent single-year pay rise.
Healthscope has waged an aggressive public campaign to make health funds pay more to cover the soaring cost of delivering healthcare. The Brookfield-owned company is about $1.6 billion ($2.4 billion) in debt following its $4.1 billion acquisition in 2019 by the Canadian private equity giant.
Private Healthcare Australia, the peak body representing health funds, said the “unprecedented” decision would affect roughly half of Australians covered by private health insurance.
‘That private hospitals have closed and others are barely hanging on … is evidence the system is out-of-whack’.
Brett Heffernan, Australian Private Hospitals Association“This is another unethical tactic from a $1 trillion North American private equity firm that appears intent on holding health fund members hostage while also trying to bully health funds into paying them more so they can increase their profits,” chief executive Dr Rachel David said.
“If Healthscope was serious about delivering patient care to Australians in a cost-of-living crisis, it would negotiate an affordable and sustainable outcome, rather than throwing its toys out of the cot.”
Brett Heffernan, chief executive of peak body Australian Private Hospitals Association, warned Healthscope’s decision was a sign of things to come.
“That private hospitals have closed, and others are barely hanging on while insurance companies accumulated over $4 billion in profit in just over two years, is evidence the system is out-of-whack,” he said.
Both agreements were due to expire in 2026. Bupa has been approached for comment.
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