Expand private sector’s role to meet future health needs

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By Michael Roff – APHA chief executive officer

Late last year, the Abbott Government released an Issues Paper entitled ‘Roles and Responsibilities in Health’ as part of its Reform of the Federation process.

The Australian Private Hospitals Association (APHA) welcomed this, seeing it as an opportunity to comment on how Australia’s health system as a whole can better meet the needs of patients and be made more efficient by expanding the role of the private health sector.

Debate has long raged over whether the public and private hospital systems complement one another, or whether they are in competition. Undeniably, the private system has and will continue to alleviate pressure on public facilities, resulting in considerable cost savings for government.

However, the shortcomings of the current division of Federal and State responsibilities in health limit the private sector’s ability to make an even greater contribution to patient care and the overall efficiency of the system. As a result, patients and the wider health sector are adversely impacted.

A key indication of the perverse incentives generated by current arrangements is the persistent rise in the share of public hospital resources given over to treating private patients. This results in significant cost shifting and diversion of resources away from providing elective surgery to public patients in particular.

This isn’t a new issue. The number of private patients treated in public hospitals has risen steadily, increasing by almost 140 per cent over the last decade. At the same time, public patient waiting lists have remained persistently high.

The most recent data available indicates that private patients (patients paying for their care using private health insurance) in public hospitals now account for 16.9 per cent of all privately insured episodes of care annually (PHIAC, March Quarter 2015). These patients account for more than 2.6 million patient days per year, equivalent to over 7,000 beds.

The growing concern is that the drive by public hospitals to increase ‘other source’ revenue is giving rise to practices which compromise the rights of patients seeking treatment in public hospitals.

One example is the undue pressure being applied to patients seeking admission as public patients to use their private health insurance. Failure to provide informed financial consent, including patients not being aware that they were signing an election to be treated as a private patient, is another.

There are cases as well in which public hospitals have acted contrary to the spirit of the National Healthcare Agreement. Specific accounts of pressure being applied to patients have been obtained in a range of circumstances including psychiatric patients and those entering a hospital through the emergency department.

Application of the principles of competitive neutrality within the health sector is one way in which government can drive needed improvements in the efficiency of service provision and innovation in response to future health needs.

Any future agreement between the Federal and State/Territory governments regarding the funding and provision of health services should include:

  • specific commitments to extension of the principle of competitive neutrality to the health sector;
  • a cap on the percentage of private patients in public hospitals together with a mechanism for adjusting the level of funding provided to public hospitals that exceed the cap; and
  • strengthening the provisions protecting patient choice.

The APHA trusts the observations it has made on the principles and criteria that should apply will be reflected in the Federation White Paper, due out later this year. They are vital to reducing the number of private patients in public hospitals, thus reducing cost shifting and the diversion of public resources away from elective surgery required by public patients.

Any review of funding models and policy settings to meet our future health needs must include an expanded role for the private health sector.

This story was originally featured in the latest edition of Doctor.

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