Roff: Medibank approach doomed to fail

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By Michael Roff – Chief Executive Officer, Australian Private Hospitals Association

Much has been made in the media recently about the dispute between Medibank Private and Calvary Health Care, but the casual observer may be wondering what all the fuss is about.

It comes to down to one thing: Medibank Private is using its size and market power to unilaterally impose measures that mean nothing in the healthcare sector and will not improve the safety and quality of care of patients.

It should be noted that I hold no brief for Calvary Health Care. They are not members of the Australian Private Hospitals Association (APHA), however many APHA members, especially smaller and independent hospitals, are too scared to speak publicly for fear of losing their contracts with Medibank Private.

Medibank Private is the largest health fund in the country. For a hospital of any size, it is crucial to have a contract with the insurer in order to continue providing services. If a hospital does not have a contract with Medibank, the hospital faces losing around 30 per cent of its potential patients.

What is wrong with what Medibank Private are doing? Amongst other things, the fund has developed a list of 165 “highly preventable adverse events” which it will not pay for. This list was created in isolation by Medibank and has no standing in the healthcare sector. It is not based on accepted clinical standards and has not been validated by any safety and quality body.

Indeed, the Australian Commission on Safety and Quality in Health Care (the Commission), the pre-eminent body charged with ensuring the safety and quality of the healthcare system in Australia, has described what Medibank is doing as untested and not fit for purpose.

At the same time the Commission is trialing a set of high-priority hospital complication indicators to identify whether they are useful to clinicians in improving healthcare safety. And last year, in conjunction with the Independent Hospital Pricing Authority, the Commission undertook a comprehensive study of so called “pay for performance” systems around the world. They actually found that there is little, if any, evidence to support the notion that this approach will improve quality in healthcare.

In the small number of cases where pricing for quality schemes did work, there were a number of common elements. These included:

  • a high level of trust between the parties;
  • clinicians and consumers were involved in the design of the scheme;
  • being part of a broader collaborative approach to Quality Improvement; and
  • being Clinician led with appropriate supports to change behavior where required.

Medibank’s scheme has none of these elements so the evidence shows us it is doomed to fail.

It doesn’t have to be this way. In recent times, private hospitals and health funds have worked together individually and at an industry level to find the best ways to improve safety and quality of the services they provide. Signing contracts with health funds that include spurious quality indicators is not a way forward that private hospitals support. But if they do not sign, the Medibank Private members most in need of care will find it increasingly difficult to gain admission to a private hospital.

But maybe Medibank is happy with the deluge of negative publicity its approach has engendered? Many of its members are now questioning if they should switch to another health fund. Medibank may not mind losing members who are likely to require hospitalisation in the near future, as its actions will shift short-term financial risk to other health funds.

But such an approach is flawed. Risk equalisation arrangements in place mean there will be no long term advantage to Medibank in shifting risk. Medibank may also find it harder to attract new members as it becomes increasingly viewed as an industry pariah.

If Medibank Private is serious about its commitment to ‘Better Health’, it must collaborate with hospitals, clinicians and other experts in the field. Its ‘big stick’ will not benefit it or its members in the long run.

Michael Roff is Chief Executive Officer of the Australian Private Hospitals Association, based in Canberra. He tweets at @MAVR_1.

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