Funding system ‘fuels growth in hospital waiting times’


Public hospitals have greater financial incentive to accept private patients due to discrepancies in Commonwealth healthcare funding, according to a new submission.

The Grattan Institute submission to the Independent Hospital Pricing Authority (IHPA) claims the pricing system for states and territories means public hospitals get more revenue from private patients than public ones.

“Private patients have shorter waiting times for admissions to public hospitals. This preferential treatment undermines the Medicare principles, especially that admission should be based on clinical need,” the report states.

Australian Private Hospitals Association (APHA) CEO Michael Roff welcomed the submission.

“APHA has long campaigned for the issue of public hospitals coercing privately insured Australians to use their insurance in the public system to be addressed. It is clear there are perverse incentives for public hospitals to continue to do it.

“This is clearly contributing to waiting list times for those public patients who have no other access to care, and the Australian Institute of Health and Welfare data also shows queue jumping is common. Public patients wait twice as long overall for elective surgery as the privately insured – a median of 44 days to 22.

“Public patients should be the priority for public hospitals, not left languishing on waiting lists because there is more revenue to be made from the privately insured,” he said. 

The Grattan Institute submission argues that a public hospital in New South Wales, for example, can receive nearly $200 more per day for a private patient’s stay than a public patient.

Report author Dr Stephen Duckett argues the incentive is poor policy.

“Yet the prices used in the national funding arrangements for private patients in public hospitals yield greater revenue to states than the prices set for public patients. This is perverse and contrary to good public policy.”

He concluded that such an incentive to admit private patients is not consistent with the principle of ‘public-private neutrality’ and should be addressed by the IHPA in upcoming negotiations for the next version of the National Health Reform Agreement.

Dr Duckett said the public/private funding discrepancy is mainly caused by two factors in the formula – length of patient stay, and the Medicare Benefits Schedule (MBS) payments.

“The residual to be met by the state for a private patient is less than for a public patient. Further, the MBS revenue is an important component of public hospital specialists’ remuneration, so they will have an incentive to support an expansion of private patients.

“The simple length-of-stay incentives, coupled with the interests of medical staff, combine to create a powerful financial motivator on hospitals to increase revenue and admit more private patients,” Dr Duckett said.

Read more: Call for national review of public hospital private practice arrangements

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