Private hospitals see light at end of the tunnel

NEWS today that Federal Health Minister Mark Butler has instructed his Department, through the Private Health CEO Forum, to 'to take action on payments to private hospitals within the next three months, directing they increase funding to a greater portion of their benefits', is cause for cautious optimism.

"This development is overdue and much-needed. It comes too late for some hospitals and services.

Nevertheless, it is important positive recognition that the funding system needs reform and that the health insurance industry has a responsibility to meet hospital costs," APHA CEO Brett Heffernan said today.

"The Minister's call mirrors our policy for 88 cents in the dollar on premiums be returned to healthcare providers. This has been the traditional split. In fact, in the past 90 cents had been achieved. But the health insurance industry has not hit the 88-cent benchmark since 2019-20.

"In fact, the shortfall in funding from insurers to healthcare providers has been $3 billion over the last three years. On the back of that funding failure, the insurance companies banked over $5 billion in record profit-taking. The result has seen many private hospitals close or permanently cancel services, including maternity and mental health, across the country.

"Australian families pay higher and higher premiums to get the best care, not to pad the bottom line of insurance companies.

"With last year's moderate average 3.03% premium increase, the Australian Prudential Regulation Authority exposed that the insurers banked $1.85 billion in profits. It was their second biggest cash bonanza ever, eclipsed only by 2023's record $2.2 billion profit. On top of that, insurance 'management fees' also rose 18% over 2023-24 to reap another $3.5 billion a year from premiums.

"Last week, APRA found that in the last quarter alone (October-December 2024), the health insurance industry had netted a further $581 million in profits and that just 83 cents in the dollar was being provided to healthcare providers.

"Clearly, the profiteering of health insurers is out-of-control. It's not hard to make never-before-seen profits when you aren't paying your bills in full.

"When people's premiums are being banked by insurance companies instead of covering the actual costs of healthcare in private hospitals, is it any wonder marginal services, like maternity and psychiatry units, are closing?

"Australians are paying for health insurance each year in the expectation that choice, access and quality are guaranteed. And that they will get their doctor or specialist, in a state-of-the-art private hospital, in a timeframe of now.

"Increasingly, that value proposition has been failing. Since 2022 almost 20 private hospitals have closed their doors entirely and more than 70 services in other private hospitals permanently cancelled, leaving consumer choice and access diminished, investment in quality compromised and public hospital waiting lists longer and deeper.

"That means patient clinical needs are disrupted in having to relocate to another private hospital to get the care they need, often much further away, or go public. Local communities lose much-needed healthcare assets. It compounds in regional areas where public and private hospitals often tag-team to provide complementary care.

"We understand this is an election-eve announcement. That's why we are cautiously optimistic. The proof will be in the pudding. But after two long years of raising the need for action, Australia's private hospitals, who carry so much of the healthcare burden, feel there may finally be a way through the viability crisis."

-ENDS-

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