Australians with private health insurance are being short-changed by big insurers engaging in “unfair and unconscionable practice”, the peak private hospital body has alleged, in a dramatic escalation of the long-running conflict between the rivals.
Australian Private Hospitals Association chief executive Brett Heffernan has penned a letter to Prime Minister Anthony Albanese, detailing what he claims are some of the big insurers’ worst behaviours — allegations that have been strongly denied by insurers.
“The misuse of market power by insurance companies by abusing their unequal bargaining power for profit-taking at the expense of patient services and the sustainability of a key plank of Australia’s healthcare system, is unconscionable,” the letter, seen by the ABC, states.
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The letter argues many of Australia’s private hospitals are “on the brink of collapse” with the recent folding of provider Healthscope and more than 70 smaller operations nationally since 2020, all citing financial distress.
The association lays much of the blame at the feet of private health insurers, calling for a mandatory industry code of conduct to hold all parties accountable.
The letter details a long list of allegations about the conduct of insurers, including claims they are delaying entering new contracts with hospitals, forcing them to run on previously agreed, lower prices.
Mr Heffernan told the ABC insurers were also misusing their market power to issue private hospitals with “take it or leave it” contracts, where there is no room for negotiation.
“To my mind, that’s unconscionable conduct. It probably looks down the barrel of being anti-competitive as well,” Mr Heffernan said.
“These arrangements mean that people with private health insurance are getting less for their money year in, year out. They’re getting less choice, less access and quality is being compromised.”
Rachel David has dismissed the allegations against private health insurers. (ABC News: Chris Taylor)
The peak body for private health insurers dismissed the allegations.
“I’d utterly reject those comments,” Private Healthcare Australia’s CEO, Rachel David, said.
“There’s tough behaviour on both sides and that level of friction I’d argue is necessary to keep downward pressure on premiums.”
But she noted the contracting process was not “foolproof” and said it was being reviewed by the Private Health CEO Forum, a group of stakeholders and experts set up by the federal government to look at ways to improve the viability of the private health sector.
Patients losing out on rehab benefits, says association
The private hospital body has also taken aim at the way insurers used so-called bundled payments — where different elements of care are grouped together in one payment — particularly for rehabilitation services.
Under these contracts, payments to private hospitals for rehab are bundled with the initial treatment, and the provider of that initial treatment is expected to pass on payment to the rehab provider.
But the association claims this results in a cap for how many rehabilitation services a patient can access, and if they exceed that target, the hospital has to bear the additional cost.
Australian Society of Orthopaedic Surgeons chair Roger Brighton said that was translating into hospitals pressuring doctors to discharge patients without rehab.
“It’s interfering with our clinical care and we’re the experts in this field.”
Roger Brighton says doctors are feeling pressure to discharge patients without rehabilitation. (ABC News: Chris Taylor)
Mr Heffernan said insurers should not be making clinical decisions.
“This is the slippery slope we’re on. This is US-style managed care where care is determined in advance by your insurance company,” he said.
Dr David said there were strong consumer protections in place for patients, but said the Private Health CEO Forum would try to “iron out” some of the difficulties with bundled payments.
“The reason that some insurers go in for bundled payments is to provide continuity of care so the hospital actually has some consistency about what services they’re actually referring patients to, because we’ve found that for the most part, that improves patient outcomes and satisfaction,” she said.
‘Toxic’ relationship between hospitals and insurers
Souring tensions between private hospitals and insurers have posed a headache for the federal government, with about half of the population holding health insurance.
The private hospital sector has been marred in financial difficulty compounded by the COVID-19 pandemic, with the government last year taking the unusual step of asking hospitals to open their books so it could assess their viability.
The private hospital sector was asked to open its books by the federal government. (ABC News: Keane Bourke)
However, the Grattan Institute’s Health Program Director Peter Breadon said solving the problem had been complicated by the pair’s deteriorating relationship, with claims and counter-claims about a lack of transparency.
“The big problem here is it’s really unclear who’s right and who’s wrong in this argument … with the insurers saying they’re just trying to get a good deal for their members and with the private hospitals saying that they’re not being paid,” he said.
“We definitely want a little bit of tension in the sector where people on both sides are trying to bargain to get a good deal, but it’s become wildly dysfunctional. These kind of disputes, people ripping up contracts and walking away, patients being left with a lot of uncertainty about where they’re going to get their care. This is clearly not good enough.”
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Mr Breadon said private hospitals should move towards an activity-based funding model — like public hospitals — where hospitals are funded according to how many and what type of patients they treat.
Mr Hefferan said the only way forward to fix a “frankly broken system” was for a voluntary Code of Conduct to be made mandatory, and administered by the Australian Competition and Consumer Commission (ACCC).
“If the health insurers have got nothing to hide, I see no reason why they wouldn’t agree,” he said.
Failure to abide by any code could result in fines and bad press for insurers involved, Mr Hefferan said.
Dr David dismissed the need for a mandatory code, saying the existing voluntary code was already overseen by the ACCC and the Commonwealth Ombudsman.
“We are held to a standard that is way higher in this regard than private hospitals, so I think the need for any further regulation or any additional layers of regulation is not required,” she said.
Mr Breadon said setting price guides for services could go some way towards mending the relationship between the pair.
“When you’ve got these two parts of the system tearing each other apart, fighting over what care should cost, it’s clearly not resulting in good outcomes for the system or for patients,” he said.
“There’s no sign that this toxic battle of contesting claims between private hospitals and insurers will go away on its own, and if something isn’t done, I worry that the fighting will continue.”
A spokesperson for Health Minister Mark Butler says the Private Health CEO Forum is looking at ways to improve the sector. (ABC News: Callum Flinn)
A spokesperson for Health Minister Mark Butler said the Private Health CEO Forum was looking at ways to improve the sector.
“In relation to a mandatory code of conduct for insurers, the range of reform options being considered may include whether regulatory settings and contracting arrangements between insurers and private hospitals are fit for purpose,” they said.
“While the minister reserves the right to take regulatory action if he deems necessary in the future, the government’s clear preference is for industry participants who have a clear stake in the operation of this part of the system, to come up with workable solutions.”