Australian Private Hospitals Association says forum designed to rescue the sector excludes most of it

The government’s latest attempt to shore up the ailing private hospital sector is a ‘dud’ that will do nothing to prevent further closures, the sector’s peak group says.

The peak hospital lobby group says a CEO forum being run by the Health Minister lacks key industry representatives.

Health Minister Mark Butler’s latest attempt to shore up the sustainability of the ailing private hospital sector is a “dud”, which will do nothing to prevent further closures across the industry, the Australian Private Hospitals Association says.

Mr Butler held the first meeting of the Private Health Chief Executive Officer Forum last Friday, where he presented a range of reforms to key decision-makers in the sector.

These included changes designed to make maternity care more accessible and affordable and improve access to mental health services by increasing the supply of internationally educated psychiatrists.

In all, there were five options presented to the group, however the APHA said more than 70 per cent of private hospitals were not represented at the forum.

“The forum lacks substance, excludes over 70 per cent of private hospitals – bizarrely those doing it toughest – poses no immediate solutions to the rolling viability crisis and tries to kick-the-can on any decision-making until after the next federal election,’’ the APHA said on Monday.

The pushback comes after The Australian revealed over the weekend that Healthscope owner Brookfield was committing more capital to the business while discussions with its lenders over its future continued.

Healthscope chief executive Greg Horan emailed staff on Friday telling them: “Healthscope, along with the rest of the industry, is facing significant financial challenges.’’

Health Minister Mark Butler. Picture: NewsWire / Martin Ollman

There were several causes, but “firstly, and most critically, private health insurers have not been funding hospitals fairly’’.

In a bid to address this funding shortfall, Healthscope in late October announced it would introduce a $100 gap fee for overnight hospital stays for Bupa and Australian Health Services Alliance (AHSA) fund members, and said at the time customers who didn’t like it should switch funds.

It followed up in November by breaking contracts with Bupa and the 26 AHSA funds, which cover about six million Australians, with Mr Horan saying insurer payouts were not matching healthcare industry inflation.

Private Healthcare Australia chief executive Dr Rachael David said at the time the real issue was the private equity debt model and Brookfield’s inability to properly run a hospital group.

Mr Horan told staff in his email that in relation to Bupa, “our door remains open, and we are confident they will do the right thing’’.

Inflation was also cited as a cause, while the company’s debt load was also to blame, he said.

“A further factor is our capital structure,’’ Mr Horan said.

“The level of debt and rents payable on some of our hospitals made sense before the Covid pandemic, but these have become difficult to support in the current environment.

“We are now working with our banks and landlords to restructure these arrangements.

“As we work through this, our main shareholder, Brookfield, has committed to invest more money in Healthscope.

“Brookfield has already invested heavily in our business and this latest investment gives us some added time to find solutions.’’

Mr Horan said Healthscope was also engaging with the federal government for “sensible policy solutions” but said “it’s important to stress we are not asking the government for any funding’’.

Mr Horan, along with Medibank managing director David Koczkar, Ramsay Healthcare boss Carmel Monaghan and Martin Bowles from Calvary Heath Care are taking part in the Minister’s CEO forum, which currently has 18 participants.

“As the Financial Health Check showed, the private hospital sector is facing a number of challenges, largely because of private pressures in the system that can only be managed by hospitals and insurers sitting down together and sorting it out,’’ Mr Butler said on Friday.

“The government is playing its part, by bringing the key players together to work collaboratively to find solutions for the benefit of patients and our health system.

“The options I presented to the CEO forum today will kickstart the reform process and fast-track the sector to a place of viability and sustainability.’’

The Government’s Private Hospital Sector Financial HealthCheck published in early November showed private hospitals expenditure increased 4.1 per cent between 2018-19 and 2021-22, but revenue only went up 2.9 per cent on average across the sector, while earnings were, the APHA said, well below the level needed to reinvest in hospital services.

APHA chief executive Brett Heffernan said on Monday that while the large operators naturally should be involved in the CEO forum, the exclusion of the smaller operators made a mockery of the process.

“To be clear, the big groups should be at the table,” he said.

“It would be odd if they were not. However, what may work for a big hospital group will almost certainly fail the needs of the other 72.2 per cent of private hospital facilities.

“It’s either an act of sheer ineptitude or wilful sabotage that these hospitals are not represented at all.’’

Calvary’s Mr Bowles said following the forum on Friday that it was achieving what it set out to do, and “enables open dialogue to identify solutions that will deliver improvements in the short term and lead to necessary long-term reform’’.

St Vincent’s Health Australia chief executive Chris Blake said the reforms presented, if implemented, would provide “immediate and real relief”.

Originally published as Australian Private Hospitals Association says forum designed to rescue the sector excludes most of it