Private hospitals suspending ‘unprofitable’ surgeries as stoush with insurers deepens

Private hospitals are suspending surgeries deemed unprofitable, leaving patients in limbo and reducing access to life-changing medical treatment.

Plastic and reconstructive surgery appear to have been hit the hardest, according to doctors groups who are calling for an overhaul of the remuneration arrangements between private health insurers and private hospitals.

Cancelled surgeries leave patients in limbo and reduces access to life-changing medical treatment.Credit: Glenn Hunt

Australian Society of Plastic Surgeons president Dr David Morgan said the current arrangements were winding back patients’ access to vital surgery.

“We recognise that the private hospitals are businesses and that they have to try and generate a profit,” he said. “But you’re reducing the value proposition of private healthcare when you’re not offering a broad-based health service.”

Morgan said many private hospitals were cutting theatre lists for plastic, breast and maxillofacial surgeons, and some surgeons in specialities perceived unprofitable had been asked by their private hospital to stump up a co-payment if they wanted to continue operating there.

“What is also happening is hospitals will either withdraw operating time or not offer new surgeons operating time if the surgery [or case mix] appears unprofitable,” Morgan said.

“These lists will be offered to surgeons from other specialties that are deemed more financially lucrative. These financial arrangements are having a detrimental roll-on effect on hospital theatre listings and ultimately are affecting patient access to life-changing surgical procedures.”

Another surgeon, who spoke on the condition of anonymity, said some private hospitals were amalgamating surgical lists and not allowing surgeons to operate until they had a minimum quota of four patients – a move not seen before, while another said they had been told a hospital had cancelled a surgeon’s operating list because they deemed it “was not worth their while”.

Health Minister Mark Butler earlier this year launched a review into the $22 billion private healthcare system, as hospitals come under significant financial pressure amid their deepening stoush with private health insurers.

Dozens of private hospitals have shut down over the past five years, citing the shift in profits from hospitals to health funds. They want insurers to contribute more to stop more facilities from closing, and in an unprecedented move launched a public “Protect Your Hospitals” campaign slamming the conduct of health funds.

Australian Prudential Regulation Authority data shows insurers returned 83 per cent of premiums to its customersin the 2023 financial year.

However, the group representing insurers, Private Healthcare Australia, said claims about private hospital closures were exaggerated. Chief executive Rachel David said data showing health funds returned 83 per cent of premiums to patients were “cherry-picked” from a period affected by the COVID-19 pandemic and did not account for cash backs and deferred premium rises.

“The [Australian Medical Association’s] call for health funds to return 90 cents in the premium dollar would send some health funds broke,” David said. “The Australian Prudential Regulation Authority rightly insists health funds have enough money to pay for claims. We do not want to see a situation where health funds go to the wall and can’t afford to pay for their members’ healthcare.”

Australian and New Zealand Association of Oral and Maxillofacial Surgeons president Dr Jasvir Singh said oral and maxillofacial surgeons, including himself, were given six weeks’ notice to wrap up surgeries at Prince of Wales private hospital, run by Healthscope, in Sydney last year.

“It was a bit of a shock,” he recalled. He said surgeons in other more niche specialities, including plastic and ear, nose and throat surgeons, were also asked to wind up their surgeries.

“They wanted to make the lists more profitable,” Singh said. “It’s all to do with the funding of the procedures.”

He said surgeons had scrambled to complete all their scheduled surgeries within the six weeks and about 12 patients had their operations rescheduled at other hospitals. He said that this caused a great deal of stress.

In a statement, a Healthscope spokeswoman said private hospitals around the country were under serious financial pressure from high costs, such as increased wages and inflation, that had been exacerbated by funding constraints from insurers.

“In August of last year, Prince of Wales Hospital made the difficult decision to not continue offering oral and maxillofacial services at the hospital and realign our clinical services,” the spokeswoman said.

“The vast majority of these cases were same-day dental procedures, which can be readily done in a day hospital, allowing more capacity in the hospital’s theatres for high acuity and complex services which need to be performed in a setting like Prince of Wales.”

While the federal review is into the financial viability of private hospitals, it is also canvassing insurance funding. Hospitals want health funds to pick up a greater portion of the tab, but those funds have accused hospitals of wanting to drive up health inflation and increase their profits at the expense of insurers.

Australian Medical Association president Steve Robson said it had become increasingly clear to the federal government there were significant concerns about the future of the private health system.

“The private system is too big to fail,” Robson said. “If we have two-thirds of planned operations in this country done in private hospitals, and it suddenly falls over, where in god’s name can we do this? We already have [long] lists for public hospitals.”

David said she was very concerned about reports of hospitals prioritising more profitable services over others.

“When people pay for health insurance to cover hospital treatment, they expect to be able to access the treatment they are entitled to in a hospital nearby,” she said.

The peak body for private health insurers is blaming the situation on the federal government’s Prescribed List of Medical Devices and Human Tissue.

This list sets the prices of all the supplies used in hospitals, such as pacemakers and sutures.

David said health funds and consumers pay up to 100 per cent more for these items in the private system compared with the prices governments pay for the same supplies in the public system.

David said she had heard that knee and hip replacements were being prioritised over reconstructive plastic surgery, gynaecological surgery and oral and maxillofacial surgery. She said this was due to “perverse” incentives to maximise the use of expensive prostheses.

The Royal Australasian College of Surgeons said it had “deep concerns” about the financial challenges facing the private health system.

“As these facilities struggle financially, the availability of surgical services is at risk, potentially leading to longer wait times and reduced access to essential procedures for patients,” the college said in a statement.

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