Private hospitals need $450m a year to avoid a potential industry crisis, lobby group says

Private hospitals need a $450m leg up from the federal government to avoid an industry collapse while a sustainable model for the sector is devised, a peak lobby group says.

Private hospitals argue insurer payouts have not kept up with inflation, putting the sector at risk.

The federal government should support private hospitals to the tune of at least $450m a year while a sustainable business model for the sector is figured out, and introduce a private hospital nursing wage subsidy to avoid a potentially disastrous collapse, the ­Australian Private Hospitals Association says.

The APHA, in its pre-budget submission to the government – effectively a pre-election wish list – recognises that efforts to figure out how the sector can remain financially viable are under way, but says short-term measures are needed after years of inaction.

The government last year conducted a Private Hospital Health Check process, and has set up a CEO forum in the wake of that to consult on sector reform, but the APHA argues that nothing substantive has been done.

The APHA says that over recent years private hospitals have had to absorb significant cost increases, while insurers are making billions in extra profits while not increasing payouts to hospitals.

APHA chief executive Brett Heffernan said without urgent action the sector would experience further hospital failures, and the organisation was pushing for a subsidy for overnight hospital stays as an interim measure.

“Failing making the insurers pay their way, the government can provide a temporary fix by funding a co-payment of $100 to $200 per hospital admission to ensure more hospitals don’t close while its CEO Forum talks on other reforms are being thrashed out,” Mr Heffernan added.

“Last year the federal health budget was $180bn. The current funding agreement between the federal government and the states to fund public hospitals is $150bn over five years. In recent days, the government has topped-up public hospital funding by another $1.7bn.

“The co-payment option for private hospitals would cost some $450m a year for two years. Not only is it a rounding error in federal budget terms, it’s a small price to temporarily support private hospitals who the government recognises are doing it tough.’’

Mr Heffernan said the funding gap between hospital costs and insurer payments over the past three years was actually $3bn, with the $450m figure representing the minimum needed to stop more private hospitals from closing.

Other recommendations put forward by the APHA include:

● Lifting the moratorium on overseas-trained doctors, especially psychiatrists.

● Freezing all regulatory changes affecting private hospitals for the duration of the CEO Forum talks, which is expected to be one to two years.

● Contracting between private and public hospitals, with private hospitals to take public patients who are beyond the clinical timeline threshold for their needs.

“All of these options are within the government’s remit to deliver quickly, easily and with minimal imposts,’’ Mr Heffernan said.

“However, if doing nothing continues to be the federal government’s approach, then the only way private hospitals can avert further closures and service cancellations is to break contracts with intransigent health insurance companies.

“The resulting out-of-pocket costs for insured patients would be in the thousands of dollars each.”

The tension between insurers and private hospital operators erupted into the public sphere in November when Healthscope announced it was walking away from contracts with insurer Bupa and the members of the Australian Health Service Alliance (AHSA) over their refusal to increase payments for hospital stays.

Healthscope had previously said it would charge Bupa patients a $100 out of pocket fee for overnight hospital stays, before breaking its contract altogether.

The hospital operator has since struck a two year agreement with Bupa, rolling back these decisions in late January.

Originally published as Private hospitals need $450m a year to avoid a potential industry crisis, lobby group says