Bupa and Ramsay fail to strike new funding agreement, forcing members to pay upfront

Doctors are warning of spiralling out-of-pocket costs for Bupa’s members due to a funding fight with Australia’s biggest private hospital operator.

Doctors are warning of spiralling out-of-pocket costs for Bupa’s four million members after the health insurer failed to strike a new funding agreement with Australia’s biggest private hospital operator Ramsay Health Care.

Australian Medical Association president Omar Khorshid says Bupa members will no longer be protected by the fund’s medical gap scheme - which caps out-of- pocket costs at $500 - when treated at a Ramsay hospital from August 2.

Private hospital operator Ramsay has issued Bupa with a notice to terminate its hospital provider agreement in early August unless “a resolution is reached” in long-running funding negotiations.

This means that after a “transitional” period, Bupa members will be forced to pay the difference between the default benefit the health fund is required to pay Ramsay and their actual hospital treatment costs.

However, Bupa said the Ramsay Health Care decision was “an affront to Australians who are facing growing cost of living pressures.”

The war of words erupted in an unprecedented exchange between Bupa and Ramsay late on Wednesday, with the health fund accusing the ASX-listed hospital group of seeking “unreasonably high rates of increase” to “increase the value of its business”; in the wake of a $20bn takeover offer from KKR.

Ramsay - which reported a 59 per cent slump in profit in the three months to March 31 - said hospital costs had increased significantly during Covid-19 while the entire health insurance sector booked a record $1.8bn profit last year.

It is understood Ramsay had been negotiating with Bupa for the past six months - long before KKR lobbed its takeover two weeks ago.

Unless a resolution is reached, Bupa members will be forced to pay the difference between the default benefit the health fund is required to pay Ramsay and their actual hospital treatment costs.

Australian Medical Association president Omar Khorshid said the standoff threatens to impact Bupa members. Picture Dean Martin

Dr Khorshid said the failure to reach agreement meant that although Bupa members could still be admitted to a Ramsay Health Care hospital, those booked from 2 August will face extra out-of-pocket hospital costs.

“The Australian Medical Association is disappointed that contract negotiations for Ramsay Health Care hospital services to Bupa members have ended in stalemate with Ramsay Health announcing that it has issued a notice to BUPA to terminate the agreement it has with Bupa,” he said.

“This situation will be compounded under current Bupa rules that prevent patients being treated in a non-contracted hospital from accessing the Bupa Medical Gap Scheme, so they are also facing higher out-of-pocket medical costs.”

Negotiations between health insurers and hospitals have been strained, particularly as hospitals have lost hundreds of millions of dollars from elective surgery bans and Covid-related costs.

While funding negotiations are typically robust, they rarely result in a stalemate and the health fund’s contract with a hospital expiring.

Ramsay Australia chief executive Carmel Monaghan said hospital costs had “increased significantly” in the past two years while Australia’s health insurance sector booked a record $1.8bn profit last year.

This was mainly due to elective surgery bans slashing the number of benefits paid, and Bupa has argued that Ramsay “sought unreasonably high rates of increase”.

“Costs of providing care have significantly increased for private hospitals over the past two years. On the other hand, health insurers have accumulated profits of $1.8bn in the calendar year,”

Ms Monaghan said, adding that Ramsay hoped to reach an agreement with Bupa prior to the contract termination on August 2.

Bupa health insurance managing director Chris Carroll said: “Ramsay’s refusal to negotiate in any meaningful manner arguably reflects a desire to increase the value of their business, which is currently the subject of a private equity backed takeover offer”.

He said the “decision by Ramsay is an affront to Australians who are facing growing cost of living pressures. Bupa is standing to support its members during this challenging time”.

“We have already delayed our annual price increase by six months, to ease the pressure on families. This will bring our total support to members to more than $464 million since the start of the pandemic,” Mr Carroll said.

“The important thing for our members to know is nothing changes in the next 90 days; if you’re booked in for an operation you will still be covered during that period. After that period, the choice to charge members an out-of-pocket cost will be a decision made by Ramsay as Bupa intends to continue paying its current rates, which are above the statutory default rates.”

Mr Carroll said Bupa would continue negotiating with Ramsay for a “fair and reasonable rate of increase on behalf of our members”.

“We will be communicating with our members and doctors to keep them informed of any updates.”

Originally published as Bupa and Ramsay fail to strike new funding agreement, forcing members to pay upfront