Ombudsman weighs in on fiery comments in Ramsay, Bupa war

Bupa accused Ramsay of seeking to increase the value of its business following a $20bn takeover offer, attracting the Commonwealth Ombudsman’s attention.

Ramsay Healthcare issued Bupa a termination notice last week after funding talks failed between the groups. Picture: Arsineh Houspian

The Commonwealth Ombudsman has weighed into a funding dispute between Australia’s biggest private hospital operator Ramsay Healthcare and health insurance giant Bupa, saying it is considering taking action over fiery public comments made after funding talks failed between the pair.

Bupa accused Ramsay of seeking to “increase the value of their business, which is currently subject to a private equity backed takeover offer”, after the hospital group issued it a termination notice last week.

Bupa said Ramsay’s Asia Pacific operations made “some $625m profit at a margin of 11.4 per cent” last financial year and the termination notice, issued after funding talks failed, was an “affront to Australians who are facing growing cost of living pressures”. Ramsay, meanwhile, highlighted the record $1.8bn profit the entire health sector generated last year.

The comments attracted the attention of the Ombudsman’s office, which has strict guidelines against creating “adverse publicity” during funding disputes and contract terminations. Specifically, the guidelines ban “imputing motives to the other party” and “commenting on the financial position or ownership structure of the other party”.

“Where there is dispute over a contractual matter, insurers and hospitals should ensure that any public statements made by them or on their behalf are fair and reasonable and do not include any information or comment that could create adverse publicity or negative perceptions of the other party to the dispute,” the guidelines state.

“It is preferable that both parties use the same wording in their communications to avoid any confusion.”

A spokesperson for the Ombudsman said it had been alerted to the potential breach of its guidelines, as well as similar comments from the health insurance lobby Private Healthcare Australia.

“The office is aware of these statements and considering what action it may take in response,” the spokesperson said.

“More broadly, in matters such as these, the office focuses on ensuring insurers and hospitals minimise any unnecessary adverse impacts on consumers.”

Ramsay received an indicative $20bn takeover offer from a KKR-led consortium in late April and had been negotiating with Bupa, which represents four million Australians, since last November. It is understood Bupa had offered a 1 per cent funding rise, while Ramsay was looking for an offer closer to helping meet hospital costs, which have risen up to 7 per cent.

Both Bupa and Ramsay have declined to comment on the negotiations and offers.

In a statement to the ASX, Ramsay said unless a resolution is reached with Bupa, its contract with the insurer will be terminated on August 2 – giving 90 days’ notice – and the health fund’s members would have to pay upfront for treatment. This would be the difference between the statutory default benefit Bupa must pay and Ramsay’s hospital treatment costs.

Doctors warned if the contract is terminated, health costs would rise with Bupa members who are treated at a Ramsay hospital no longer covered by the funds medical gap scheme, which caps out-of-pocket costs at $500. Bupa has denied this.

In comments on social media, Bupa has softened its language from its earlier media statement, saying it is continuing to negotiate with Ramsay.

“As always, our members’ remain our top priority, so if you’re booked in for a procedure at a Ramsay hospital you will still be covered during the next 90 days. We are continuing to negotiate with Ramsay and hope to reach a resolution that helps keep healthcare affordable and accessible,” Bupa said in a post on LinkedIn.

“If we aren’t able to reach an agreement with Ramsay, we have made the decision to continue to pay Ramsay the same rates as our current contract.”

Private Healthcare Australia also speculated on Ramsay’s motives, issuing a media release with the headline ‘new (health) minister to face double digit premium increases if Ramsay/KKR demands met”.

“Ramsay is currently the subject of a private equity backed takeover by KKR and is using this negotiation as an opportunity to increase the value of the business at the expense of Australian consumers,” PHA chief executive Rachel David said.

“This behaviour is entirely unacceptable and will drive up premiums at the worst possible time; it is also ethically wrong as waiting times for surgery and cost of living pressures are spiralling.

“If the Ramsay/KKR demands are met, it would be a disaster for health care in Australia – forcing people out of private cover with serious consequences for Australia’s public hospital system.

KKR is currently completing due-diligence on the proposed takeover. It is yet to lob a binding offer.

Ramsay shares fell 2 per cent to $77.20 on the ASX on Tuesday, giving it a $18.02bn market capitalisation. That’s down sharply from KKR’s $88 a share offer.

Originally published as Ombudsman weighs in on fiery comments in Ramsay, Bupa war