Private hospital sector and health insurance industry trade barbs over crisis in maternity services

The private hospital sector and the health insurance industry are at loggerheads over the crisis in maternity wards after the Hobart Private Hospital announced it would be closing its service.

Healthscope has announced the closure of the maternity ward at the Hobart Private Hospital, sparking a stoush between the private hospital sector and the health insurance industry.

A stoush has erupted between the private hospital sector and the health insurance industry over the closure of maternity wards across Australia, including the service at the Hobart Private Hospital.

It comes after Private Healthcare Australia (PHA), the peak industry body for private health insurers, called for a major overhaul of the way maternity services were funded.

PHA CEO, Dr Rachel David, said on Monday that midwives, GPs, and obstetricians should be allowed to “offer a total package of private maternity services”, so that consumers weren’t required to pay “prohibitive” out-of-pockets costs for a private obstetrician to directly manage their pregnancy.

The Hobart Private Hospital maternity ward is set to close.

She said health funds were currently only allowed to pay for in-hospital care and not the management of a pregnancy, while obstetricians were sometimes charging more than $6500 out-of-pocket for appointments in the months leading up to birth.

“This is an enormous barrier to private maternity care right now and one that health funds are not able to control,” Dr David said.

According to the PHA boss, if health funds and the federal government paid a minimum of $3000 to lead practitioners undertaking a care co-ordination role – with a single bill provided to the patient instead of several – the Commonwealth would need to spend about $246m over four years.

The PHA says this would give families clarity on total out-of-pocket expenses and ultimately create savings for the federal government by lowering demand in the public system but the private hospital sector claims that health funds themselves are to blame for the crisis in maternity services.

Dr Rachel David, Private Healthcare Australia.

The finger-pointing comes amid ongoing concerns regarding Healthscope’s announcement last week that it would be closing the maternity ward at the Hobart Private Hospital, citing labour challenges.

Australian Private Hospitals Association (APHA) CEO Brett Heffernan said insurers had “a lot to answer for when it comes to hospitals shutting down services”.

“The real problem is private hospitals are unable to cover the losses in services like maternity … because private hospitals are being short-changed by insurance companies across almost all services,” he said.

“[The Australian Prudential Regulation Authority] reports that over the last three years the shortfall in funding to private hospitals from insurance companies for treatments is a massive $3bn. The insurers do not deny this. It’s a matter of public record.

Brett Heffernan, Australian Private Hospitals Association CEO.

“Their catchcry is they cannot keep pace with the rising costs of healthcare. But the APRA data belies that claim, with insurers banking never-before-seen profits of more than $5bn over the same three years.”

Dr David hit back at the private hospital industry association, saying there was “no evidence that health funds are underpaying hospitals”.

“[APRA] data shows in 2023-24 health funds paid private hospitals more than $11.7bn for members’ healthcare – 8 per cent more than the year before,” she said.

“To keep premiums affordable, health funds always seek the best price for services when they negotiate multi-year contracts with private hospitals. Health funds are paying fair, competitive rates for hospital services across Australia and do not ‘owe’ hospitals any unpaid funds.”

Originally published as Private hospital sector and health insurance industry trade barbs over crisis in maternity services