Hundreds of staff underpaid by private healthcare provider

One of Australia’s largest private hospital operators underpaid staff by an estimated $21.7 million after hundreds of disability service workers were incorrectly paid and some nurses may not have received their full entitlements.

Healthscope, a national private hospital operator and healthcare provider, revealed in a company report to the Australian Securities and Investments Commission in April that it had hired external advisers to help determine the extent of underpayments.

“While this review is ongoing, based on analysis undertaken during the financial year, Healthscope has recorded provisions of $21.7 million,” the company report said.

Healthscope runs 38 private hospitals across Australia.Credit: Photo: Andrew Quilty

A Healthscope spokesperson told The Age the private healthcare provider was working to resolve two issues that may have resulted in a number of employees being incorrectly paid or not receiving their full entitlements.

These involved historical underpayments of 500 current and former staff at Healthscope Independence Services – a disability support service based in Victoria – and accrual of annual leave for nurses in NSW hospitals.

Healthscope’s hospitals in NSW include the Prince of Wales Private Hospital, Northern Beaches Hospital, Campbelltown Private Hospital and Newcastle Private Hospital.

Healthscope, which was acquired by Canadian infrastructure giant Brookfield in 2019, said in the company report that where appropriate it had begun to make remediation payments.

“In both these instances we have advised the impacted staff, and have taken steps to resolve the issues as quickly as possible,” the company’s spokesperson said.

“These are both historic issues that predate Brookfield’s acquisition of Healthscope in late 2019.”

The underpayments come at a time when the $22 billion private hospital sector is in financial crisis, due to soaring costs and wages and decreasing patient numbers since the pandemic.

In NSW, Queensland, WA, Victoria and Tasmania, at least 10 private maternity hospitals have closed since 2017 – largely due to workforce shortages. Five of those were in 2023.

Healthscope posted a loss of $648.9 million in 2023 after it wrote down the value of its business by $919 million due to forecasted changes in cash flow as a result of revised expectations of hospital admissions and operating costs.

The spokesperson said the underpayment of staff at its Healthscope Independence Services business affected about 200 current and 300 former staff.

“Employees were incorrectly classified in our payroll system, resulting in historic underpayments,” they said.

“Healthscope has engaged PwC to assist with the identification of employees affected and to calculate the remediation payments for individuals.”

The spokesperson said payments to current and former staff had been made progressively, with final payments expected to be paid this quarter.

“Healthscope self-reported the underpayments to the Fair Work Ombudsmen.”

A spokesperson for the Fair Work Ombudsman said the workplace regulator was investigating Healthscope following its self-reported underpayments of staff.

“As this matter is ongoing, it is not appropriate to comment further,” the Fair Work spokesperson said.

Healthscope said the other issue involved the accrual of annual leave for nurses in its NSW hospitals and had arisen as a result of complex clauses in the relevant enterprise agreement.

“The proper interpretation of those clauses is currently before the Fair Work Commission, and Healthscope is working constructively with the NSW branch of the Australian Nursing and Midwifery Federation to attempt to resolve the matter,” its spokesperson said.

A spokeswoman for the NSW branch of the union said it could not comment on the matter because it was before the Fair Work Commission.

The Health Workers Union, which represents some Healthscope workers in private hospitals and disability care, said it was not aware of the underpayment issue.

“Given Healthscope’s history of underpayment of employees in the private hospital sector we are not at all surprised,” a spokesman said.

Professor Anthony Scott, a health economics expert from Monash University, said the underpayment of Healthscope employees added to the pressures being felt by private hospitals.

“It doesn’t do the sector any good in terms of their reputation,” he said.

He said workforce shortages, increased wages for healthcare workers and Australians cutting back on private health insurance during a cost-of-living crisis were placing pressure on the sector.

“The private sector is in a position to respond more quickly,” he said. “If there’s a drop in demand they can close wards or hospitals straight away, the public sector can’t do that.”

In June, federal Health Minister Mark Butler launched an urgent review into the private hospital sector amid skyrocketing costs and intense financial pressure threatening its viability. The Department of Health expects to report back at the end of August.

More than 70 private hospital services have closed in the past five years as inflation dramatically increased costs, including wages, food, energy, personal protective equipment, IT and maintenance.

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