Millions of Australians to lose cover at 38 private hospitals

More than 6 million Australians face hefty out-of-pocket fees at 38 private hospitals after the country’s second-largest hospital operator pulled out of agreements with dozens of funds, as the health minister urges the parties to end their long-running stoush.

In an escalation of the funding war between private hospitals and health insurers, Healthscope announced on Friday that it would be terminating its contracts with major health insurer Bupa and 22 smaller not-for-profit funds represented by the Australian Health Services Alliance (AHSA).

Healthscope chief Greg Horan says private hospitals face a “viability crisis” and some insurers have refused to pay for rising healthcare costs.Credit: Oscar Colman

Healthscope chief executive Greg Horan said the company had been left with no choice but to cancel the agreements after the insurers threatened legal action against its decision in October to impose up to $100 out-of-pocket fees on Bupa and AHSA members using their facilities.

“In the absence of fair funding, this fee was Healthscope’s best option,” Horan said in a statement. “The response from the insurers was lawfare, and we are not prepared to engage in protracted and expensive legal challenges.”

Bupa released a statement on Friday reassuring its customers they would be fully covered until February 20, when the contract terminates, and services commenced or booked before that date, such as maternity and cancer treatment, would not be affected.

“We are shocked and deeply disappointed by Healthscope’s action … at a time when we should be working together to build trust in the private health system and take pressure off hospitals and their frontline teams,” chief executive Nick Stone said.

AHSA chief executive Andrew Sando said Healthscope’s decision was driven by concern for investors, not patients.

“Gouging the Australian public to generate profits for their private equity owners is not in the national interest, and flies in the face of compassionate, equitable and sustainable healthcare,” Sando said.

Federal Health Minister Mark Butler implored Healthscope and the insurers to “sit down and sort this out”.

“This brinkmanship has got to end,” he said on Perth radio on Friday.

“At the end of the day, they [private hospitals and insurers] receive a lot of taxpayer money and obviously a lot of money from their members to do the right thing by patients.”

In Sydney, Healthscope operates Norwest, Prince of Wales, Campbelltown and Nepean private hospitals, as well as the private arm of Northern Beaches Hospital. In Melbourne, Healthscope runs La Trobe, Melbourne, Knox and John Fawkner private hospitals.

The decision presents a particular headache for fund members already booked in for surgeries or procedures at Healthscope hospitals.

From February 20, Bupa’s 4 million customers will be forced to move health funds, choose a different hospital, or stump up massive out-of-pocket fees to be treated at Healthscope hospitals. Healthscope’s agreement with the AHSA funds will end on March 4.

Pam O’Connor, a Bupa member from Hawthorn in Melbourne’s east, said she would move to another fund if no agreement had been reached by February.

“We weren’t concerned about the $100 payment … but not being covered at all is quite serious,” she said.

Horan said Australia’s private hospitals were haemorrhaging money and struggling to attract new investment, and the health funds had so far refused to alter their contracts to factor in higher costs.

“There is a viability crisis impacting private hospitals across the country,” Horan said.

“In an environment of rising costs and private hospital closures, it is unacceptable for insurers to fail their core purpose – funding the care of their members.”

A federal government review of the financial health of private hospitals, released earlier this month, found rising costs had halved their margins in the five years to 2022.

Healthscope is also facing an industrial dispute with its NSW nurses, who have walked off the job three times this month demanding a 15 per cent single-year pay rise.

‘Unethical tactic’

Healthscope has waged an aggressive public campaign to make health funds pay more to cover the soaring cost of delivering healthcare. The Brookfield-owned company is about $1.6 billion ($2.4 billion) in debt following its $4.1 billion acquisition in 2019 by the Canadian private equity giant.

Private Healthcare Australia, the peak body representing health funds, said the decision would affect roughly half of Australians covered by private health insurance.

Chief executive Rachel David said Healthscope was “throwing its toys out of the cot” instead of negotiating a fair deal for patients.

‘That private hospitals have closed and others are barely hanging on … is evidence the system is out-of-whack’.

Brett Heffernan, Australian Private Hospitals Association

“This is another unethical tactic from a $1 trillion North American private equity firm that appears intent on holding health fund members hostage,” David said.

Brett Heffernan, chief executive of peak body Australian Private Hospitals Association, warned Healthscope’s decision was a sign of things to come.

“That private hospitals have closed, and others are barely hanging on while insurance companies accumulated over $4 billion in profit in just over two years, is evidence the system is out-of-whack,” he said.

Private health funds set to lose Healthscope contract:

• Bupa
• AIA Health Insurance
• Australian Unity 
• GMHBA
• HBF Health (including see-u)
• CBHS Health and Corporate Health funds
• Health Insurance Fund of Australia (HIF)
• Health Partners
• Defence Health
• Navy Health 
• Teachers Health Fund
• Nurses & Midwives Health
• Doctors Health Fund
• Emergency Services Health
• Frank Health Insurance
• HCI
• Latrobe Health Services
• Onemedifund
• Peoplecare Health Insurance
• Phoenix Health Fund
• Police Health Limited
• ACA Health Benefits Fund
• Queensland Country Health Fund
• Reserve Bank Health Society
• Territory Health Fund
• TUH
• UniHealth Insurance
• Union Health
• Westfund

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