$1bn hit on Ramsay Health as private patients opt out

Australia’s largest private hospital group has sounded a warning amid a growing trend of private patients using public hospitals.

Ramsay Health Care managing director Craig McNally. Picture: Hollie Adams

The head of Australia’s largest private hospital group has sounded a warning on the healthcare system, as rising costs and concerns about affordability cause patient numbers to drop, including a 12 per cent fall in maternity cases last month alone.

Craig McNally, managing director of Ramsay Health Care, yesterday became the latest industry leader to raise a red flag about Australia’s healthcare system, which survives on a mix of public and private services.

He was forced to slash the Australian-listed company’s earnings guidance because of weak conditions in its local sites and a significant downturn in its UK business. The warning wiped almost $1 billion from Ramsay’s Australian market valuation yesterday as its shares slumped 7.5 per cent to $57.49.

Mr McNally pointed to a “ramped up” trend of privately ­insured patients electing to have their babies in public hospitals because out-of-pocket costs could be as high as $10,000 in a private setting. “In May there was a surprising 12 per cent decrease in maternity and I believe that is an out-of-pocket issue,” he said.

“We have flagged to the ­market for a while that maternity services were under pressure but that seems to have ramped up. I don’t have the absolute answer about that at the moment but I’m sure affordability is a part of that.”

In 2006-2007, 28.2 per cent of births were in private hospitals. The figure had fallen to 24.5 per cent in 2015-2016.

The Turnbull government is overseeing reviews into Australia’s healthcare system, including one on rising out-of-pocket costs and another on private health insurance. Health Minister Greg Hunt has introduced changes to address concerns but the industry has argued more urgent action is needed to support the private healthcare system.

“We are facing more challenging conditions in Australia with lower growth in procedural work and inpatient admissions, which has adversely impacted case mix in our Australian hospitals,” Mr McNally said. “Given the current climate around private health ­insurance and affordability, we expect this trend will continue into 2019.”

Bill Shorten has promised to cap the annual health-insurance premium rise to 2 per cent for the first two years of a Labor government. Mr McNally said this would have wider ramifications not yet understood, including an impact on hospital staffing and on wage negotiations.

The discussion needed to be “better than it currently is so everyone understands where it is heading rather than a headline announcement”, Mr McNally told The Australian.

Investment bank Credit Suisse recently reported private patients were increasingly opting to join public waiting lists because public hospitals cover certain costs.

“We are seeing lower growth in inpatient admissions in the more acute procedures,” Mr McNally said. While it was too early to determine the reason, “I can only speculate if that is an out-of-pocket issue because that is where the bigger out-of-pockets are.”