Catholic hospitals won’t be allowed to follow Healthscope down the boycott road

Catholic Health Australia, whose members provide about a third of private hospital care nationally, will not be allowed to emulate Healthscope’s boycott of private health insurers.

Private hospitals are locked in a fight over funding with insurers.

The competition regulator intends to block Catholic Health Australia’s private hospital members from collectively boycotting large private health insurers, should negotiations for increased hospital funding arrangements fail.

The decision comes at a trying time for relations between private hospitals and insurers, with Healthscope recently breaking its contracts with Bupa and members of the Australian Health Services Alliance over their refusal to increase payments for hospital stays.

CHA, whose members operate 63 hospitals nationally, in July applied to the Australian Competition & Consumer Commission (ACCC) for the right to be able to “potentially engage in limited collective boycott conduct against only the five largest health insurers in Australia (by national market share)’’.

CHA member hospitals include St Vincent’s private hospitals, Mater hospitals, Calvary hospitals and St John of God hospitals, which each operator working across a number of states.

CHA says it is Australia’s largest non-government grouping of health and aged care services, and accounts for about 10 per cent of hospital-based care across Australia, and 30 per cent of private hospital care.

FULL LIST OF HEALTHSCOPE HOSPITALS AFFECTED BY THEIR INSURANCE BAN

CHA argued in a submission to the ACCC that shifts in the insurance and health markets have acted against its members’ interests, and it needed the ability to conduct boycotts as a negotiating tactic with the increasingly larger entities on the other side.

“Over the last few years, the private hospital sector (and in particular, Catholic healthcare providers) has been particularly hard-hit by structural changes, which have further diminished their already-limited bargaining power in respect of large funding organisations and suppliers of products and services (many of whom are either large national or international conglomerates),’’ the submission says.

“At the same time, there has been significant consolidation of the for-profit private health insurance sector, with 65 per cent of the insured population in Australia now covered by for-profit funds.

“Canon and civil law requirements typically make it difficult for Catholic hospitals and aged care facilities to merge their operations, as has occurred in the for-profit health sector.

“For-profit operators have been able to realise cost savings and efficiencies through a significant degree of consolidation.

“For Catholic hospitals and aged care facilities, in the absence of a full merger, and as a matter of financial viability, collaboration is essential for Catholic hospitals and aged care facilities to operate efficiently and effectively for the benefit of Australians.’’

CHA argued the ability to boycott would be “pro-competitive and efficiency-enhancing’’.

“It will ultimately deliver benefits to Australian consumers in the form of lower out of pocket expenses,’’ CHA said.

If allowed, a CHA boycott would have dwarfed that instigated by Healthscope, which operates 38 hospitals.

The ACCC disagreed with CHA that allowing boycotts would benefit consumers, and has disallowed the conduct in a draft determination released on Thursday. It was “not satisfied that there were likely public benefits arising from this conduct that would outweigh the likely public detriment’’.

ACCC deputy chair Mick Keogh said the ACCC recognised the challenges facing the private hospital sector.

“However, collective boycotts have the potential to cause significant harm to not only the target business, but businesses participating in the boycott,” he said. “In this case, we are concerned that the collective boycott could create disruption for health fund members seeking treatment in member private hospitals.”

CHA is also seeking authorisation for its members to collectively negotiate with suppliers and engage in a collective boycott of large suppliers where negotiations fail, which the ACCC has said it will approve.

“Private hospitals and private health insurers rely on each other,” Mr Keogh said.

“However, in the case of suppliers of other goods and services, we consider that the size thresholds of targets and their broad international customer base mitigate any substantial detriment arising from that conduct.”

The ACCC is also proposing to authorise CHA members to share information for benchmarking purposes.

The ACCC is seeking submissions in response to the draft determination by January 24 before making its final decision.

CHA said in a statement it welcomed the decision to allow it to collectively bargain with funders and suppliers.