Healthscope boss in swipe at insurers over costs of clinical care

Private health insurers are not the best judges of where to deliver clinical care, says Healthscope’s CEO, amid a debate on costs.

Healthscope CEO Gordon Ballantyne. Pic: Aaron Francis

The head of private hospital group Healthscope, Gordon Ballantyne, has argued health insurers are not the best judge of where clinical care should be delivered, adding there is no such thing as “low-value care”.

The Healthscope chief executive made the comments after reporting a 12.8 per cent dip in first-half profit to $77.5 million, with an “adverse patient case mix” fuelled by a strong flu season impacting the result.

Shares in Healthscope (HSO) were today trading lower on the back of the financial result, down 3.4 per cent at $1.80.

The private hospital group’s results come as the wider industry debates increasing costs in healthcare and the issue of the affordability of private health insurance. The major health funds have argued a focus on what they label as “low-value” care is needed to help address cost increases.

The Weekend Australian revealed that insurers were spending almost $700 million a year on common hospital procedures or care that could be performed as day surgery, in doctors’ rooms or in the home at a fraction of the cost. This, insurers say, is contributing to rising insurance premiums and needs urgent attention.

Mr Ballantyne said at the heart of any healthcare system were clinicians who were qualified to assess where care was best delivered.

“There’s no such thing as low-value care. That is the line of an insurer or financial services organisation,” he said.

“I don’t think I would trust an insurance salesman to be the best judge of where clinical care should be delivered.”

Healthscope’s half-year result, released today, also reported a decline in hospital operating EBITDA of 8.6 per cent, which it said reflected an adverse patient case mix as a tough flu season had an impact.

“We had an acute flu season across winter,” Mr Ballantyne said.

“Instead of a lot of surgical work, a lot of our beds were filled with elderly people with influenza. That had an impact on our top line growth and also the profitability of those patients.”

The hospitals division represents around 82 per cent of earnings and Healthscope’s results showed that across that portfolio there were a range of costs, including wages, which increased faster than health fund price indexation that impacted the result.

Mr Ballantyne said it was a challenging first half, with several one-off costs.

“It is a tough market. We saw growth of 4.5 per cent on a 12 month basis, 3 per cent in the half at a market level, that is a decline on the prior half,” he said.

“It’s a tougher market, so you need to be more agile and operationally efficient.

“The second half will still have challenging market conditions in terms of volumes, but we won’t see the size and scale of that impact in the second half.”

The company also announced today a review of its Asian pathology business. Mr Ballantyne said given it only represented four per cent of Healthscope’s portfolio and its focus was in Australia and New Zealand, it decided to look at various options for the Asian business in the future.

“It is a great platform in Asia to have a broader Asian pathology roll up if that was the intent. This decision reflects on whether we want to do that now or if others are best positioned to do that,” he said.

“It’s about focus, driving returns from our core Australian and New Zealand business and ensuring we are seeing growth across the portfolio.”

The company highlighted in its results that it expected its second half to deliver growth in earnings and it expected that momentum to carry into fiscal 2019, and beyond. It said its 2018 full-year result was forecast to be “broadly similar” to last year’s annual result.

The company will pay an interim unfranked dividend of 3.2c-per-share, to be paid on March 23.