Healthscope says funds should reward hospital efficiency

Healthscope says private hospitals should be rewarded by health funds for greater efficiencies.

Healthscope managing director Robert Cooke. Picture: Ian Currie

Healthscope says private hospitals should be rewarded by health funds for greater efficiencies, with both parties having a “symbiotic” relationship, as the company struck a new two-year deal with listed insurer Medibank Private.

The remarks by managing director Robert Cooke came as cornerstone shareholders TPG Capital and Carlyle Group last night offloaded their combined $854 million stake in an off market trade.

The sale effectively ends the association between the US-based private equity firms and the hospital chain they brought back to the public markets in 2014 in a $3.6 billion initial public offering.

Mr Cooke’s comments continues the war of words between some health insurers and hospital operators over contract negotiations.

A dispute between Medibank and Calvary Health Care recently gained prominence after the companies could not agree on a list of 165 “highly preventable adverse events” that Medibank has said it would no longer cover due to funding costs.

Performance-based contracts, where hospitals cover the costs when avoidable complications arise, have sparked concerns about insurers taking better care of shareholders than patients.

But Healthscope and Medibank said insurers and hospital operators were working together to tackle growing challenges facing Australia’s health system as the firms agreed to a new two-year deal that commences in March.

The company has more than 40 private hospitals.

“Over the past 12 months there has been a lot of noise around health funds and their relationships with private hospital operators,” Mr Cooke told the company’s annual meeting.

“We believe health fund contracts should reward outstanding clinical outcomes in recognition of the superior experience for patients and greater efficiency for the industry. We have three health fund contracts that have pay-for-quality clauses and four contracts that incorporate what we refer to as ‘never events’.”

Medibank managing director George Savvides said the deal helped the health insurer spend members’ premiums wisely.

“This renewal reflects the importance of the performance-based contracts that Medibank is implementing with our hospital providers,” Mr Savvides said.

Mr Cooke added that there was no change to the company’s financial guidance, but Healthscope would be commissioning a number of large capital projects that would lay the foundation for accelerated growth in the 2017 ­financial year and beyond.