Ramsay fails to break stalemate with Bupa, terminates hospitals funding deal

Bupa-insured patients may have to pay hundreds of dollars in out-of-pocket costs if they are treated at one of Ramsay’s 72 private hospitals.

Ramsay Australia CEO Carmel Monaghan says putting the patient first has lead to the hospital group saving health funds $16m annually. Picture: Lyndon Mechielsen

Australia’s biggest private hospital operator, Ramsay Health Care, has terminated its funding agreement with British health insurance giant Bupa.

The pair were unable to reach a to reach a resolution on key elements of the contract, meaning Bupa-insured patients may have to pay potentially hundreds of dollars in out-of-pocket costs if they are treated at one of Ramsay’s 72 private hospitals across the country.

Ramsay told the ASX on Tuesday is now informing Bupa members of their options, with contractual and agreed transitional arrangements in place for at least 60 days from termination.

Patients insured with Bupa will then be required to pay an upfront payment on admission, being the difference between the statutory default benefit Bupa is required to pay and Ramsay’s hospital treatment charges.

In the meantime, negotiations continue between the parties on a new hospital purchaser provider agreement.

It is understood Bupa offered a funding increase of about 1.5 per cent, while Ramsay was chasing a figure closure to help meet hospital costs, including nurse wages, which have soared 7 per cent.

“There has been no resolution reached as yet,” Ramsay Australia chief executive Carmel Monaghan told The Australian on Monday night.

It comes as health insurers have been advocating cheaper alternative care models and looking to rein in “unnecessary health inflation”, which has included lobbying the government to reform the cost of artificial hips, knees and other prostheses, and in the case of Bupa standing firm in its negotiations with Ramsay.

Ramsay’s cost savings have included shaving $16m off health fund bills in the past year by providing care in patients’ homes rather than in its hospitals.

The company established Ramsay Connect — a “home hospital service” — in 2020 via a joint venture with Remedy Healthcare and in the past 12 months has treated 3000 patients. This has slashed costly hospital stays, known as bed days, by more than 30,000 — what the company says is the equivalent of a 104-bed hospital.

Ms Monaghan said Ramsay was expecting to double the number of patients it treats via the service to 6000 within the next year, generating further savings.

“More funders — both government and health funds — are recognising the benefits of providing care in the home to support people with both acute and chronic conditions,” Ms Monaghan said.

“Our hospital-in-the-home service continues to expand to support more complex patients with the help of remote monitoring technology and expert clinical teams.”

Ramsay Connect deploys specialist nurses, who work with doctors, allied health staff — such as physiotherapists, occupational therapists and dietitians — to care for patients outside a hospital setting.

Bupa has recognised the savings of at-home treatment, funding such services in the new funding agreements it has struck with other private hospital groups, including Melbourne-based not-for-profits Cabrini and Epworth.

But Ms Monaghan said while insurers acknowledged the savings of out-of-hospital services, attracting funding remains difficult.

“There is a lot of discussion with health funds and they all want something different. And then some health funds own their own services so they won’t fund ours, which is complicated because the patient has a history with you, the allied health team usually know them, the nurses know them, we’ve got all the information in the record and then they go home and somebody else looks after them,” Ms Monaghan said.

“We are fine with other services being offered but it shouldn’t be ‘either, or’. It should be a patient choice.”

Ramsay has also begun moving its mental health services outside hospitals and into the community, opening 11 psychology clinics across Australia, with plans to establish 20 more in the next two years.

Shortening hospital stays has been one way to cut out-of-pocket costs and keep health insurance premium increases.

Australia’s biggest health insurer Medibank is close to securing a strategic stake in a third hospital on Australia’s east coast as it advances its short-stay and no-gap surgery model.

Chief executive David Koczkar said in February money spent on costly hospital stays can be diverted into surgery fees, reducing out-of-pocket costs and making private healthcare more affordable, strengthening the overall system.

“As we expand our investments in those settings where we see a very large market opportunity. We’ll continue to work with partners with offers to make sure that when we do invest, the value is given for our customers through no out-of-pocket (costs) and to make sure that there is preserved autonomy between patients and doctors as they’re offered this new choice,” he said.

Bupa health insurance managing director Chris Carroll said despite the existing agreement with Ramsay expiring on Tuesday, members remained fully covered for another two months for most treatments.

“Our negotiations with Ramsay are continuing and we’re hopeful of reaching an agreement,” he said on Monday night.

“While we continue to negotiate, we want our members to know there are no immediate changes to their coverage and they will not face any additional out-of-pocket costs. Bupa members are fully covered at Ramsay hospitals at least until October 1 2022, and with some treatments including maternity and oncology, and any treatments already commenced, they’re covered up to August 2023.”