Surgery figures a sign of private health insurance ills

Surgical volume growth in Australian hospitals is slowing, in another warning sign about the state of private healthcare.

Below average surgical growth is seen as a sign of private health system pressures.

Surgical volume growth in Australian hospitals is slowing, in another warning sign about the health of the private healthcare system.

Medicare data for May has revealed that adjusted surgical volumes increased 3.7 per cent on a 12-month rolling basis, which was down on the prior month (4.1 per cent) and below the five-year average of 4.2 per cent.

It comes after warnings early this month that surgeons’ fees were one reason why consumers are fleeing private health.

UBS analyst Saul Hadassin noted that the data also showed a recent sharp decline in specialist attendance growth — a leading indicator for private hospital volumes — with current growth of 0.4 per cent, which was below the five-year average of 2.9 per cent.

“For surgical volumes, below average growth is likely symptomatic of private health system pressures that have been present for some time,” he said.

Credit Suisse analysts said the May Medicare surgical data showed that most specialties grew at below longer-term averages.

“While longer-term drivers of demand for private hospital services remain in place — ageing population — we think it is unlikely that we will see a recovery in utilisation in the short term as long as affordability pressures continue to shift patients into the public system and the government displays low appetite to produce meaningful reforms to reverse this trend,” the investment bank’s analysts said.

Australia’s largest private hospital group, Ramsay Health Care, put a spotlight on volume issues last week when it revealed a decline in patient numbers at its local sites. Challenging conditions in Australia and a downturn in volumes at its UK business forced the company to slash its earnings guidance.

The cost of health care in Australia’s private healthcare system has been driving debate between the providers of that care and the payers. It has also fuelled government reviews into rising out-pocket-costs hitting consumers and also prompted calls for new models of care to stop people getting unnecessary procedures.

JP Morgan warned last week that there was a risk of further slowing demand as commentary and criticism of the private health system mounted ahead of the next federal election. Opposition leader Bill Shorten has promised to cap annual health insurance premiums at 2 per cent for the first two years of a Labor government.

The analysts also said that they were concerned that rising out-of-pocket charges — real or perceived — could cause demand from older members to slow, causing further weakening in activity levels.

Industry observers have also warned that with no apparent resolution to the private health insurance affordability issues, they did not see any material recovery in Australian private hospital volume growth, at least in the near term.