Healthscope and HCF in game of bluff at the expense of doctors and patients, says top cardiologist

A prominent cardiologist has warned of a trend of hospitals terminating funding agreements with health funds, with the extreme negotiating tactic disrupting patient care.

Healthscope’s termination of its contract with HCF is the second high profile funding dispute between a hospital and health insurer in six months.

A prominent cardiologist has branded the souring of relations between Australia’s biggest hospital groups and some health insurers as “corporates calling bluff on each other at the expense of patients and doctors”.

Australia’s second largest private hospital group Healthscope has terminated its funding agreement with Sydney not-for-profit insurer HCF — six months after its larger rival Ramsay Health Care tore up its contract with Bupa, only to salvage a deal at the 11th hour — signalling a dramatic shift in the way hospital funding contracts are negotiated as inflation soars.

HCF retaliated this week, sending letters to more than 6000 doctors advising that it would withdraw its no gap program for patients treated at a Healthscope hospital from February 1 next year.

The termination of health funding agreements is an extreme negotiation tactic after pandemic-fuelled elective surgery restrictions wiped hundreds of millions of dollars from private hospital earnings.

But Mark Sader, a top procedural cardiologist who works across public and private hospitals in Sydney, said the high profile disputes between private hospitals and health insurers were highly disruptive to delivering patient care.

“It’s a big call to terminate an agreement. I don’t understand why you would terminate the agreement rather than have some continuing of the old agreement in good faith while you negotiate,” Dr Sader said.

“I think that’s a smarter move for everyone involved – not ignoring the fact there are increasing pressures on both fronts and there are probably reasonable arguments on both fronts.

“Clearly there has to be a smoother process because this cannot be the way it continues going forward with a sequence of disruptions to patient care and doctors’ capacity to care for them.”

Procedural cardiologist Mark Sader. Picture: Elenor Tedenborg

Ramsay and now Healthscope are seeking agreements with health funds to help cover the cost of a 7 per cent rise in hospital costs after their earnings were hit hard from stop/start elective surgery restrictions during the pandemic.

But the health insurance lobby has argued that if they meet the hospital demands it will put pressure on premium rises — and possibly fuel double-digit increases.

Healthscope — which Canadian private equity titan Brookfield acquired for $4.4bn in 2019 — surprised many in the industry when it terminated its agreement with HCF.

After all, it was HCF that signed a record five-year deal with Ramsay during the ASX-listed hospital giant’s feud with Bupa. At the time Ramsay praised HCF for striking a partnership that recognised hospital costs had increased significantly.

But a spokesman for HCF has labelled Healthscope’s move a “cash grab” that risks privately-insured patients being “locked out of Healthscope hospitals”. It is estimated that HCF policyholders will have to pay an extra $1000 in out-of-pocket costs for treatment at a Healthscope hospital from January 31 or seek an alternative health provider.

“This is not only a HCF and Healthscope issue, HCF just happens to be the first fund up for renegotiation with Healthscope at a time when Healthscope has taken the view that it doesn’t need to continue to provide services at reasonable cost to private health funds in Australia,” the HCF spokesman said.

“This is a new dynamic, it is unprecedented and in all likelihood people are going to find themselves in the same situation, no matter which fund they move to, as Healthscope takes its unreasonable and uncompromising stance into future negotiation renewals with the whole Australian private health insurance sector.

“The very real risk is that privately insured people get locked out of Healthscope hospitals unless they are prepared to pay substantially more than they would in any other facility. We’re doing everything we can to ensure our members are supported on their healthcare journey, which means knowing what their options are and making informed decisions based on what they know is the right model of care for them.”

However, a Healthscope spokesman said: “The contract termination notice between Healthscope and HCF is due to HCF’s final offer not being enough to cover the cost of hospital treatment for their members.

“We’re disappointed that HCF have chosen to involve doctors in the dispute, disadvantaging them by withdrawing their ability to participate in HCF’s gap scheme. This will needlessly impact on HCF members and add to their out of pocket cost burden.

“HCF’s approach is at odds with that taken by Bupa in their recent contract dispute with Ramsay, where they chose to not disadvantage patients and continued to honour their gap scheme arrangements with doctors.”

Healthscope’s termination of its agreement with HCF comes after it adopted a similar tactic in mid-2020 when it gave the Australian Health Services Alliance (AHSA) — which represents six smaller not-for-profit funds — 45 days’ notice that it would not proceed with a new two-year funding contract.

Australia’s Private Health Insurance Ombudsman was forced to intervene in that dispute, which Healthscope and AHSA resolved following mediation.