Healthscope hospitals cut ties with health insurers Bupa, AHSA

Millions of Australians will be affected by Healthscope’s decision to cut ties to 26 insurers – which the industry has labelled ‘unethical’. Is your fund affected? | FULL LIST

Healthscope CEO Greg Horan said his company had no decision but to end the contracts.

Health insurer Bupa has accused Healthscope’s Canadian private equity owners Brookfield of prioritising its bottom line over patient care, after the private hospital operator cancelled its contracts with Bupa and the Australian Health Services Alliance, in a move which will affect about six million people nationwide.

Healthscope announced on Friday it had ended its three-year contract with Bupa and its two-year deal with AHSA fund members early, accusing the insurers of “greed” and putting their members at a disadvantage.

The hospitals operator has been trying to negotiate higher payments for hospital stays and procedures from the insurers, and has been successful in striking new deals with Medibank and NIB.

No such deal has been achieved with Bupa and AHSA’s 26 small to medium sized private health insurance funds, with Healthscope on Friday saying the insurers’ refusal to accept a “modest fee” to attempt to bridge the cost gap meant that the action was necessary.

Bupa’s APAC chief executive Nick Stone responded, saying they were “shocked and disappointed by the decision’’, while reassuring customers they will be covered until February 20 next year – and beyond for certain treatments including maternity and oncology, and any treatments which have already started.

Bupa struck its current deal with Healthscope in November last year, with the agreement expected to run for three years.

Healthscope in late October announced it would introduce a $100 gap fee for overnight hospital stays for Bupa and AHSA fund members, and said at the time that customers who didn’t like it should switch funds.

SEE THE FULL LIST OF AFFECTED HOSPITALS

Healthscope chief executive officer Greg Horan said on Friday Bupa and AHSA members’ refusal to sustainably fund hospitals in a high-cost environment left Healthscope no option but to end the contracts.

“Healthscope cares for over 650,000 patients every year and we are absolutely committed to providing the best possible care. But we can only do this if we are adequately funded,” Mr Horan said.

Mr Horan said the action announced on Friday was the result of both insurers pursuing legal threats to stop the introduction of the gap fee it had proposed in October.

“We were proposing the hospital facility fee following Bupa’s and the AHSA’s failure to recognise and fairly fund the rising cost of care. In the absence of fair funding, this fee was Healthscope’s best option,” Mr Horan added.

“In order for us to remain viable, we are left with no choice but to terminate the contracts.”

Mr Horan also warned of a “viability crisis” in hospitals across the country.

“Hospitals are losing money, and cannot attract new investment,” he said.

“Private health insurers are banking record profits – Bupa, in particular, has delivered enormous profits to its UK parent, while refusing to pay fairly for the care of its Australian members at Healthscope hospitals.”

The terminations will come into effect from February 20 for Bupa, and from March 4, 2025, for the AHSA funds.

Bupa has 4.1 million health insurance members and the AHSA collectively covers more than 2.5 million people.

The termination will impact all Bupa customers as well as the customers in the Alliance Group, which includes Australian Unity, GMHBA, Health Partners, Westfund and HIF.

Mr Stone said Healthscope appeared to be “disregarding the interests of our shared patients and customers by seeking to impact their access to healthcare’’.

“We are concerned that Healthscope’s actions will cause undue stress to patients and customers looking to access private healthcare at a time when we should be working together to build trust in the private health system and take pressure off hospitals and their frontline teams.”

Mr Stone said Bupa was continuing to explore its options to ensure its customers were not placed in a disadvantaged position.

“We want our customers to know that our priority in these negotiations has been to keep healthcare costs affordable without compromising quality of care, especially when cost-of living pressures continue to impact Australians,” Mr Stone said.

“We will always work hard to advocate for them by negotiating fair and sustainable contracts with our hospital partners, including recent agreements with other private hospitals, that strike the right balance between minimising premium increases and hospital costs.

“We acknowledge Brookfield, Healthscope’s Canadian private equity owners, may have additional considerations to ensure the viability of their business in Australia.”

Mr Stone said Bupa had a large network of private hospital providers and in most cases, there were alternative options available to its members.

The peak body for health funds, Private Healthcare Australia, labelled Healthscope’s move “unethical’’.

“This is another unethical tactic from a $1 trillion North American private equity firm that appears intent on holding health fund members hostage, while also trying to bully health funds into paying them more so they can increase their profits,” chief executive Dr Rachel David said.

“If Healthscope was serious about delivering patient care to Australians in a cost-of-living crisis, it would negotiate an affordable and sustainable outcome, rather than throwing its toys out of the cot.

“There is no scope for health funds to pay across the board, above-inflation increases to private hospitals.

“People struggling with the cost of living will simply drop out or downgrade their health cover, which leaves Healthscope worse off as its customer base dries up.”

Dr David said if Healthscope followed through with its contract termination, patients could be charged thousands of dollars to receive care at a Healthscope-owned hospital.

“This is just not done in Australian health care,’’ she said.

“We don’t rip up contracts, we don’t hang patients out to dry and we don’t directly gouge patients like the American system.

“It’s really sad to see this North American private equity firm prepared to throw Australian patients, doctors, nurses and hospitals under the bus to enrich their investors.”

Dr David called on medical practitioners who work at Healthscope hospitals to consider alternative options given the uncertainty Healthscope has created for patients who were awaiting surgeries.

“In most locations, alternative hospital providers with more stable finances are available. There are empty beds and operating theatre capacity around the country, in some cases right next door to a Healthscope hospital,” she said.

“Federal government data shows we now have more private hospitals in Australia than we did five years ago. There are more ethical hospital operators who are happy to talk to medical practitioners about switching patients, or doctors’ entire practices, to alternate facilities.”

AHSA chief executive Andrew Sando said Australian health insurers should not be forced to fund the profits of one of the world’s largest investment companies.

Mr Sando said AHSA had a two-year agreement in place with Healthscope, and has commenced dispute resolution processes in a bid to resolve the funding issue.

“Healthscope is driven by one thing – maximising returns for their investors, regardless of the impact upon the Australian private health care system,’’ Mr Sando said.

“Gouging the Australian public to generate profits for their private equity owners is not in the national interest, and flies in the face of compassionate, equitable and sustainable healthcare.

“How and why the Australian government permits foreign private equity owners such as Brookfield to extract more profits from the already financially challenged private health care system is unclear.”