It’s time to rethink hospital care, says Medibank Private

Australia is reaping the fruits of a decade of inaction in the management of its private medical sector, with a greater focus on providing services outside the traditional hospital setting now vital.

Medibank Private managing director David Koczkar. Picture: NewsWire / Nicki Connolly

Australia is reaping the fruits of a decade of inaction in the management of its private hospital sector, Medibank Private managing director David Koczkar says, with a greater focus on in-home care and providing services outside of the traditional hospital setting vital.

Mr Koczkar, who on Thursday delivered a 13.8 per cent increase in underlying first-half net profit to $298.7m, said that while there had been recent cost pressures for the hospital sector, the real answer was rethinking how services were delivered.

Some parts of the private hospital sector have argued payouts from insurers such as Medibank need to rise to cover higher costs of delivery.

While Medibank has avoided conflict with its own hospital stakeholders, hospital operator Healthscope last year took the drastic measure of seeking to cut ties with Bupa and the funds in the Australian Health Service Alliance (AHSA) over payments for overnight stays.

Bupa and Healthscope settled their differences in late January, but a deal with the AHSA funds is yet to be struck.

Mr Koczkar said the real issue was sector reform, with patients preferring different forms of service delivery, rather than simply hospital stays.

“We are not dealing with new news here,’’ Mr Koczkar said.

“The key indicators of at least a decade show that our system needs change and unfortunately we’re now witnessing the results of inaction.

“Yes, there have been some rising costs in the short term, and we have increased our indexation rates for private hospitals and maintained a payout ratio that’s higher than the industry average. We’ve also provided one-off benefits and invested in partnership agreements.

“But private hospitals are also facing not just short-term cost challenges but an oversupply of beds.

“Doctors more and more are delivering services in day and short-stay settings rather than acute hospital settings, so that health transition, driven by consumers and doctors, is not a new thing.

“We can’t simply fund the old system; we need to fund what’s right for consumers now and in the long-term.’’

Mr Koczkar said an example of innovation in the sector was Medibank’s recent launch of Australia’s first no-gap, short-stay hospital in partnership with 50 doctors.

“It’s a world-class facility which is changing the way healthcare is delivered,’’ he said.

“For all private hospitals in Australia – there are about 600 – they all need to think about the future and investing in the future and that’s why our partnership agreements encourage that and indeed fund that.’’

Analysts said Medibank would benefit from this week’s federal government-mandated health insurance cost increases, under which the company can charge 3.99 per cent more for policies in future.

“Compared to its average claims expense per policy unit experience of 2.3 per cent, Medibank’s approved rate increase of 3.99 per cent nationwide, or 4.81 per cent for NSW customers, looks positive,’’ Citi analysts said.

“It is also returning an additional $160m to customers, which might help retention.”

Medibank customers will each receive at least $50 via its latest pandemic give-back program, while some will be eligible for as much as $255.

The give-back program is based on a commitment from Medibank that it would not profit from the pandemic while customers’ capacity to use their private health cover was curtailed.

The company grew net resident policyholder numbers by 18,500, or 0.9 per cent, and its non-resident policyholders by 38,900, or 12.6 per cent.

Medibank said cost of living pressures had resulted in a modest increase in the number of customers across the industry lapsing and switching funds. The company expects to grow in line with the market during the second half.

Medibank will pay a 7.8c per share dividend, up 8.3 per cent.