Insurers ‘bleeding private hospitals’ as war of words threatens sector collapse

The battle over private health has exploded into a bitter public war as health insurers respond with fury to suggestions patients may be denied cancer treatment and maternity care.

Healthscope has been accused of embarking on a scare campaign after it reached a standstill in negotiations with health insurers. It comes as the sector struggles to remain afloat, endangering shared bargaining agreements sector wide.

You can now listen to The Australian's articles. Give us your feedback.

The battle over private health has exploded into a bitter public war as health insurers respond with fury to suggestions patients may be denied cancer treatment and maternity care.

Insurers have also accused one of the nation’s biggest ­private-equity-backed hospital groups of resorting to scare tactics to mislead consumers and pressure the federal government to bail it out as it bleeds profits amid rising costs and plummeting revenue.

The nation’s second largest for-profit private hospitals operator, Healthscope, which was bought by Canadian private ­equity giant Brookfield for $4.4bn five years ago, launched an extraordinary public campaign on Wednesday warning consumers that health insurers were “bleeding private hospitals dry … we are all paying for it”, and that cancer patients, women having babies, and those in need of psychiatric admissions might not be able to get care in the private system in future because insurers were not offering hospitals a fair deal.

The campaign, dubbed “Protect Your Hospitals”, warns that hospitals will close, people will go on wait lists for surgery, stroke patients may have to travel further for rehabilitation, and out-of-pocket expenses will rise further if insurers don’t pay more for procedures under contracts with hospitals.

It offers consumers a portal through which their insurer will be emailed if patients want to demand a better deal.

Bupa and Australian Unity are the specific targets of the campaign. Those two insurers have been in contract negotiations with Healthscope that have reached a stalemate, with the hospital group’s chief executive Greg Horan accusing them of underfunding hospitals.

Healthscope manages 38 hospitals nationwide, including Nepean Private Hospital in Sydney and John Fawkner in Melbourne.

“Our intention here is to get fair deals in place,” Mr Horan said. “What we’re trying to do here is raise awareness to (the insurers’) own members through this, so that they’re aware of how their fund is putting at risk their own local private hospitals and their choice of care.”

He alleged Bupa and the Australian Health Service Alliance offered the worst negotiations of all the insurers with which Healthscope had partnered.

Healthscope owns the Nepean Private Hospital in Kingswood in western Sydney.

“We are, at the moment, trying to strike fair funding arrangements,” Mr Horan said. “They are the lowest payers we have and have not been able to progress meaningful conversations to bridge the gap.”

“We’re very comfortable to have (run) this campaign by ourselves. We see it as a sector-wide problem. However, we are very happy to raise the public awareness for Bupa and our AHSA members to ensure they’re aware of the impact of the lack of funding their funds are having on their local healthcare provider.”

AHSA represents non-profit health funds. Its chief executive Andrew Sando said he did not have any intention to renege on deals with Healthscope.

“The AHSA and Healthscope entered into a new, two-year agreement earlier this year, which includes more than 20 of the ­nation’s not-for-profit health funds. The agreement is valid up until 2026,” Mr Sando said.

“We will continue to work with Healthscope, as we do all major hospital groups in Australia, to provide customers of AHSA member funds access to the highest quality private health services.”

Private insurers have labelled the unprecedented public call to arms by the private hospital group “a disgrace” that will erode goodwill and undermine sector-wide efforts in collaboration with the federal government to ensure the viability of private hospitals nationwide. Private Healthcare Australia chief executive Rachel David characterised the campaign as “designed to pressure health insurers and the federal government into a bailout which would drive up the cost of health ­insurance for millions of Australians” and said health funds would not permit hospitals to charge consumers more.

This latest spat follows stoushes between St Vincent’s Health and NIB and UnitingCare Queensland and the AHSA over contract negotiations.

“We are holding the line to ­protect our members from rising premiums and out-of-pocket costs,” Dr David said. “It’s a disgrace they are threatening pregnant women and people with cancer with extra fees.”

In a sign of how acrimonious the relationship between insurers and private hospitals has become, Dr David launched a broadside over Healthscope’s business model and practices in response to the hospital group’s consumer campaign. “Brookfield bought Healthscope in 2019 with a goal to make as much money as possible for its foreign investors, but it took on too much risk and too much debt,” she said.

“Brookfield ransacked the assets, sold them offshore, and now they’re struggling to pay their bills due to inflation and high interest rates. Brookfield does not care about the health of Australians or our health system. It is the only hospital owner in Australia whose mission is to make short-term financial gains for foreigners … Health insurers acknowledge private hospitals, like all sectors, have been under pressure, so they are working with the government and private hospitals to develop a sustainable solution.

“However, Brookfield’s tactics are undermining the process and eroding good will.”

The dispute follows the conclusion of a recent federal government viability review of private hospitals chaired by Health ­Department secretary Blair Comley, where tension between insurers and private hospital chief executives ran high.

The review raised the prospect that the private hospital ­sector was “uninvestable”.

The federal government has not released the results of the review. But it reportedly found many private hospitals were due to close within 12 months, placing a greater burden on the public ­sector that likely could not be bailed out on the taxpayer dollar. “There’s no silver bullet from Canberra or funding solution from taxpayers to deal with what are ­essentially private pressures in this system,” Mr Butler said on Wednesday. “The sector itself is going to have to provide that leadership.”

“This has always been a sector where these operators, many of them quite big, influential, powerful operators, play it hard and they negotiate hard.

“This system, which was contemplated very deliberately by Bob Hawke and others in developing Medicare, is a fundamentally important part of our healthcare system that requires these operators to work together in the interest not just to their own organisations, but the interests of patients.”

Healthscope over recent weeks attempted to recruit other hospital groups as well as consumer ­organisations and the Australian Medical Association to join the Protect Your Hospitals campaign, but all have distanced themselves. There is significant disquiet in the sector that the nuclear option employed by Healthscope goes too far, undermines co-operation and runs the risk of consumers dumping their private health insurance, destabilising the sector even more.

“With our public hospitals in crisis we just can’t allow a war between insurers and hospitals to destroy the whole value proposition of having private health insurance,” said AMA president Steve Robson.

Consumer Health Forum chief executive Elizabeth Deveny warned the campaign could drive patients to dump their insurance out of uncertainty.

The Australian Patients Association argued the Healthscope campaign jeopardised ongoing bargaining. “We understand that negotiations are already underway between government, private insurers and Healthscope, so campaigning from Healthscope to gain leverage in those discussions isn’t helpful and creates unnecessary fear and concern in the public,” a spokesperson said.

“This is an argument about profit sharing between huge players in the healthcare system. Meanwhile, patients are financially suffering.”

Labor MP Mike Freelander, who chairs a parliamentary inquiry into public health, argued private hospitals were also lagging behind the sector and needed to focus on being commercially viable.

“The private system has lagged behind any sort of new innovations for some time,” Dr Freelander said. “It’s really quite noticeable. I see it with my own eyes when I go into the private hospitals, they’re not as busy as they used to be, and healthcare has changed.”