Private hospital closures spark fears for industry

A confidential briefing personally presented to Mark Butler has revealed the sector plunged to a $611m loss last financial year, almost double that of the previous year.

Health Minister Mark Butler.

A confidential briefing personally presented to Health Minister Mark Butler has revealed private hospitals are bleeding money after the sector plunged to a $611m loss last financial year, almost double that of the previous year.

Losses have been accelerate since the start of the Covid-19 pandemic, according to a leaked financial report obtained by The Australian which warns patient choice, elective surgery wait times and the government’s fiscal position are all under threat.

The document, marked private and confidential, was presented by the chief executives of Australia’s leading private hospitals including Healthscope, Calvary, St Vincent’s Health Australia, Mater, St John of God and Cabrini to Mr Butler last week in Parliament House.

Mr Butler said he was worried about the financial viability of private hospitals given the important role they play in the broader health system.

“I am concerned about the financial viability of private hospitals, particularly those in regional areas and where they play an important role in the local community,” Mr Butler told The Australian.

“It is important that private health insurers and hospitals engage meaningfully with one another to ensure the sector remains viable and provides valuable healthcare for Australians.”

Industry sources told The Australian that the meeting prompted Mr Butler to instruct his department to investigate the financial deterioration of the private hospital sector.

The group, representing 50 per cent of private hospital beds in Australia, is calling on the federal government to force health insurers to fund a Covid price adjustment mechanism in a bid to return the industry to a sustainable footing.

“Insurers have accumulated significant capital beyond their profit, they can afford to pay this now, without passing it to consumers,” the document said.

“The public’s system cannot support the scope of care required by the Australian population, and the rules and regulations governing private health services have not sufficiently protected consumers from service closures.”

“With private health insurance making huge profits and private hospitals struggling, there needs to be a recalibration.”

The commonwealth funded about 33 per cent of the $19bn spent on private hospitals in 2019-202 despite the private sector delivering 66 per cent of elective surgeries.

About 900,000 people have taken out private health insurance since the beginning of the Covid-19 pandemic, with fears the public system was too overwhelmed to look after them a large driver of the uptake, heaping pressure on the sector.

It has also been grappling with soaring cost of inputs due to inflation including rising bills for energy, insurance, wages and interest.

Private Healthcare Australia, the peak body representing the insurers, said it had not seen the report but acknowledged some hospital providers were “doing it tough.” It said health funds were not to blame, rejecting hospital’s proposition of a Covid price adjustment mechanism.

“There are several major trends impacting the private sector hospital sector including workforce shortages, increasing out of pocket costs dampening demand for inpatient care, and more consumers and doctors are opting for convenient healthcare options including shorter hospital stays and hospital in the home,” PHA chief executive Rachel David said.

“This is disrupting private hospitals’ traditional business model. These factors outside the control of health funds.”

Opposition health and aged care spokeswoman Anne Ruston called on the government to immediately address deteriorating financial position of private hospitals, expressing concern for the impact of hospital closures on regional areas.

“We know that regional Australia is already facing serious inequities in their access to critical healthcare services and any further closures in our regions would be disastrous,” Senator Ruston said.

“The Government must immediately respond to these reports and outline how they are going to protect our healthcare system to ensure access to critical health services is not put even further at risk.”

The briefing comes after The Australian this week revealed surging costs in the private hospital sector plunging the $19bn

private hospital sector into financial crisis with sky­rocketing wages, energy, insurance and debt costs fuelling concerns that more hospitals, health clinics and dental surgeries will close.

The study, labelled commercial in confidence and worked on as late as February 27, found private hospitals’ energy and utilities bills were up 13.8 per cent compared with a year earlier, insurance was up 10-15 per cent, interest rate-driven debt costs were up 6 per cent while workforce costs were up by 3.5 to 4.5 per cent.