Healthscope, Australia’s second-largest private hospital operator, will terminate its contracts with two private health insurers, leaving members facing potentially hundreds of dollars more in out-of-pocket costs.
The change will affect 38 hospitals across the country.
Healthscope released a statement on Friday saying it had “no choice” but to terminate contracts with Bupa and the Australian Health Services Alliance given the funds’ refusal to address its financial concerns.
The terminations will come into effect for all Bupa customers from 20 February, and 4 March for customers in the Alliance Group, which includes Australian Unity, GMHBA, Health Partners, Westfund and HIF.
The federal health minister, Mark Butler, said he was “deeply concerned” about the estimated 6 million Australians who will be affected.
He said the government would not get involved but he expected both parties “to get back to the table and fix this”.
Healthscope said it had proposed a fee to help cover the gap between health insurance payouts and the rising cost of hospital care but both insurers had pursued legal threats to stop the fee’s introduction.
Dr Rachel David, the chief executive of Private Healthcare Australia, the peak body for health funds, said Healthscope’s plan to charge members of several health funds a “hospital facility fee” of $50 for same-day services and $100 for overnight services from 26 November was an “unethical new low”.
Greg Horan, the chief executive of Healthscope, said the hospital operator was “not prepared to engage in protracted and expensive legal challenges”.
Horan said he was deeply disappointed that the insurers’ actions to oppose the fee had led Healthscope to terminate the contracts, meaning their members will pay potentially hundreds of dollars more to be treated in a Healthscope hospital.
Horan said Healthscope “stood ready as always to negotiate a fair funding agreement”.
PHA accused Healthscope of ripping up the contracts “so it can gouge Australian patients” and increase profits for the private equity group Brookfield. The North American group owns Healthscope and controls more than US$1tn worth of assets worldwide.
Healthscope’s announcement it was ripping up the legally binding agreements within months of signing contracts with health funds representing 50% of Australia’s private health insurance market was unprecedented, PHA said.
David said patients could be charged thousands of dollars because of the split.
“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,” David said.
She called on medical practitioners who work at Healthscope hospitals to consider seeking employment at alternative hospital providersbecause of the the uncertainty Healthscope had created for patients awaiting surgeries.
The federal health department announced a review of the finances of private hospitals in June after multiple contract disputes between private hospital companies and health insurers.
But because financial data was provided by only 243 out of 647 hospitals, experts questioned the review’s value.
Brett Heffernan, the chief executive of the Australian Private Hospitals Association, said Healthscope’s announcement was a “a sign of things to come”.
“Over the last few years around 20 private hospitals have shut their doors entirely, while more than 70 services have closed in other hospitals. This has coincided with health insurance companies raking in billions in record profits …
“But the benefits they paid to hospitals fell and runaway inflation has seen the gap widen. For instance, in 2015 the average payment hospitals received from health insurers for a hip replacement was $22,166.
“Despite almost a decade of growing costs and inflation, in 2023 the average payment was $20,548. Private hospitals performed 29,236 hip replacements last year (74% of all procedures), so the losses quickly add up. They are losing money across a raft of the procedures, treatments and services they provide.”
