Health check confirms private hospitals on knife's edge

WHILE private hospitals have demonstrated a desire and willingness to work constructively with government to find a solution to the issues impacting the viability of private healthcare in Australia, what was released today fails to make clearer the path forward, let alone flag any solutions.

"We've all been waiting a very long time for this report only to find out what we already know," Brett Heffernan, CEO of the Australian Private Hospitals Association, said today.

"We recognise that long-term systemic reforms will be needed, but there is no escaping immediate action is essential to prevent more private hospitals from going to the wall.

"The Government's own report paints a bleak picture for the private hospital sector. Expenditure has increased 4.1 percent, while revenue has only gone up 2.9 percent. You don't have to be very good at maths to see that doesn't add up to a profitable sector, let alone one that will be able to keep surgery doors open.

"Not only that, the report shows private hospitals are operating at Earnings Before Interest, Tax and Depreciation of 4.4 percent in 2022-23, down from 8.7 percent in 2018-19 – this is significantly below the 5 percent threshold that represents the required free cash to reinvest in hospital services.

"So we have a situation where in 2021-22 health insurers racked up $1.1 billion in after tax profits. It doubled in 2022-23 to $2.2 billion. The latter was on the back of an average 3 percent premium hike.

"In just the first quarter of 2024 the insurers pocketed $800 million in profit. Now it is being suggested some insurers may be seeking a 5-6 percent premium hikes in 2025, and private hospitals are going backwards.

"And the Government response is to say, 'yes the numbers show you're in a lot of trouble, let's have a chat about it'. APHA has been banging on the door of Government saying this is a problem for a year, and in that time more hospitals have closed their doors. Inaction will see more services close or hospitals fold.

"We weren't anticipating that this report would provide a panacea, but all this suggests is continuing a conversation. We are long past the need for answers, not more discussion.

"Private hospitals are willing and able to come to the party and work with the Government on solutions for the health care system – because make no mistake, this is an issue for the public hospital sector as much as the private one – but there needs to be a short-term fix alongside medium and long-term reforms.

"As the report says, about 70 percent of surgery is done in the private sector. If more private hospitals close, that workload moves immediately to the public system which is groaning under the weight of huge waiting lists. Patients will suffer.

"Structural reform of the relationship between funders and providers of private health care is needed, but it won't come quick. In the meantime, if health insurance companies can't be forced to meet the costs of their members in hospitals, then the government will have to fill the void with temporary co-payments just to keep private hospital doors open and the health care system afloat.

"If not, for the first time in decades private hospitals will have no choice but to charge patients gap fees to meet the shortfall left by derelict health insurers."

-ENDS-

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