Call for Mandatory Code of Conduct

PRIVATE hospitals are calling on the Australian Government to establish a Mandatory Code of Conduct for contracting between private hospitals and the health insurance industry.

The 12.5 million Aussies with private hospital insurance are paying more but getting less for it. Annual premium hikes are banked by insurers rather than trickle down to healthcare providers. The contract tactics of insurers reduce patient choice and access, and cap patients' clinical needs.

"A Mandatory Code is a positive way to ensure transparency, fairness and proper funding," APHA CEO Brett Heffernan said. "Enforceable protections and minimum standards provide certainty, stop insurer abuses, restore equitable prices and protect Australians' right to quality healthcare.

"Such a Code with an arbitration model and price transparency would cost taxpayers and patients nothing, but it would make insurance companies accountable. It is the least interventionist option, so should be palatable to government, and would be quick, easy and positive in holding all parties to account.

"Private hospitals are up for a transparent contracting system overseen by the ACCC. We have nothing to hide. A cleansing light needs to be cast on the practises employed by insurers. If the insurers think their contracting tactics pass muster then they, too, should have nothing to hide."

The APHA, as the peak body representing private hospitals across Australia, has written to the Prime Minister, Treasurer and Health Minister seeking urgent action to safeguard the private hospital system that supports 12.5 million insured Australians and relieves public hospitals of over 5.14 million patients a year.

"The unequal bargaining position in contracting between hospitals and insurers has become a murky and fraught arena riddled with unconscionable conduct and endemic market abuses," Mr Heffernan said.

"Insurers use their market power to not pass through adequate payments to cover health costs, despite making an average $2 billion a year in profits and $3.5 billion a year in 'management fees' from premiums, while the shortfall in funding to private hospitals is $1 billion a year."

The lack of price transparency in contracting, along with bad faith tactics employed by insurance companies, is reducing quality and limiting patient needs to line the pockets of insurance companies. A Mandatory Code can address a raft of contracting abuses, including:

• take-it or leave-it contract offers – refusing to negotiate in good faith, making one inadequate offer only and using market power to influence other parties, i.e. doctors, to effectively boycott hospitals that do not comply,
• bundling and penalties for referrals – imposing restrictions on hospital operators for the post-hospital care of patients to limit the duration of patient rehabilitation. These pre-determined timeframes are imposed by insurers regardless of patient clinical needs,
• playing hospitals against one another – the imbalance in information access between most hospitals and insurance giants disadvantages hospitals. Insurers are privy to more data, including the practises and caseloads of hospital competitors, and use this information in negotiations to force positions,
• paying on time – payment schedules are notoriously unmet, and delays of many months are typical,
• contracting delays – contract renegotiations are being delayed by months and in some cases by more than a year,
• failure to contract at all – an increasing trend sees insurers simply refused to re-contract, forcing affected insured patients to pay significant out-of-pocket expenses or be funnelled to other hospitals. This distorts the market to the advantage of insurers by pushing patients to their hospital/s of choice, including ones they own. It's a clear conflict of interest,
• aggressive audits – these have gone beyond the remit of insurers' rights to patient information, with some insurers insisting on patients' full medical history, not just the procedure, treatment and services involved in the relevant admission.

"These practises have been allowed to infiltrate and fester in contracting negotiations over a long period of time, to now be considered 'the norm'," Mr Heffernan said.

"Unaddressed, these practises will continue to reduce patient access and choice, more services will close, investment in quality further compromised, and private hospitals' vital role in supporting the entire health system will falter – resulting in massive new caseload pressure and costs on public hospitals.

"A Mandatory Code would materially improve the sustainability of the health system. Greater transparency would prevent unconscionable tactics, increase efficiency and reduce overall costs to consumers, and go a long way to addressing viability of private hospitals through a market-based mechanism similar to codes in dairy, sugar and gas industries.

"The Code should be focused on the outcome of restoring the contract link between premiums paid by Australians and funding of services back to historical levels of 88%. As at the recent December-March Quarter the benefits ratio was just 80%. That means insurers pocketed 20% of premiums.

"It is also likely to be a popular initiative that holds the insurance industry to account, while not costing taxpayers or patients anything."

-ENDS-

What private hospitals do:

• 5.14 million patient admissions each year.
• 70% of all planned surgery (1.83 million operations) each year, including the majority of hip and knee replacements, malignant breast cancer procedures, spinal disorders, and eye surgeries.
• 1.66 million medical treatments each year, including the majority (54%) of chemotherapy.
• 61% of acute mental health care.
• 81% of hospital rehabilitation.
• Directly employ 155,000 Australians, including 59,132 nurses.

More data available at: PH Facts.

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