How many more private psychiatric hospitals have to close before government acts on mental health crisis?

APHA's opinion piece published in The Mercury newspaper.

THE irony of acute psychiatric hospitals closing while demand for mental healthcare is exploding in suburbs and towns across the country should not be lost on anyone.

Despite private hospitals accounting for 61% of acute psychiatric care, over the last two years 10 private mental health hospitals closed and more closures are looming.

Why? To be blunt, it's due to the exploitative practices of private health insurers, who see mental health as a cost to be avoided, and a Federal Government that, for three years, ignored all the warnings.

In 2024-25 Australia's health insurers pocketed a record cash grab of $5.53 billion. That's $2.13 billion in after-tax profits on top of $3.4 billion in 'management fees'.

At the same time, analysis of Consumer Price Index impacts and data health insurers provide to the Australian Prudential Regulation Authority (APRA) shows that the insurers short-changed private hospitals by $1.1 billion.

Australians are paying higher annual premiums just to line the pockets of insurance companies.

The biggest health insurer, Medibank Private, recorded a $741.5 million profit, up a massive 7.1% on last year. It's management fees reaped another $654.9 million, an increase of $40 million in just one year.

Even HCF as the biggest 'not-for-profit' insurer reported an adjusted insurance service profit of $28.3 million in its last annual result. According to APRA, HCF's management expenses and claims handling topped $485 million.

Mental health is a particular casualty. Insurers include it in their policy offerings but are loathe to pay for it. Once diagnosed these patients are likely to be an ongoing cost, so insurers make a point of driving mental health services to the wall.

Tasmania's only remaining private acute mental health hospital, The Hobart Clinic, treated 780 patients a year. It will close this month after 40 years of exemplary care. Many patients will have to make the trek to Melbourne to get the care they need.

Insurer payments simply don't meet the costs of care, while rising out-of-pocket costs for patients, due to insurance gaps, turn people off the treatment they need.

Most insured patients face more and higher gap fees because their insurance policy doesn't cover them adequately. It's a growing problem.

A massive 8.6 million hospital insurance policies, or 68%, are embedded with restrictions. That's up two million in five years. Patients are getting caught out paying more for their health insurance each year but getting less for it.

Toowong Private Hospital in Brisbane, a renowned acute psychiatric leader for 50 years that treated 3,000 patients a year, closed in June.

With Toowong, health insurers employed a number of tactics including disingenuous take-it or leave-it rate offers, refusals to contract at all, delayed contract negotiations by more than a year, and routinely underpaid for the care of insured patients.

In 2022 private hospitals, including Toowong, pleaded with Federal Health Minister Mark Butler to act, otherwise closures would result. Falling on deaf ears, the failure to rein in insurers as they recklessly pursued profits over patient care is why mental health, and healthcare more broadly, is in crisis.

The chronic shortage of psychiatrists also went ignored.

By 2024, more than 90% of psychiatrists said their workforce crisis is negatively impacting patient care, 73% of those have a wait list and a growing number of clients are waiting six months to a year for an appointment.

Almost half closed their books to new patients, while many others simply left the profession due to the strain.

Private hospitals urged Minister Butler to ease the 10-year moratorium that prevents internationally-trained psychiatrists already in Australia from working in private hospitals.

Pulling this simple policy lever would cost government nothing, but free-up accredited psychiatrists to practice in acute settings. The government did nothing.

Increasingly, patients with mental disorders are being medicated instead of getting the professional attention they need. There simply aren't the psychiatrists for GPs to refer patients.

It is not well understood, including by policymakers, that in psychiatric care private and public hospitals complement each other. They treat different cohorts of acute patients, so when private services close, patients fall through the cracks.

Already overburdened GPs are doing the best they can in treating mental health patients. In 2023, 4.8 million Australians (18% of the population) filled prescriptions for mental health medication. The vast majority were antidepressants (72%), with GPs prescribing 85% of all medications.

But, when affected by deteriorating mental illness, these patients have nowhere to go but an already overburdened public hospital Emergency Department where the wait times are long and the care options are extremely limited.

Ultimately, they are simply sent home with the promise of a community follow up visit in a few weeks' time. Meanwhile, they and their families live in constant fear and helplessness awaiting their next episode when the tragic cycle starts again.

We know of another eight private psychiatric hospitals that are on the brink of collapse. How many more have to close before government gets the message?

Brett Heffernan is chief executive of the Australia Private Hospitals Association. Published in The Mercury newspaper on 7 October 2025.

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