Insurers wield the scalpel

APHA's opinion editorial published in the Herald Sun.

WHEN health insurance companies seek to justify their forays into clinical services based on cost savings, be alarmed.

The only people who should be making decisions about what care patients receive and where that care is delivered are you and your doctor.

Health insurers in Australia are reaping record profits and massively inflated management fees from their customers each year. And the biggest of them all, Medibank, is bankrolling its windfalls into hospital ownership.

The value for private health has long been your choice of specialist, working for you, who accesses a world-class private hospital. But the equation changes when insurers own the hospital.

The fundamental conflict of interest when the private funder of healthcare is also the healthcare provider is as obvious as it is disturbing. Vertical integration skews the emphasis from quality care to cost control and it's a direct threat to patients.

In the last 18 months Medibank has doubled its incursion into hospital ownership. Starting with East Sydney Private Hospital, Hirondelle Private Hospital (Sydney) and Deakin Private Hospital (Canberra), Medibank has now added Adeney Private Hospital (Melbourne), Nundah Private Hospital (Brisbane) and Western Hospital (Adelaide).

One of the promotions is 'no gap surgery'. Sounds awesome, right? But in paying surgeon fees directly, surgeons are now effectively working for or directly with the insurance company.

Where does that leave you, the patient?

A serious line has been crossed. The once sacrosanct relationship between doctor and patient is corrupted when insurers own hospitals.

The US has seen this playout for decades. The nightmare of US-style managed care is fast becoming a reality in Australia and the outcomes for patients under this model are grim.

In 2023 a Harvard University-led study into the impact of vertical integration on 2.6 million American patient visits across 5,488 physicians found that "physicians significantly alter their care process after they vertically integrate, and there is a substantial increase in patients' post-procedure complications".

The study asserts "the financial incentive structure of the integrated practices is the main reason for the changes in physician behaviour because it discourages the integrated practices from allocating expensive resources to relatively unprofitable procedures". It concluded, "We find that vertical integration negatively affects the quality of care".

Personally, I wouldn't want a loved one within Cooee of such a hospital. I have zero confidence that clinical decisions are made in the best interest of patients and not the bottom line of insurers.

The insurance industry in Australia protests that they would never behave this way.

Yet, they created phoenix policies, a loophole exposed by the Commonwealth Ombudsman. CHOICE Magazine recently found customers are hit with 70% premium increases over five years when 'official' increases went up by 15%.

BUPA was caught red-handed offering doctors payments of up to $500 per patient to take their patients to any hospital except the hospitals with whom they were in a contractual dispute.

Separately, BUPA was also recently fined $35 million when forced to admit to unconscionable conduct in falsely advising members they were not entitled to claims.

This is the insurance industry that refuses to contract with accredited private hospitals at all, imposes unrealistic conditions when it does, then doesn't pay in full or on time and pressures hospitals and clinicians to limit patient care.

Under so-called 'bundling', insurers restrict what care, especially rehabilitation, their members will receive before they even get sick or injured. Patients only become aware of this when it's too late and they are at their most vulnerable.

The very same insurers that have built exclusions into 70% of policyholders' cover, delivering their members less while exposing them to hefty and often hidden out-of-pocket costs.

It has emerged, in writing, that insurers are now coercing doctors to force hospitals to provide treatments at less than cost or risk losing patients altogether, while also demanding they pre-approve what services hospitals can offer in the future or forgo payments.

They flagrantly abuse paying legislated minimum fees per episode of care. Insurers insist that averaging the minimum payment across multiple episodes is enough. By definition, that means they are routinely paying hospitals below basic rates.

No-one is surprised that health insurance companies do, in fact, behave this way. The 12.6 million Aussies with hospital cover see insurance as "a necessary evil", essential to them accessing the quality treatments and personal care private hospitals provide.

But when insurers spruik cost savings in their hospitals, you have to wonder what corners are being cut in your healthcare. You should also ask, where is the Albanese Government while this is going on?

Brett Heffernan is chief executive of the Australian Private Hospitals Association. Published (abridged) in the Herald Sun newspaper on 3 April 2026.

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