Private Health Sector Reforms: Consultation 1

PRIVATE hospitals are central to Australia's health system, but the sector is operating under sustained and worsening financial pressure. Australian Bureau of Statistics (ABS) Australian Industry data shows that the private hospital sector recorded a loss of $756 million in the most recent reporting period, 2024-25.

This result reflects a structural imbalance between the cost of delivering hospital care and the benefits paid for that care, compounded by rising labour, medical supplies, insurance, compliance and financing costs.

The APHA is determined to engage constructively in this first tranche, and subsequent tranches, of the consultation on private health reforms. That said, we remain perplexed at the delay. The APHA championed the need for policy reform in the areas identified in this first consultation paper four years ago.

That the Australian Government accepted the issues and need at the time, then embarked on two consultative forums over two years, released a Private Hospital Viability Health Check confirming the issues, all without action has materially exacerbated the viability issues confronting the sector.

While we are optimistic about the potential for positive reforms on the matters raised for discussion in Tranche 1, it must be noted that these considerations – even collectively – do not in any way address or improve the viability issues caused by the underpayment for treatments and services at the hands of health insurance companies recording over $2 billion a year in after-tax profits and $3.4 billion a year in so-called management expenses.

This financial pressure directly affects the availability of services that patients reasonably expect private health insurance to cover. Private maternity units have closed across the country – 18 in the past decade and 13 of those in just the last three years.

Private acute mental health hospitals have closed, those with mental health units have ceased their operation and others are on the brink of collapse. This situation, during a recognised and prolonged, acute mental health crisis in Australia is a diabolical result for patients and their families.

We are aware of would-be patients who have suicided while awaiting much-needed care, unable to secure a consult with a psychiatrist, while many acute private mental health hospitals have 40-60% vacancy rates.

This alarming lack of access to psychiatrists, while the benefits paid to acute mental health hospitals fall short, is materially and negatively impacting patient care, patient options and their access to the acute care they need.

Regional private hospitals remain exposed to second-tier arrangements that often do not meet the cost of care. Hospitals seeking to deliver contemporary models, such as Hospital in the Home, face establishment costs, workforce constraints, unclear MBS arrangements and the absence of a minimum benefits' framework to provide an insurance funding mechanism for innovative models of care.

Against that background, APHA welcomes the Department's focus on contemporary models of care and value for consumers. However, consumer value cannot be assessed only by reference to product simplicity or nominal benefit design. A private health insurance product has little real value if the hospital service it purports to cover is no longer viable, unavailable in a patient's region, or only accessible with substantial unexpected out-of-pocket costs.

APHA's central submission is, therefore, that the reform package should be implemented as a coherent set of measures directed at both consumer value and provider viability. Reforms should simplify private health insurance, improve access and support innovation, but they must also be enforceable, properly funded and co-designed with the hospitals that will deliver the care. Nominal protections, such as minimum benefits that can be contracted below, exemptions that can still be disputed, or product tiers that include only restricted cover, will not achieve the policy objective.

Across each proposal, APHA applies three tests: whether the reform improves real access for patients; whether it supports the viability of the hospitals required to deliver that access; and whether it creates clear, enforceable obligations rather than avoidable or disputable entitlements.

The APHA's full submission is available at Private Health Sector Reforms: Consultation 1.

Previous Submissions:
7/8/2026 Informed Financial Consent