Health insurers and private hospitals are fighting over who meets certain patient expenses. Photo: Glenn Hunt
The head of the doctors’ lobby, Brian Owler, says strict contract clauses being pushed by Medibank Private that put financial risk for unplanned patient readmissions and preventable falls back on private hospitals is evidence the newly listed market leader has shifted its priority from patients to shareholders.
However, the chief executive of health insurer nib, Mark Fitzgibbon, has backed his larger rival, saying hospitals need to be held accountable for quality care, and claims of overservicing of patients and wastage need to be tested.
The relationship between health insurers and private hospitals is always fraught, but the recent stoush between Medibank and Catholic provider Calvary Health Care again puts the tension in the spotlight.
Healthcare costs are rising, due in part to a growing and ageing population. The community is demanding no compromises on care, but the big question is who is going to pay. Insurers can only put up insurance premiums so far, because pressure on affordability is pushing health fund members to downgrade or ditch their cover. So the funds instead want hospitals to take more responsibility on cost.
Calvary said on Friday that Medibank is being unreasonable by demanding hospitals, not insurers, pay for “highly preventable adverse events”, such as patients falling in hospital. Calvary says many of the events on Medibank’s 165-long list are just common complications. Medibank is also insisting that Calvary pay for patient readmissions within 28 days of a procedure, which the hospital group says puts the chronically ill and dying at risk of being pushed to the public system.
Medibank’s behaviour has changed since it was privatised in a $5.7 billion float last November, Australian Medical Association president Dr Owler said. “Medibank has to grow its market share and it has to grow dividends for shareholders. Pressure will be put back onto the patient.”
However, Mr Fitzgibbon backed Medibank. “Just like public funders have realised there is an efficient price for procedures in hospital, I’m interpreting from the Medibank and Calvary dust-up that Medibank is saying: ‘We are not going to pay you more than the efficient price for procedures.’
“I am saying, ‘Go for it Medibank.’ They’ve got the market power to take the leadership on some of these issues,” Mr Fitzgibon said.
One way of looking at the dispute is to consider which sector has benefited most from growth in the private health sector.
Morgan Stanley analyst Daniel Toohey recently published a note showing that the past decade has been good for private hospital operators while insurers struggle to sustain margins.
Over the past seven years earnings margins across the private hospital industry increased by 20 to 25 per cent, while average insurer gross margins have shrunk despite premiums rising around 6 per cent a year.
Listed players Healthscope and Ramsay Health Care are enjoying particularly robust profit growth.
Pushing some cost back to hospitals will diminish their profits in favour of the insurers. However, there is another push at play that has the prospect of also dampening revenue. There has been an explosion in policies offering lower premiums in return for excluding certain services, like mental health or orthopaedic surgery. This limits the exposure for insurers, but if patients then need those services they will have to turn to public hospitals, which cuts revenue from private.
According to the Private Health Insurance Administration Council, the portion of exclusionary policies purchased by the market has increased from 7 per cent to 35 per cent over the last eight years.
“We see people taking private insurance and not being covered to be a private patient in a private hospital,” Dr Owler said. “I call that a junk policy.”
But nib’s Mr Fitzgibbon said the downgrading of cover and the rise of exclusions is not something to be afraid of.
It is good, for example, that younger or older consumers with no intention of being pregnant can save money by not being covered for obstetrics, he said.