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Australian Private Hospitals Association: Preserving Australia’s private hospital system

In recent years, Australia’s private hospitals have been experiencing challenging economic times due to increasing costs and health insurance payments not keeping up with inflation.

The sector has emerged from the COVID-19 pandemic having propped up public hospital services for almost two years, while their own elective surgeries bounced from open to closed depending on what state they were in, to find a new world order.

Rather than returning to the relative calm of 2019 conditions, post-COVID-19 private hospitals faced workforce shortages, wage increases, and increasing costs that all Australians would be familiar with, like food, power and supplies. Private hospitals have reported a six per cent increase in these unavoidable costs.

On top of that, while episodes of care in the private sector have almost returned to pre-COVID levels, they are not as high as private health insurance membership numbers suggest they should be. More than 850,000 members have been added to health insurers' membership books in the past five years, but no similar boost has occurred in episodes of care.

This could be because many of these new members may have purchased “junk” policies. That is, there are many low-cost health insurance products that the insurance companies describe as “entry-level”. But the truth is these policies are not fit for purpose and do not allow people to access the many services provided in private hospitals that they need. Should a health issue arise, Australians hoping to avoid long waiting list times in the public sector may be in for a rude shock when they need hospital care.

The cumulative effect of these changes in the sector means private hospitals need help. We have seen at least four hospitals announce closures since the start of 2024 and more in previous years, including closures of individual services such as ICUs and maternity units. This will have an impact on Australians’ access to health services, particularly those in the regions.

In comparison, private health insurers recorded record profits of two billion dollars last financial year and have just been awarded (on average) a 3.03 per cent increase on premiums from April 2024. Some large private health insurers will increase their premiums even more than that. The payments to private hospitals to cover their increased costs have not kept pace with inflation, despite claims these cost increases are why premiums need to go up.

So, we now have a perverse situation — people take out health insurance to receive care in a private hospital should they need it, but health insurance companies are enjoying record profitability while private hospitals are closing.

The private health sector is not in balance and private hospitals are struggling. Health insurers have the financial capacity to meet the true costs of providing hospital care without the need for further premium increases, but appear to prefer bolstering their own profits.

Private hospital success is in everyone’s interests. Without private hospitals, health insurance companies do not have a product to sell. Every time a private hospital closes, the burden on struggling public hospitals increases, as do waiting lists. This also throws more burden on taxpayers to fund health services.

Any threat to the private hospital sector will have significant consequences for health delivery across the country. Private hospitals treat almost five million patients (2020–2021 data) per year — more than 40 per cent of all hospital admissions. The public system could not cope if these patients flooded their waiting lists.

In addition, private hospitals provide 60 per cent of all surgical services, including 50 per cent of all cardiovascular procedures, 60 per cent of musculoskeletal procedures, 70 per cent of all eye procedures, and 75 per cent of procedures on the brain, spine and nerves.

Private hospitals also account for 80 per cent of all in-patient rehabilitation, 45 per cent of all acute adult psychiatric beds, and at least 30 per cent of all chemotherapy.

The public system simply does not have capacity to take on all of that work.

Unless something changes, there will be increased costs to taxpayers and governments. By leveraging the private contribution through health insurance, governments collectively pay around $5.6 billion for the 40 per cent of hospital admissions provided by private hospitals. In contrast, they pay around $60 billion for the 60 per cent of services delivered in public hospitals.

Private hospitals also play an essential role in the training and development of the future health workforce. The Australian Private Hospitals Association (APHA) estimates each year, private hospitals provide more than 40,000 days of clinical placement for medical students, more than 300,000 days of clinical placement for nursing and midwifery students, and almost 30,000 days of clinical placement for allied health students.

If private hospitals close, those training days are lost, just at a time when state and federal governments are investing in increasing the home-grown health workforce. Again, there is no capacity within the public system to train those nurses, doctors and allied health professionals.

The issue of hospital profitability, or hospitals just keeping the doors open, is a very real one. Australian Bureau of Statistics data shows only 30 per cent of businesses in the private hospital sector report making a profit or just breaking even in 2021–22. This is down from 89 per cent in 2019–20 and the situation has deteriorated further in the last 12 months.

APHA is working closely with governments on this issue. Along with raising it with the Federal Minister for Health and Aged Care, APHA has had discussions with health departments and state and territory ministers and their staff.

APHA has also made progress on workforce issues that emerged following the COVID-19 pandemic. Many hospitals reported nurses were choosing to retire sooner than they had initially indicated, and others were looking to work fewer hours. On top of this, there had been two years with little to migration, so the usual funnel of overseas nurses to cover any shortages in the Australian workforce had dried up.

The workforce, particularly the nursing workforce, was a significant challenge just when hospitals were opening up and needed to cut those elective surgery waiting lists.

APHA called for a reduction in red tape for hospitals and migration applicants as well as a clear pathway to residency for health workers.

Drawing on the experience of France and Canada, which had rapidly opened up to health workers by offering fast access to residency and citizenship, Australia needed to act quickly to compete in an international market.

While the government has acknowledged problems with slow visa processing and undertaken ways to fix this, hospitals sponsoring skilled health workers to migrate to Australia are still experiencing long delays in processing. We will continue to drop down the list of attractive destinations for skilled migrant workers until these issues are actually fixed.

However, there continue to be workforce issues, including the continued desire to drop back hours for both nurses and doctors, which has impacted the ability to work through elective surgery lists.

While there are a number of issues facing the sector, it remains a great one to work in. The high-quality care delivered in the private sector is one of the main selling points to consumers, who understand that private hospitals offer a choice of doctor and enable them to choose the timing of their procedure and have it delivered in comfortable surroundings.

Michael Roff, APHA CEO

02 6273 9000


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