Australia: Expensive healthcare pinches patients’ pockets

Thousands of patients may face increased out-of-pocket healthcare costs following a breakdown in negotiations between St Vincent’s private hospital network and the private health fund, NIB, for a new funding agreement. On Thursday, St Vincent’s Health Australia notified NIB that they would terminate their contract within 65 business days unless a fairer agreement is reached.

Without a new agreement by October 3, NIB-insured patients using St Vincent’s private hospitals will likely incur higher costs. St Vincent’s operates 10 private hospitals in NSW, Victoria, and Queensland.

St Vincent’s CEO, Chris Blake, emphasized the gravity of this decision, noting it was the first time in their 167-year history that they had to end an agreement with a private health fund. The healthcare provider stated that despite their best efforts, NIB did not present a fair offer that accounted for the increasing costs of private hospital care.

Blake highlighted inflation’s impact on costs such as wages, food, energy, PPE, IT, and maintenance. For instance, their electricity costs are expected to rise from $6.5 million in 2023 to nearly $12 million in 2024. In the past year, St Vincent’s successfully negotiated new agreements with Medibank, HCF, and the Alliance group of health funds, showing flexibility on both sides, but NIB’s stance left them no choice.

NIB CEO and Managing Director, Mark Fitzgibbon, expressed disappointment over St Vincent’s public stance but remained open to ongoing discussions, citing a long partnership with St Vincent’s and acknowledging the financial challenges faced by private hospitals.

The Australian Medical Association (AMA) urged both parties to resume negotiations to protect patients from higher out-of-pocket costs and maintain public confidence in private health insurance. AMA President, Prof Steve Robson, stressed that such disputes damage trust, especially amid rising premiums and cost-of-living pressures.

Dr. Katharine Bassett, Director of Health Policy at Catholic Health Australia, criticized insurers for increasing premiums while reducing payouts to patients. She supported St Vincent’s stance against insurer practices, citing NIB’s significant premium hikes and low return rate to patients.

The ACCC’s recent report highlighted a significant rise in the private health insurance industry’s net profit, doubling from $1.04 billion in 2021-22 to $2.19 billion in 2022-23. Bassett noted the financial strain on not-for-profit hospitals, with 71 private hospital services closing last year due to financial difficulties.

Blake acknowledged a crisis in private healthcare, calling for cooperation between health funds and hospitals. The CHA advocated for reforms to the premium process and a new funding model, the National Private Price, to better reflect hospital costs. The AMA called for an independent Private Health System Authority (PHSA) to regulate the sector, resolve disputes, and ensure patients receive value for money.

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