Latest news with #privatehealthcare
The Guardian
5 days ago
- Business
- The Guardian
Australians remain deeply sceptical about the value of private healthcare – it's time for radical reform
The viability of private healthcare in Australia has been thrown into doubt after Brookfield's decision to place Healthscope, the operator of 37 private hospitals, into receivership. After months of acrimonious negotiations with private health insurers and a failed search for buyers, the global investment firm has walked away. This is a 'canary in the coalmine' moment for the private hospital sector. Brookfield's exit suggests that private hospitals, at least in the near term, are no longer a safe bet for private equity investors. The reasons are complex but not new. The sector has been under pressure since 2016, when shares in Healthscope and Ramsay Health Care tumbled amid falling demand for private health insurance – a trend not seen since the early days of Medicare. Australians were questioning the value of private cover as premiums soared, out-of-pocket costs ballooned, and insurers quietly trimmed the list of services they would fund. Complaints surged. Confidence eroded. This was bad news for private hospitals. Healthscope was de-listed from the stock exchange and bought by Brookfield. In response, the federal government introduced reforms: capping premium increases, introducing tiered gold, silver and bronze policies, and trying to make specialist fees more transparent. But these measures have largely failed to restore trust or affordability, as witnessed by the events of the last few days. The pandemic has only deepened the cracks. Elective surgeries were cancelled, demand for private care dipped and, when it returned, it did so in a landscape reshaped by inflation and workforce shortages. By late 2022 inflation had peaked at 7.8%, squeezing household budgets and prompting many to delay or forgo care – especially in the more expensive private system. At the same time, hospitals faced rising costs for supplies and consumables, while medical fees continued to climb. Nursing shortages, exacerbated by burnout and shifting work-life expectations, made it harder to maintain services. Though inflation has since eased, many of these pressures remain. Health workforce retention is still a major concern. Medical out-of-pocket costs continue to rise. And the public remains sceptical about the value of private healthcare. What happens next for Healthscope depends on who takes over. Any new owner is likely to cut costs, potentially closing smaller, less profitable hospitals. Patients will need to go elsewhere. Public hospitals are facing growing demand from an ageing population, with a renegotiation of the national health reform agreement, the key funding deal between the commonwealth and the states. In Victoria the state government has injected $9.3bn into public hospitals, a sign of the growing strain across the board. The reasons why Healthscope is in trouble give us some clues about what we might do to ensure sustainability of the sector. There will always be fights about funding, whether it is private health insurers and private hospitals, or governments and public hospitals. Brookfield's decision raises urgent questions about how we fund and regulate private healthcare in Australia. The opaque and often adversarial contracts between private insurers and hospitals need greater oversight. Financial risk must be more evenly shared. And we need smarter, more localised workforce planning to address chronic shortages. Ultimately, the private system must reckon with its value proposition. While it may offer shorter wait times, care from senior specialists and private rooms, these benefits are increasingly offset by unpredictable and rising out-of-pocket costs. And when hospitals are owned by private equity firms, as in the case of Healthscope, there's growing concern, backed by international evidence, that quality of care will take a back seat to profit. The question now is whether we treat Healthscope's collapse as an isolated failure – or as a catalyst for deeper reform. Anthony Scott is a professor at the centre for health economics at Monash University
The Guardian
5 days ago
- Business
- The Guardian
The fall of Healthscope: bad luck, bad decisions, or is Australia's private health model sick?
Investing in hospitals is viewed as a safe bet. People regularly get sick and the population ages. Australian private hospitals have the added advantage of being backed by a government-supported private healthcare system. But on Monday, a huge private equity-backed hospital deal officially soured, sending Healthscope into the hands of receivers, and raising questions over whether Australia's private healthcare system needs to be overhauled. Brookfield, a private equity multinational headquartered in Toronto, paid $4.4bn for Healthscope in 2019 after a competitive bid inflated the price tag. The amount was considered high at the time given there were signs an increasing number of Australians were dropping out of private health insurance. Healthscope had also recently opened its biggest project yet, the Northern Beaches hospital. That facility was plagued by staff shortages and unavailable stock of medical supplies. Peter Breadon, the health program director at the Grattan Institute, said Brookfield 'competed fiercely' in the bidding process. 'So they paid a premium, then they loaded it up with debt before interest rates skyrocketed. 'They were then hit by the pandemic, which disrupted everything,' he said. The Covid-19 pandemic exacerbated financial pressures as elective surgeries were postponed or cancelled, further eroding revenue. When patients did return, many opted for day surgery, robbing the hospital network of high overnight room charges in a trend that has swept through global healthcare. 'There was a perfect storm, which was a mix of bad luck, bad timing, bad decisions, but compounded by broader sector wide headwinds,' Breadon said. 'Healthscope should not be taken as a sign that the whole system is on the verge of collapse, but it does shine a light on some of the vulnerabilities in the sector.' Long-term signs of financial stress at Healthscope crystallised earlier this year when the hospital operator started falling behind on its rental payments. In March, one of Healthscope's landlords, a real estate investment vehicle run by HealthCo, issued a breach notice over unpaid rent, and threatened to bring in rival hospital operators. Less than three months after the breach notices were issued, Healthscope's lenders withdrew support, plunging the company into receivership on Monday. Healthscope said in a statement that its 37 hospitals would remain open and operating on a business-as-usual basis, with no impact on staff, doctors or patient care. A sales process is now under way. Prof Francesco Paolucci, an expert in health economics at the University of Newcastle, said Healthscope's failings are indicative of more profound issues facing Australia's private health sector. Private hospital providers are facing increasing pressure on costs, driven by an ageing population with more chronic disease, rising costs of providing care and workforce scarcity. A 'blame game' has ensued between hospitals and insurers as to who should bearing the costs. But ultimately, Paolucci said, the government needs to step in to create a framework to manage this situation. 'That's why we're here. The framework is not there,' he said. With more than 60 private hospitals having closed in recent years, Paolucci said he would not be surprised if other private hospitals will soon hit financial trouble. Failing to provide a long term solution has implications for the public sector, as private providers support the public system, and private health insurers receive billions of dollars in annual government subsidies. The health minister, Mark Butler, told the ABC on Tuesday the federal government would not bail out private operators. He described Healthscope as a 'unique case' subject to very complicated financial structuring. However, he acknowledged the need for broader reform, and said he expects private health insurers to pay more of their income to private hospitals. 'I've given them a particular timeframe. If they haven't resolved that over the coming weeks, I've said that I reserve the right to act,' Butler said. The fall of Healthscope has sparked discussions about sector reforms. The Grattan Institute has recommended a model that independently establishes a floor price for hospital visits to remove disputes between insurers and hospital operators over the cost of care. In the meantime, Healthscope's receivers are looking to sell the network of 37 hospitals, which could be done through a carve-up to different owners or in a single transaction. Healthscope has said it has received 'around 10 non-binding indicative offers' and that a sales process would take up to about 10 weeks. Dr Rachel David, the chief executive of the health insurance representative group Private Healthcare Australia, said the private sector would be stronger without Brookfield's presence. 'The demise of Healthscope is an example of why multinational private equity is the wrong model to finance and run hospitals,' David said. 'From the moment private equity took ownership of Healthscope hospitals in 2019, it made a series of terrible decisions that have brought the hospital group to its knees.' Brookfield was contacted for comment. Mark Fitzgibbon, the former long-serving chief executive of the health insurer Nib, said the future for private hospitals, notwithstanding some of the structural issues, was positive, and that the country needed a thriving sector. 'These assets are still highly valuable and they'll find their price,' Fitzgibbon said. 'Ultimately, there's more and more growth. The Australian population is growing, healthcare spending is growing, so the long term outlook for the private hospital system is good, but there will be disruptive forces, and there will be changes.'
News.com.au
5 days ago
- Business
- News.com.au
Healthscope downfall blamed on ‘terrible business decisions' by Brookfield Corporation
Private Healthcare Australia CEO Rachel David discusses the time when Healthscope launched an advertising campaign targeting private health insurers claiming they weren't paying their fair share to private hospitals. 'There is no amount of money that health funds or the government could've thrown at Healthscope at that point which would've made up for the terrible business decisions made by Brookfield,' Ms David said. 'The advertising campaign was a misstep, but now that we're in a situation where new owners can take over, I think myself and the private health insurance industry is incredibly optimistic that the private hospital sector will come through this.'
News.com.au
5 days ago
- Business
- News.com.au
Healthscope collapses over ‘terrible decisions' made by management
Private Healthcare Australia CEO Rachel David claims Healthscope made several 'terrible decisions' which led to its collapse in the private health sector. According to the federal government, more than half of the Australian population has private health insurance. 'Like many businesses throughout Australia, private hospitals in particular, have had a pretty tough time,' Ms David said. 'The circumstances facing Healthscope have been a bit different, the fact that there was a private equity owner that came in and made a number of really quite terrible decisions in its management … that's led to what it is now. 'Health funds have paid private hospitals an extra nine per cent over the last year and the year 2023. 'For Healthscope in particular, it's received a number of hardship payments throughout that period.'
Bloomberg
6 days ago
- Business
- Bloomberg
Healthscope Receives Funding From CBA to Keep Hospitals Running
Australia's biggest bank has stepped in to provide funding to hospital operator Healthscope Ltd. as the government said it wouldn't provide a bailout. Healthscope, one of the country's largest private health care providers, has entered administration, according to a statement Monday. Commonwealth Bank of Australia has provided a A$100 million ($65 million) funding package to support the sale process and ensure normal patient care at its 37 medical facilities, the statement said.
