Program: Mornings
Date: 5/9/2024
Time: 10:08 AM
Compere: Gary Adshead
| GARY ADSHEAD: |
Now yesterday on the program you would have heard that I was speaking to one of the organisations that represents private hospitals, Healthscope. Included in the list of hospitals that they have is the Mount right here in WA, and they were highly critical of the private health insurance sector, saying that it- the money that is being contributed by the private health insurance sector is making it difficult for hospitals to stay open. And that was an alarm bell. They’re saying that within 12 months, hospitals- some hospitals might have to close. Now, Healthscope stopped short of saying that theirs would, but they certainly know that there’s pressure on. The reaction to that has not been great from the- course from the private health sector. Here’s a little bit of what Greg Horan from Healthscope, he’s the CEO, had to say to me yesterday. [Excerpt] |
| GREG HORAN: |
The sector is un-investable at the moment. For the likes of both Bupa and Alliance member funds for Healthscope, not fairly funding their local private hospitals, which means we can’t in a lot of instances provide services that- we’re providing services at a loss, and therefore we’re putting pressure on the services that we’re providing in those local communities. If we can’t get them to fund fairly, then that really puts those services at risk. [End of excerpt] |
| GARY ADSHEAD: | All right. Dr Rachel David is the CEO of Private Healthcare Australia and wants to respond to that, and she joins me now. Thanks for your time. |
| RACHEL DAVID: | Morning, Gary. |
| GARY ADSHEAD: | You’re not fairly funding the private hospitals. What’s your response? |
| RACHEL DAVID: |
Well, look, that is simply not true. We’re in a cost of living crisis right now. And the first thing that I’d say is that our responsibility as health funds is to our 15 million members, and we are not going to take any action that’s going to result in big premium increases next year. Our sole focus is keeping downward pressure on premiums. Now, we are paying hospitals 8 per cent more than last year, which is above inflation and which is- and which should be sufficient to manage even in a difficult economy. And we know the pandemic’s been tough on them. We know that everyone- that hospitals, like every other business, are struggling with the costs of power, food, workforce. But what we can’t do is give them a massive above inflation across the board increase, because to do that would put serious upward pressure on premiums for consumers. They drop out of the system, and then the hospitals have an even bigger problem. |
| GARY ADSHEAD: | So you’ve got obviously Healthscope prepared to single out certain insurers. Bupa, they say, paid out $0.81 in the dollar for the 2023 financial year. And they say that that is simply not high enough, and it should be around $0.88. |
| RACHEL DAVID: |
Look, let me take you through that. For a start, health insurance pays out more in the dollar or pays back to consumers more in the dollar than any other type of insurance out there. Whether it’s home, car, whatever, health funds pay back more. So before the pandemic, we did- the health funds did pay back $0.88 in the dollar. Then there was the pandemic, and a number of hospitals and health services had to close. So the health funds started to accumulate money, and they made an agreement with the ACCC and the government that they would pay that money back to consumers. So during that period, there was not as much money paid back in per dollar, but they paid it back separately to consumers as cash rebates. And that totalled $4.5 billion over that period. Now claims are coming back to normal, so the claims ratio or the amount paid back per dollar is coming back to normal. So to quote from the period during the pandemic is simply misleading, and it’s not giving the funds credit for what they did do, which was to pay that excess money back. And no other business did that during the pandemic, to be honest. |
| GARY ADSHEAD: | I think people listening, people out there that might have private health policies and they know that their premiums will go up at some degree – as you said, you’re trying to keep a lid on how high. But they’ll be confused about this. I mean, who’s telling us the truth? |
| RACHEL DAVID: | Well, look, I think what I can easily say to that is health funds are rigorously regulated by the prudential regulator and by the Department of Health. All of the data supporting what I’ve just said is published on the prudential regulator, which is APRA. It’s all published on their website. We have absolutely nothing to hide. And what we can guarantee to people with private health insurance is we are not going to let any hospital which is genuinely in trouble and which is genuinely providing essential services in an area of need, we will not let any hospital in that situation close. But what we’re not going to do is simply agree to an above inflation across the board increase for the entire sector, which is going to put upward pressure on premiums. That is not fair to families that are struggling with cost of living and to pay their bills. And it definitely won’t do anything to help the sustainability of private hospitals. |
| GARY ADSHEAD: | So are you saying that they, when we talk about the hospitals, are not managing their own finances well and looking for a scapegoat? I mean, you’ve got Healthscope coming out today saying that they’re hoping to get rent relief for some of the building spaces that they occupy, that they’re that desperate. They need rent relief. |
| RACHEL DAVID: | Well, look, a couple of the funds have already given them one-off payments for rent relief already, and they’ve come back for more. But let me take you through what’s happened with Healthscope. So Healthscope was acquired by Brookfield, which is a big North American private equity firm, in 2019. They paid far too much for the assets, according to the reporting by the market, but then they sold and- the hospitals for $2.5 billion, which they immediately sent back to their private equity investors in North America. They invested nothing locally. Then they leased the hospitals back. That deal did not take account of the fact that interest rates were going to go up. So now they’re in trouble with their rent, but they’re only in it for the short term because they’re private equity and they’re casting around for the government, health funds or anyone who’ll listen for extra money to bail them out. Now, that is simply not fair on people with private health insurance who are struggling with their own cost of living issues. Why on earth should an Australian family with a mortgage be bailing out Brookfield, which is a trillion company worldwide? |
| GARY ADSHEAD: | You talk about that. Are you saying that- I mean, I did ask specifically what he thought the Federal Government could do. He didn’t sort of go down the path of asking for bailouts. |
| RACHEL DAVID: | Yeah. Well, look, this is not something that the taxpayer should be bailing out, and it’s certainly not something that people with private health insurance should be bailing out. Brookfield has made some terrible business decisions in Australia, and they need to take ownership for that. And they’ve got $1.3 trillion worth of assets worldwide. They can bail out their own hospitals. What we can guarantee is that no hospital that is genuinely in trouble, that is in an area of need and that is providing essential services, will be permitted to close. |
| GARY ADSHEAD: | In terms of the campaign that’s been launched, I mean, what’s your reaction to that? Protect your hospitals is what they’re encouraging people to get involved in, and even to email the private health insurers and go with the argument that Healthscope and others are putting. |
| RACHEL DAVID: | Well, look, we’ve had a bit of a look at their website and some of the materials that they have posted online. I was particularly disappointed to see on that website claims that they were threatening pregnant women and people with cancer with charging extra fees. That is unnecessary. It’s scaremongering and an absolute disgrace. And I’ve been involved in this industry for a couple of decades now, and I’ve never seen something so unethical in my life. We will not permit that. Both Bupa and the other funds they’ve talked about have existing contracts with Healthscope that prohibit them from charging those extra fees. And we will be doing everything possible to ensure they honour those commitments. |
| GARY ADSHEAD: | The suggestion of hoarding, quoting from the document that Healthscope have put out there, hoarding super profits and surpluses. And that’s off the- and that’s naming Bupa and Australian Health Services Alliance and Australian Unity. What do you say to that? I mean, if I look at the figures, there’s not evidence of that. And given if I look at Bupa, for example, I think they had an underlying profit of $756 million in 2022, but that fell to 291 in 2023. So a huge drop. |
| RACHEL DAVID: | Yeah. Look, there really is no evidence for that. As I mentioned, cash accumulated during the pandemic lockdowns, that’s all been paid back to health fund members. So that really should not be counted as profit. And the margins of the industry are healthy, but they’re not excessive. They’re actually under the net margins of Australia’s biggest private hospital group, which is Ramsay. And I would also remind viewers- the people that are listening that under Australian law, it’s not permissible to operate a health fund at a loss year after year. It does have to prove that it meets its prudential requirements to our regulators and that it is a profitable business. Otherwise it will not be permitted to operate by our regulators. |
| GARY ADSHEAD: | Just finally, you would have seen, though, that the Health department in terms of a report that’s been done, which some of it’s been seen, I think by the Australian Financial Review, that does say that there is grave concern that hospitals will close in the next 12 months because of the current growing crisis. What do you say to that? |
| RACHEL DAVID: | Well, look, no one’s actually seen this report. The Fin Review- obviously somebody who was involved in that process talked to them and talked up these issues. There’s no doubt that the pandemic has put private hospitals under stress and inflation has put private hospitals under stress, like every other business in the Australian economy. But I just repeat our commitment that if a hospital is in an area where there’s no alternative in an area of need, if it’s providing essential services and it’s genuinely in trouble, it’s been found to be in trouble by this process, then we’re not going to let it close. But what I did say was some reports in the media that were going around that there were 72 hospitals that had closed. Now, there are more private hospitals open today than there were six years ago. But when we looked at that list, 60 of them were small day surgeries that had closed as others opened. There were 12 left, and of those, seven were still open because other groups had invested in them, which left five hospitals, all in rural and regional Australia, that we might be genuinely concerned about. So I think it’s important not to wildly exaggerate what’s going on here. Every business in the Australian economy is having to adapt to the current inflationary environment, and that includes private hospitals. We will help them. But what we’re not going to do is give massive above inflation increases to everyone, which will put upward pressure on premiums. |
| GARY ADSHEAD: | All right. Well, it sounds to me like the Health Minister federally needs to get both sides of this argument in a room and try and come to some sort of consensus as to where things are at. I do appreciate you joining us today. |
| RACHEL DAVID: | Thanks, Gary. |
| GARY ADSHEAD: | Okay. That’s Dr Rachel David there, the CEO of Private Healthcare Australia, having their say on an argument that was certainly picked yesterday with a- what they describe- the private healthcare industry is saying is nothing more than a scare campaign by some of the hospital operators around the country. |
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