Dr Rachel David spoke with ABC Radio Hobart about the closure of Hobart Clinic and the issue of soaring medical specialist fees

26 Sep 2025Interviews and Transcripts

Transcript

Station: ABC Radio Hobart
Program: Breakfast
Date: 26/9/2025
Time: 7:12 AM
Compere: Ryk Goddard

Interviewee: Dr Rachel David, CEO, Private Healthcare Australia

TRACEY STRONG:	With me now is Dr Rachel David, CEO of Private Healthcare Australia, which is the peak body for health insurers. Dr David, good morning.
RACHEL DAVID:	Morning, Tracey.
TRACEY STRONG:	The key message we’ve been hearing is that health fund reimbursements have not kept pace with the cost of running hospitals like the Hobart Clinic. How do you respond to that?
RACHEL DAVID:	Well, look, it’s always very sad when a hospital that’s been around for a few decades closes, and we feel the same way about the Hobart Clinic. But what I do take issue with is that this is down to the actions of health insurance funds. Health funds have actually paid an additional 6 per cent out, and it’s the highest amount they’ve ever paid to private hospitals. But no amount of additional funding would have saved the Hobart Clinic. Why? Because simply insufficient patients were being referred to be managed as inpatients in in the hospital. So it was no longer viable to keep operating. The reasons for that are, firstly, it’s very expensive to see a psychiatrist, and only a psychiatrist can admit you to a psychiatric hospital. So people have been priced out by fees in the community to see a psychiatrist of almost $1000 in some cases. And we know from very recent research that of all the people referred to see a medical specialist, 20 per cent are not going because of the cost.
TRACEY STRONG:	I actually think people could identify with that because you’re right, you can get a referral to see a specialist and talking more broadly, like to see a gynaecologist or something like that, and decide not to take that up because it is too expensive, it’s too much out of pocket to pay for that specialist. But that’s not stopping hospitals closing. Do insurers need to take on some of the responsibility, or are you saying it’s solely the doctors and the patients that are the challenge?
RACHEL DAVID:	Look, the insurers could have doubled what they were paying to the Hobart Clinic, but the hospital would have still failed. So it’s not just a matter of fewer people getting in to see a psychiatrist. The psychiatrists themselves have changed how they manage a large number of mental health conditions. A huge amount of this shifted to telehealth, particularly during the pandemic. So it’s actually quite rare these days for someone with a moderate severity mental health condition or addiction to be managed in hospital. And we’re seeing a number actually of psychiatrists on the mainland offering psychiatric care to people in Tasmania via telehealth, and we don’t see any signs that that new clinical model of care, managing someone in the community, is going to change.
TRACEY STRONG:	So you think having inpatient, private, psychiatric clinics are just not going to be around in the future?
RACHEL DAVID:	No, that’s right. There will be some private mental health facilities to treat the most serious cases, people that are at risk of harming themselves or maybe even someone else or people who can’t function at all.
TRACEY STRONG:	With respect, people would have said the Hobart Clinic were doing that too, were looking after people in that situation.
RACHEL DAVID:	And I have no doubt that some were in that situation, but it’s a very small hospital, which these days is subscale. So it only had 27 beds and it wouldn’t have taken much in terms of a long-term reduction in occupancy to put it in the situation it is now.
TRACEY STRONG:	Well, if it truly isn’t a reimbursement issue then, from your perspective, what do you think needs to happen to stop the private hospital system going backwards?
RACHEL DAVID:	We absolutely need to address the issue of soaring medical specialist fees. They’ve been going up by 12 per cent per year since the end of the pandemic, and we’re not even sure we’re capturing all the fees because we can only measure what comes through the Medicare system. The Federal Government has done the right thing and before the election announced that they were going to publish all of the fees on their Medical Cost Finder website so that people at least when they go to see the GP, they have the choice of going to see someone who might bulk-bill them and might be cheaper. But if we don’t take that step and we don’t take additional steps to protect consumers from soaring costs, I can see that this problem will continue.
TRACEY STRONG:	The Minister has written to insurers, your members, and asked them to make more strenuous efforts to keep struggling private hospitals and offer fair value to customers. What do you think is going to happen as these negotiations start between insurers and the government regarding premium increases?
RACHEL DAVID:	The health insurance funds do this every year in a process called the premium round, which is extremely robust. The health funds make submissions to the prudential regulator, which is APRA, and to the Department of Health to enable the Minister to make a decision about the price. It’s extremely thorough. Claims, operating expenses, and operating margins of the health funds are reviewed during that process, and we expect it to be tough because at the end of the day, we don’t want to raise premiums by $1 because we understand what- the struggles that people are having with cost of living. Inevitably, there’s some inflation in the system, which the funds need to cover, but it is a very robust process. What I would say about the Minister’s letter this time is that health insurers over the last 20 years have consistently paid out 85 cents in the dollar for every dollar of premium revenue that they earn. That is far higher than any other form of insurance. So it’s actually a very value-driven process to set the price, and health insurers provide more value for money than any other type of insurance.
TRACEY STRONG:	I do wonder, just personally, isn’t it in your best interest though to keep the hospitals open? Because if private hospitals cut back on services and close services because what they say is a reimbursement issue from you, won’t that put your business model at risk?
RACHEL DAVID:	Well, there’s a very big difference in how some hospitals are performing. Overall, they had a very tough time during the pandemic with lockdowns and then the subsequent inflation that occurred. But big operators like Ramsay are actually doing pretty well, and there are a number of smaller hospital groups, particularly in the day surgery and day admission space, that are doing pretty well also. I would however restate that there is nothing the health funds could have done in terms of additional funding to save the Hobart Clinic. Its issue was poor occupancy. And in fact, one of the local health funds in Tasmania, St Lukes, bent over backwards to try and help the hospital by interacting with its board over the last couple of years. And at the end of the day, the health fund funding follows the patient, and the funds cannot pay for a hospital with no patients.
TRACEY STRONG:	Dr Rachel David, CEO at Private Healthcare Australia, the peak body representing private health insurers. I really appreciate you taking the time to chat with us today.
RACHEL DAVID:	Thanks, Tracey.
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