PHA CEO Dr Rachel David discusses the Government’s review into private hospitals on ABC RN

Station: Radio National
Program: RN Drive
Date: 13/6/2024
Time: 4:08 PM
Compere: Andy Park
Interviewee: Dr Rachel David, CEO, Private Healthcare Australia



Well, if you ever needed elective surgery or maybe a procedure like a colonoscopy, or even just wanted your own room after having a baby, it’s likely that you’ve had a stay in at a private hospital. You can pay a bit of money for this sort of care, some of it covered with private health insurance, some of it out of pocket but, hey, you jump the public hospital queue. But the Federal Government now wants to peer into the books of these facilities in a major review now underway, saying it’s concerned about reports of the sector’s sustainability.

Doctor Rachel David is the CEO of Private Healthcare Australia. Doctor David, the Federal Health Minister Mark Butler has told us in a statement that they need to better understand the situation. He says he’s concerned about reports of sustainability of some private hospitals, particularly those in regional Australia where they play an important role in the local community. How bad is the situation?

RACHEL DAVID: Well look, we certainly agree that it’s something that we need to look into. We are concerned that private hospitals have done it tough as a result of the pandemic and the lockdowns, but also as a result of inflation because the cost for them of recruitment, power and food have gone up dramatically. And we know that the community really values private hospitals, they include some very iconic brands – Saint Vincent’s Calvary for example, in the not-for-profit sector. And people, over many generations, have used some of these hospitals for birth right through to death, so they are a very valued part of the community. We do-
ANDY PARK: [Interrupts] But how long can you keep pointing at the pandemic? When does mismanagement come into it?

Well, look, I think they have had a tough time with inflation, but we have to tread a very careful line here because our role is to represent the needs and issues for the 15 million consumers of private health insurance. And, as you can imagine, in a cost of living crisis their most major issue is the affordability of premiums.

The health funds have done their best in their contracts with private hospitals to keep up with inflation, and including actually paying them in between their normal contractual processes to top up their funding to some extent. But what we can’t have is a situation where we’re faced with a sudden spike in premiums or premium increases because we’ve been asked to bail out a sector without getting the right information first.

And I think one thing that we do- we will be making clear through this process is if the health funds are required to put in some more claims funding then what we’ll need to do is to make savings and remove waste from our health fund claiming at the same time and we do- so, so that people aren’t stung with extra costs.

ANDY PARK: I know a number of private hospitals have reportedly already shut or had their declaration as a private hospital revoked since 2023. Are there other facilities at risk of this now and where are they?

Well look, we don’t know. We have a suspicion and a theory that some of the hospitals in regional areas might be doing it tougher. Certainly, the hospitals that do a large amount of elective surgery are doing a lot better than some of the others, and some of the hospitals which are large, have large scale and located near the cities, for example, are doing better than others. But, until we know and get a very good understanding of where their funding comes from, how it’s being spent, how they’re actually calculating demand for private hospital beds, we’re not really going to know the answer.

Now, there have been some reports of closures – I think about 18 hospitals out of, you know, several six- 600 or so. So, it’s a concern but it’s not a disaster at this stage. But one thing we would point out is that while our members really desire and want very high quality private hospitals, and our members want surgery and mental health care at a time of their choosing, we don’t need to deliver that by having a hospital on every corner.

So, we’re not coming into it with a perspective that all hospitals, regardless of how they’re doing, need to stay open. And we do need to keep that perspective that if we are going to pay more for hospitals then we also need to make savings out of, you know, some of the waste and overpricing that goes on in healthcare.

ANDY PARK: 12:04, you’re listening to RN Drive. The CEO of Private Healthcare Australia Doctor Rachel David is with me. We’re talking about a Federal Government review into the $22 billion private hospital sector. This review will reportedly assess profitability and identify market challenges. I can sense that you’re keen to point the finger at waste and wastage, but this is a profitable sector. How profitable is this sector?
RACHEL DAVID: I assume that by that you’re meaning the private health insurance side or the payment side in terms of profitability?
ANDY PARK: In terms of private hospitals themselves?

Yeah. Well look, it varies, it varies greatly between the hospitals depending on their scale, you know, whether they’re a list- or whether they’re a listed company or not. And some other factors like how, for instance, some of their, you know, overseas funders, private equity and so forth have managed the real estate, for example.

So, there are a lot of factors that go into profitability. Our largest company, Ramsay in Australia, is a very profitable company. It’s a-

ANDY PARK: [Interrupts] Will they hand over detailed revenue and profit margin information? Is that what’s being asked of them?
RACHEL DAVID: Well, I think if this process is to be credible then that’s what they’ll need to do, and to provide some detailed statements of revenue and a detailed P&L – much the same as health funds are required to do when APRA looks into their books every quarter.
ANDY PARK: Private hospitals are indirectly publicly funded through private health insurance rebates. The Department of Veterans Affairs and the Medicare benefits schedule claims as well. So, it’s only fair, really, that the health minister asks for a little bit of transparency. Would you agree?

Yes, absolutely. And I think all parts of the sector need to be prepared to provide that. The Health Insurance Fund, Andy, is probably the most regulated end in terms of transparency in that the Prudential regulators the Department of Health go through their books in fine detail every year as they set prices or the premium. And then it kind of- you know, there are other parts of the sector where maybe we know a little bit less about where and how the money is being spent.

And part of this process will look at, firstly, where the funding comes from – whether it’s from private health insurance; other payers; out of pocket, you know, self-pay; markets; whether it comes from, in some cases, rebate funding from some of the big surgical companies and- for example. So, we’ll look at all of that and then look at how it’s spent; what has been the impact of the pandemic and inflation; and what are the drivers of demand for a private hospital bed which might include things like people’s capacity to pay, the number of doctors who are available in an area, or the number of nurses in a period of workforce shortage.

So, there are lots and lots of things, I think, that we need to look at here before we can make a- before we can arrive at recommendations about the best way for this essential sector to be run.

ANDY PARK: We’ll have to leave it there. CEO of Private Healthcare Australia, Doctor Rachel David. Thank you for your time.
RACHEL DAVID: Thanks, Andy.
ANDY PARK: And we did approach the Australian Private Hospitals Association for an interview. They were unavailable.
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