But don’t blame the private health insurers, says the PHA.
Healthscope, operators of 38 private hospitals including the troubled Northern Beaches Hospital, has joined the ranks of strugglers, downgrading its value by $919 million, according to the financial media.
The company made a loss of $649 million in the year up to 31 December 2023, according to the Australian Financial Review this morning. It is currently owned by Canadian asset manager Brookfield after a 2019 $4.4 billion buyout.
Healthscope is not alone as a struggling private hospital operator.
St John of God will bail out of operating the Hawkesbury Hospital when its agreement with NSW Health expires at the end of June. It posted an operating loss of $116 million to 30 June 2023.
Calvary endured the takeover of their Canberra asset by the ACT government last year, while posting a $377 million lost in 2022-23.
Even Ramsay Health Care, which has had a good year financially with a $785 million net profit for the six months to December 2023 – a 286% increase – has been on the receiving end of acquisition rumours, courtesy of Wesfarmers.
Healthscope CEO Greg Horan told the AFR that the financial results reflected the pressure private hospitals were under.
“Cost increases across the sector, especially labour rates, utilities and medical supplies, have outstripped the historic rates of indexation, leading to severe margin compression,” he was quoted as saying.
“Healthscope is proactively engaging with lenders, landlords, private health insurers and government to manage the structural shift and rebalance the sector’s funding.
“We are addressing the challenges of underfunding now, to ensure we can continue delivering the highest standards of care well into the future,” he said.
Michael Roff, CEO of the Australian Private Hospitals Association, said last week that the whole system was “out of balance”.
“We’ve got private hospitals closing services and in fact entire hospitals closing,” he said.
“And at the same time, you’ve got the private health insurance sector that collectively made a profit of $2 billion last year. The system is clearly out of balance.
“And the health insurers have the capacity to pay hospitals more without the need for additional premium increases.”
Unsurprisingly, Dr Rachel David, CEO of Private Healthcare Australia, the insurance peak body, disagreed.
“That’s really not true at any level,” Dr David said on the ABC yesterday.
“There’s no doubt that private hospitals have had a tough time as a result of the pandemic. And also, as a result of the consequences of inflation, they are paying more for recruitment, power and food, the same as other businesses.
“To the extent that they can, health funds have been meeting through their contractual obligations those payments, including when hospitals have come to them out of cycle of the normal contracting processes and asked for more money. I’m unaware of any of those requests that have actually been denied.
“For the most part, we understand that private hospitals are the bedrock of our system in terms of the equality and access, particularly to surgery, that they provide.
“But the entire onus in our system is placed on the health fund to keep premiums and treatment in hospital affordable.
“That’s why the contracting process can become adversarial, because at the end of the day, the health funds will not get massive premium increases approved by the Federal Government.”