Private health industry crisis in South Australia

by Bob Briton

A ceasefire has been called in a dispute that for three weeks 
meant that South Australians insured with the State's largest 
private health fund, Mutual Community, were effectively locked 
out of hospitals owned and managed by the State's largest 
provider of private beds, Healthscope. The tussle was only the 
most recent between major players in the private health sector 
and gave us another glimpse of what lies ahead if the Federal 
Government succeeds in replacing public health care with private 
operators.

Private hospital says change fund

During the spat, members of Mutual Community arriving at 
Healthscope hospitals for anything but emergency attention were 
warned that they would have to pay up front for their treatment 
and, even after claiming from their fund, that they would be left 
with a considerable "gap".

When booking in for a natural birth, women were asked to cough up 
over $4000 and told that they would have a gap of $1018. A 
caesarean section was $5600 with a $1517 gap. Patients needing a 
hip replacement would have to produce over $13,000 and take a 
$3540 gap on the chin.

Healthscope suggested to patients that they change funds to avoid 
the need to pay upfront for treatment and absorb the hefty gap. 
Unfortunately, there were no guarantees that members transferring 
to similar tables with other funds would avoid the gap left in 
these particular circumstances.

Australian Unity went public with its decision not to pay the gap 
for patients fleeing the clutches of Mutual Community. Medibank 
Private took a more compassionate attitude, however, and offered 
immediate cover.

Funds say change hospital

On the other side of the contest, Mutual Community was taking a 
similarly hostile line. It recommended that its members should 
get treatment in other private facilities and avoid Healthscope's 
hospitals.

This was easier said than done — Healthscope is the largest 
provider of private beds in the State and provides services for 
over 24,000 Mutual Community members annually.

Healthscope manages the Ashford, Flinders Private and The 
Memorial hospitals for the financially troubled private owners, 
Adelaide Community Healthcare Alliance, and owns the Griffith 
Rehabilitation, Holdfast Private and Parkwynd Private hospitals 
in its own right.

Furthermore, the Ashford Hospital is the only private hospital in 
the State with the highest ("2B") level neonatal nursery for 
premature babies and able to cope with other birthing problems. 
At the time of the standoff, there were over 1000 women waiting 
to have their babies at Ashford and Flinders Private. There was 
justifiable concern that the situation could put babies at risk.

The flow of patients to other, non-Healthscope private hospitals 
was putting the doctors and staff of those other institutions 
under a lot of strain. Calls went up from all quarters for talks 
and inquiries to settle the issue and get back to "business as 
usual".

The crisis set in when Mutual Community rejected a proposal from 
Healthscope for an 11 percent increase in the rebate paid to the 
hospital for its services to its members. The hospital managers 
claim that they had negotiated new contracts with 27 other funds 
before striking this snag with Mutual Community.

They maintain that their costs have risen at two and a half times 
the rate of inflation and that, if the fund didn't agree to their 
demands, they might go the way of the 14 private hospitals that 
have closed in the State over the past decade.

Mutual also cried poor, in spite of the mighty boost they have 
had from their share of the annual injection of $3.6 billion of 
taxpayers money into their industry sector through the Federal 
Government's 30 percent Private Health Insurance Rebate.

Giving in to the likes of Healthscope would cause increased 
premiums and gaps to occur for members across the board, they 
said. They offered Healthscope a two percent increase over three 
years and added that even this amount made Healthscope the best-
compensated hospital operators in SA.

On October 1, the contract between Mutual Community and 
Healthscope lapsed. State Labor Health Minister Lea Stevens 
called on her Federal counterparts Senator Kay Patterson and the 
new Health Minister Tony Abbott to intervene. "Private health 
insurance is the province of the Federal Government and this is 
an ongoing issue of real concern here in SA", she said.

Opposition Health spokes-person Dean Brown took advantage of the 
impotence of the opposition to get tough on the corporations. He 
claimed that Ms Stevens had "considerable powers" under the 
Health Commission Act to enforce a no-gap system on the parties 
while they slugged it out.

Eventually, the hospital managers and the health fund agreed to 
meet with Private Health Insurance Ombudsman John Powlay in the 
mediator's chair.

The on-again, off-again talks last week resulted in Healthscope 
dropping its demands for upfront payments while the details of an 
agreement with Mutual Community were worked out. The health fund 
warned that the outcome could still involve some gap payments at 
Healthscope hospitals.

Elsewhere, Mutual had a similar confrontation with Healthscope 
earlier in the month over payments to the Darwin Private 
Hospital.

In Victoria, thousands of psychiatric patients faced bills of up 
to $300 per day recently when Healthscope and health fund HBA — 
now wholly owned by the transnational British United Provident 
Association — fell out over rebates. Patients staying the 
average 18 days at the Northpark psychiatric unit or the 
Melbourne, Victoria and Geelong clinics faced a gap of $5328!

In two other recent cases — Ramsay Healthcare versus NIB in 
Newcastle in 2002 and Australian Healthcare versus MBF Health on 
the Gold Coast in 2000 — the courts found in favour of the 
hospitals in their disputes.

This latest spat, which is still to be resolved, exposes some of 
the problems associated with private health insurance and 
privately run hospitals whose first priority is profits. 
Providing health care is the vehicle for profit-making, not their 
number one priority.

It demonstrates that the private sector cannot be relied upon to 
manage something as important as healthcare.

Worse to come?

Medibank Private managing director George Savvides has warned of 
worse to come. Gap payments and other difficulties loom as the 
hunt for profits dominates the negotiation of new contracts. "If 
we can't settle on the right contract, Medibank Private won't be 
frightened about not being in contract", he told the media last 
month.

The uncertainty, expense and profiteering behaviour of the 
players in the private health sector are not new features and are 
not likely to go away when the South Australian crisis blows 
over. They are becoming more common and threaten to leave us with 
a system similar to the US where "your" choice of hospital (and 
even treatment) is actually made for you by an insurance company.

A stronger public health system — not a stronger private sector 
as is being pushed by the Federal Government — is our only 
guarantee of universal access to health services with acceptable 
standards.