SEVERAL generations of Australians have enjoyed a health system that balances public and private medicine in a manner that is, in theory at least, fair, accessible and affordable.

However, in recent years, private models of hospital and outpatient care have come under considerable pressure, as commercial interests, regulation and population factors change. The COVID-19 pandemic of the past 2 years has amplified these pressures particularly on Australian private hospitals, due to costs for personal protective equipment, absenteeism, and reliance on telemedicine rather than face to face consultations.

This makes me wonder whether Australia’s private hospital system will become the unwitting casualty of the pandemic.

Importance of Australia’s private hospitals

Australian private hospitals number 639, meaning more than one-third of Australia’s hospitals are private. The private hospital sector employs more than 69 000 full-time equivalent (FTE) staff, including 38 000 FTE nurses, almost 10 000 FTE allied health and clinical support staff and nearly 20 000 FTE ancillary staff (private correspondence). In addition to these are thousands of doctors who hold visiting and staff contracts to private hospitals.

In a typical year, that is, pre-COVID-19, the private hospital sector accounted for 4.4 million hospitalisations (p 21).

Care that has been lost

In their 2022–23 Budget Submission, the Australian Private Hospitals Association (APHA) report that as at 30 June 2021, 290 000 fewer privately insured patients than expected were treated in private hospitals, since the start of the COVID-19 pandemic in March 2020.

Many of these missing episodes of care will never be recovered, and the consequential health outcomes have yet to be calculated (here and here).

Another effect of these missing episodes has been a spike in the public hospital waiting lists. There has been deliberate stopping of lists and delaying of lists. Ipso facto the waiting lists lengthen.

Emergency policies

In some states, governments restricted activity in private hospitals and sometimes have even sequestrated wards and operating theatres for public use (and here).

Pandemic-related regulations, such as mask wearing, social distancing, and polymerase chain reaction (PCR) testing, have been very strictly applied to hospital settings, with good reason.

The combined effect of the above-mentioned fall in activity and pandemic compliance issues has been a sudden, significant fall in private hospital revenue. According to the APHA:

“In 2019–20 total revenues (all sources) in the private hospital sector declined in real terms by 3.4% when compared with 2018–19. Although the contribution of the Australian Government increased in real terms by 14.5%, state/territory government contributions declined by 1.6% and non-government contributions declined by 9.2%. Although health expenditure data for 2020–21 is not yet available, data reported by [the Australian Prudential Regulation Authority] shows a second year of low revenues from the sector’s primary revenue source, private health insurance.”

At the same time, there was a significant increase in running costs. Again, according to APHA:

“Operational costs increased as a result of the pandemic as the price of items essential to the COVID-19 response suddenly rose and international supply chains came under pressure. These cost increases also impacted the cost of non-COVID activity as many of the same supplies are also essential for standard hospital services. Although most acute shortages have moderated with time, the vulnerabilities of supply chains have been exposed and many ongoing costs have increased because of sustained upward … pressure on price and changed operational requirements.”

Given that the private hospital sector runs on a profit margin of 4.5% (p8), a significant change of the status quo brought about by the pandemic will almost certainly render many hospitals unviable, with inevitable closure, in my opinion. The problems are ongoing – personal protective equipment supplies, COVID-19-leave provisions, social distancing, additional cleaning and sterilising – all take their toll on financial viability.

Private funds

And during this period of upheaval, private health insurance companies have kept receiving payments of premiums while patients have made far fewer claims.

The APHA reported to me in a personal correspondence that Australian health funds have made a $2 billion windfall during the pandemic.

The current inflationary cycle in our economy, with the rising cost of living without a matching growth in wages, may mean many Australians will jettison their private health funds in order to stay financially afloat, as many have already done, in my opinion.

Thus, a causal nexus is before us. Private health funds become more unaffordable while private hospitals close or offer fewer services to remain viable.

The result is a possible collapse of the private hospital sector. While it has clearly been a threat, the COVID-19 pandemic can also be seen as a catalyst for discussion and action as to how to preserve the duality of the Australian hospital system.

Dr Aniello Iannuzzi is Chair of the Australian Doctors’ Federation. He is a rural GP.



The statements or opinions expressed in this article reflect the views of the authors and do not represent the official policy of the AMA, the MJA or InSight+ unless so stated.


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7 thoughts on “Australia’s private hospitals: victims of the pandemic?

  1. Greg the Physician says:

    In Queensland this year, private hospitals have been required to care for their own COVID positive inpatients (rather than transferring them to designated COVID public hospitals, as was the case in 2020-21) AND accept public inpatient transfers at their expense from public hospitals. The private hospitals have also been required to provide their own medical and nursing staff to look after the transferred public patients, and to prioritize the care of these public inpatients during periods of staff shortage.
    Then there is the matter of the recommendations made by the consultant physician panel of the MBS Review Taskforce – which had virtually no non-procedural physicians as members. They have recommended (i) abolishing the distinction between consultants and specialists, presumably by lowering the Medicare rebates of the former to the levels of the latter; (ii) replacing the current item numbers for consultations by consultant physicians by new, time-tiered item numbers; and (iii) only counting time spent face-to-face with the patient for billi8ng purposes for the time-tiered item numbers, including for inpatient consultations.
    These changes would make inpatient consultations financially unviable – consultant physicians would have to either withdraw from private inpatient work or charge substantial gap fees. While many private hospitals are focused on surgical throughput, physicians are frequently essential for achieving good surgical outcomes.
    Private hospitals are therefore threatened on several fronts.

  2. Anonymous says:

    I’m crying with gratitude, the article is balanced. The comments.. brilliant. Thank you. Hope restored.

  3. James Leyden says:

    The private system is in flux, yet despite this, transparency is needed. For a period of time now it seems the private hospitals will only focus on offering the most superficial services for the most profitable surgical procedures, with the public hospital to cover the catastrophic events. People with private cover have a right to know which services are simply not offered. One example, of many, is stroke treatment. The insurers should be obliged to tell their members which services they won’t offer. End the smoke and mirror game.

  4. Ian C says:

    All the concerns regarding private hospital financial viability are overridden by the greatest challenge in front of the private sector – NURSES, or lack thereof. Nurses are leaving the private and public sectors in numbers I have never seen before but there is a reluctance for nurses to work in the private sector given the lower pay rates compared to the public sector, and lack of salary sacrifice opportunities. The next 12 months will be interesting indeed.

  5. Anonymous says:

    The key factor is the ability to run “proper” self-sufficient intensive care units in private hospitals. At present none of the private hospitals can declare that they have such a capability. They are all slaves to a nearby public hospital where through shady arrangements their public Intensivists provide a adhoc cover. This is despicable. If you can’t treat your sickest or surgical misadventure, why do you call yourself a hospital? They will have to close, no doubt.

  6. Anonymous says:

    There is a premise in this article that a dual hospital system should continue. This is debatable. An argument could be mounted that the country would be better off with a single system with all hospitals the funded in the same way.

  7. Anonymous says:

    How does this make sense?in Westmead Pvt NSW Ramsay (for one) has negotiated public arthroplasty waitlist reduction theatres since covid began, pretty much. The same outsourcing of public trauma/joint lists has been happening for months in Perth WA (SJOG). All with no troublesome acutely unwell, long staying Covid admissions on which no high earning procedures can be performed. The private hospitals have benefited during this period, from what I have seen.

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