Access to surgery, mental health treatment and specialist care could be at risk without urgent federal budget measures to support private hospitals, according to the Australian Private Hospitals Association.
The industry body says financial pressures are building across the sector, which performs about 70 per cent of planned surgery and handles more than 5.1 million admissions each year, and is calling on the Albanese Government to act to stabilise services and reduce strain on public hospitals.
“The financial settings underpinning private hospital viability are broken and being abused. Despite higher premiums, ostensibly to meet rising healthcare costs, health insurer payments have failed to keep pace with the cost of care for years,” APHA chief executive Brett Heffernan said.
“If governments want Australians to get timely surgery and treatment, private health system funding must be fixed.”
Mr Heffernan said patients were paying higher premiums while receiving less comprehensive cover, leaving them exposed to higher out of pocket costs.
“Australians know quality healthcare isn’t cheap. That’s why they grudgingly cop higher annual premiums in the expectation their insurer will meet those costs. But that pact has also been broken, with insurers short-changing hospitals while also pushing sub-par insurance policies that fail to cover patients adequately, leaving them with higher out-of-pocket costs.”
He said insurers were prioritising profits over patient care, adding, “Insurers are reneging on their duty of care to instead bank their biggest profits and highest management fees ever, and it is plunging Australia’s balanced public-private healthcare system into chaos.”
The association’s federal budget submission calls for a return to a pre-pandemic benefits ratio, where 90 per cent of premiums are paid out to hospitals. It says the current level, around 85 per cent since 2022, has created a funding gap of more than $1 billion annually between the cost of care and insurer payments.
The group is also seeking a mandatory code of conduct for contracts between hospitals and insurers, with oversight by the competition regulator, as well as a long-term funding program to allow private hospitals to take on more public patients.
Pressure on the public system is a key concern raised in the submission. Private patients currently account for about 11 per cent of admissions in public hospitals, with higher rates reported in some states.
Private hospitals are urging a reset to funding settings that were in place before the pandemic, arguing that a higher share of insurance premiums should flow directly to patient care. The sector wants the benefits ratio lifted back to 90 per cent, up from about 85 per cent in recent years. It says the shortfall has widened into a gap of more than $1 billion each year between what it costs to deliver care and what insurers pay.
The association argues that clearer funding arrangements would help shift demand back to private facilities and reduce waiting times.
It also calls for private hospitals to be recognised as critical infrastructure to improve access to government support, particularly during emergencies, and for inclusion in national climate funding programs. Hospitals account for about 2.4 per cent of Australia’s greenhouse gas emissions, yet private facilities are excluded from the Net Zero Transition Fund.
Concerns have also been raised about public hospitals competing for privately insured patients. The submission points to cases where state-run hospitals have expanded private services, including new maternity offerings, which it says risks diverting resources from public patients.
Workforce shortages are another pressure point, particularly in mental health. The association warns that specialist training programs are under review and may face cuts, while restrictions on overseas-trained doctors are limiting capacity.
“For more than three years private hospitals have urged the government to ease the outdated moratorium that prevents overseas-trained doctors, especially psychiatrists, already living in Australia from working in acute private hospitals,” Mr Heffernan said.
He said the restrictions were contributing to gaps in care, particularly in mental health services, where demand is rising.
“Mental health is a prime example of the systemic problem. While governments laud out-patient services, these are no substitute for patients suffering with acute mental health needs who are increasingly put in the too hard basket.”
He added that many private psychiatric hospitals had unused capacity but were unable to admit patients due to a shortage of psychiatrists.
“Severe-to-mid level needs mental health disorders are going untreated despite acute private psychiatric hospitals having 40-60% vacancy rates and turning away referrals due to the lack of psychiatrists. Meanwhile, registered psychiatrists are prevented from working in private hospitals due to antiquated federal bureaucratic rules.”
Mr Heffernan said the effects were being felt across the system, with patients turning to general practitioners or emergency departments when care was not available.
“Increasingly, patients with mental disorders are being medicated instead of getting the professional attention they need. Already overburdened GPs are doing the best they can, but when affected by deteriorating mental illness, these patients have nowhere to go but an already overburdened public hospital Emergency Department where the wait times are long and the care options are extremely limited.”
He said closures of private facilities and services were already affecting access to care and placing further pressure on public hospitals.
“A strong private hospital sector is essential to the functioning of the entire health system,” he said.
“When private hospitals are under pressure, the impact is felt across the whole healthcare system. Private hospital closures, with more looming, along with 80 services permanently shut down, impacts public hospital waiting lists and Emergency Department dysfunction.”
Mr Heffernan said the sector needed targeted support to maintain services and meet growing demand.
“Supporting the sustainability of private hospitals means timely treatment for more patients and better access to healthcare for all Australians. It’s time the Federal Government stepped up and acted to fix the failing health system.”
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