Hospitals warn patients will suffer without budget reform

29/05/26

PATIENT access to surgery, acute mental health treatment and specialist care will be under increasing threat unless the Albanese Government uses the upcoming Federal Budget to address mounting financial pressures facing private hospitals.

The Australian Private Hospitals Association (APHA) is urging decisive action to stabilise the sector and safeguard care for millions of patients. Performing 70% of all planned surgery and recording more than 5.1 million admissions a year, private hospitals are critical in providing patient care while keeping pressure off the beleaguered public hospital system.

"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 CEO Brett Heffernan said.

"If governments want Australians to get timely surgery and treatment, private health system funding must be fixed.

"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.

"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."

Key initiatives sought in the APHA's Federal Budget submission include:

• Legislating to restore the pre-Covid benefits ratio of 90% of every premium dollar. The benefits ratio has languished at around 85%, or less, since 2022, leaving a gap of more than $1 billion a year between the cost of delivering care and what insurers pay hospitals.
• A Mandatory Code of Conduct for contracting between private hospitals and insurers, with an arbitration model and price transparency overseen by the ACCC, is essential in-tandem with the 90% guarantee to ensure consistency and fair terms across the sector. It is a system rife with insurer abuses.
• With public hospitals in crisis with record waiting lists, dedicated funding to alleviate this patient load through private hospitals should be a priority. It's time to do away with the ad hoc use of private hospital services and replace it with a dedicated long-term program to ensure timely care for patients.
• There are a disproportionate number of private patients taking public hospital beds. Private patients in state-run public hospitals account for 11% or 805,000 admissions. NSW is the standout with 19% of patients being privately insured. When states are hooked on private patient dollars, the federal government needs to put the squeeze on the funding drip.
• Extending the definition of critical infrastructure to all private hospitals is long overdue. This would enhance capacity for surge response, including during disasters, while ensuring all hospitals have access to government assistance to meet emerging challenges.
• Australian hospitals account for 2.4% of Australia's total greenhouse gas emissions. Unlike public hospitals, private hospitals do not have access to funding for climate sustainability and are excluded from the government's Net Zero Transition Fund. This fund should be expanded to capture climate mitigation opportunities in private hospitals.
• There are concerns that state-run public hospitals are actively using public funds to compete with private hospitals, distorting markets and diverting resources from public patient needs. In 2024, NSW's Royal Prince Albert Hospital launched a maternity wing exclusively for private patients, while offering to waive up to $500 in insurance gap payments. There is no justification for taxpayers underwriting services to compete with private hospitals, especially when private hospitals are capable of meeting demand.
• Specialist training programs, which provide a suite of mentored, practical training for surgeons, psychiatrists and other practitioners, are under threat. A review by the Federal Government risks slashing this vital, comprehensive surgical and clinical training for the future medical workforce. It must be saved. Meanwhile, the Psychiatry Workforce Program is failing to keep pace with mental health needs.
• 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. It would cost government nothing, but free-up psychiatrists to practice where severe-needs mental health patients are falling through the cracks, in turn, easing the burden on GPs and reducing public hospital Emergency Department traffic.

"A strong private hospital sector is essential to the functioning of the entire health system," Mr Heffernan said. "Governments used to celebrate the complementary nature of public-private healthcare, which had our system at the lead of the global pack.

"But government has lost sight of that fundamental principle and Australia's once-renowned healthcare system is lurching from crisis to crisis across the full gamut of health services that are intrinsically interlinked.

"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.

"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.

"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.

"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.

"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."