Peak body says Medibank has "a serious conflict of interest" to answer

The Australian Private Hospitals Association (APHA) has said that Medibank Private “has a serious conflict of interest question to answer” over funding and owning hospitals. The peak national body representing private hospitals said: “with health insurers across Australia reaping record profits and massively inflated management fees, totalling $5.5 billion a year, from their customers, Medibank has bankrolled its hefty share into owning hospitals in Sydney, Melbourne, Brisbane and Adelaide”.

“The conflict of interest in funding and owning hospitals is obvious, but now we see evidence that Medibank’s contracting with local hospitals has nosedived around its Sydney hospital, which distorts the market in Medibank’s favour,” APHA CEO Brett Heffernan said. “According to Australian Government private health data, Medibank bought 49% of East Sydney Private Hospital in August 2020. At that time, Medibank held contracts with 84.13% of private hospitals in adjacent local areas (106 of 126 hospitals).”

Heffernan said that the July 2025 data shows that, today, Medibank contracts with just 54.89% of hospitals in those areas (73 of 133 hospitals), with the effect being “less choice and access for patients, while patients are funnelled towards Medibank’s East Sydney Private Hospital”. “Naturally, there is a conflict of interest under vertical integration when the funder of health care, with total control over contracting with hospitals or not, owns competing hospitals. But this data seems to confirm that Medibank’s market dominance and dramatic decline in contracting with rival local hospitals has a perverse and material impact on the market,” Heffernan said.

“With Medibank recently opening Adeney Private Hospital in Melbourne, Nundah Private Hospital in Brisbane, as well as buying into Western Hospital in Adelaide, each of these markets warrant very close scrutiny,” Heffernan added. “At Adeney Private Hospital the promotion is ‘no gap surgery’. At face value it has appeal, but scratch the surface and it means that surgeons are paid their full asking rates by the insurer. In other words, surgeons are, effectively, working for the insurance company,” Heffernan said. “The danger to clinical autonomy is real and patients deserve to be aware of the threat this funding approach poses in undermining the care they receive.”

Heffernan points to a 2023 Harvard University-led paper into the impact of US managed care on 2.6 million patient visits across 5488 physicians. This study found that “physicians significantly alter their care process (eg, in using anaesthesia with deep sedation) after they vertically integrate, and there is a substantial increase in patients’ post-procedure complications”. The paper also finds that “the financial incentive structure of the integrated practices is the main reason for the changes in physician behaviour because it discourages the integrated practices from allocating expensive resources to relatively unprofitable procedures”, adding: “we find that vertical integration negatively affects the quality of care”.

Also pointed to by Heffernan is a 2023 Australian Medical Association report that warned Australia is heading towards a US-style managed care health system, leading to outcomes that are not in patients’ best interests. “A serious line has been crossed and it’s a direct threat to patient care,” Heffernan said. “By owning hospitals, insurance companies are hands-on in running the operation. It’s time the Albanese government acknowledged and investigated this disturbing trend.”

Image credit: iStock.com/Roman Bykhalets