Immediate action needed for private hospital sector

Day Hospitals Australia has called for immediate action to reduce private health insurance costs for consumers, prevent the closure of day hospitals and improve the financial sustainability of all private hospitals. The crisis in the private hospital sector will have major impacts on the public hospital system which will add pressure to the already struggling public hospitals.

There was no mention of the hospital crisis from the leaders during the election campaign, which requires urgent action.

The private health insurance funding model is broken. Funding has not addressed changes in innovation and treatment modalities. Since the late eighties there has been a gradual movement towards more procedures performed on a same day basis. This has resulted in a notable change on the overnight hospitals’ case mix where now 50–60% of all procedure services are delivered as same day. At the same time the day hospital sector emerged in the late eighties/early nineties, demonstrating a price advantage in the beginning. The differences in funding indexation between overnight and day hospitals is significant.

Currently twice the number of same day procedures are provided in the overnight hospitals compared with day hospitals. This tendency towards the increased use of higher cost venues of care for same day procedures threatens not only the viability of day hospitals, but the sustainability of the whole private hospital sector.

Complex procedures are not sufficiently funded in the overnight hospitals and in the past, there has been a reliance on cross-subsidisation from the less complex procedures. With the dramatic shift in overnight hospitals’ case mix to ever increasing amounts of same day cases, the cross subsidisation is no longer working.

Day Hospitals Australia after detailed analysis of the current funding crisis, using publicly available data, is suggesting that care should be delivered to the right patient, for the right procedure, in the most cost-efficient venue of care.

To reduce costs by millions of dollars Day Hospitals Australia proposes a new Type “D” procedure category, where certain procedures must be performed in a day hospital setting. This regulatory change would need to be implemented gradually with resultant savings transferred to a more sustainable funding model for overnight hospitals. A pilot program addressing ophthalmology and diagnostic gastroenterology could demonstrate immediate efficiency improvements and cost savings of $300 million to private health insurers and the broader health system. This then creates an environment to deliver savings to consumers.

In conclusion, the current funding model is unsustainable and there is a need for immediate change and reform, with collaboration between all stakeholders to ensure a sustainable hospital system that delivers quality, safe, efficient care in the most appropriate setting.

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