The clock is ticking for thousands of patients after Australia’s largest not-for-profit healthcare provider, St Vincent’s, announced it would end its current agreement with health insurer NIB if a fair funding deal could not be reached before 3 October.
The chief executive of NIB, Mark Fitzgibbon, says he hopes negotiations resume, but St Vincent’s maintains the insurer needs to come to the table during the notice period and put forward a proposal that reflects the rising costs of healthcare.
Against that fraught backdrop, what’s at stake for patients covered by NIB if talks fall over? And how do these kind of private healthcare arrangements work?
Why do health insurers enter into contracts with private hospitals, and what does the contract mean for patients?
Health insurers enter into agreements with private hospitals to ensure the hospital charges an agreed amount the insurer is prepared to pay.
These agreements ensure patients with private health insurance don’t have to pay out-of-pocket costs, or that patients know what those out-of-pocket costs are, because exceptions like a hospital excess or surgeon’s fees are outlined in their policy.
Ben Harris, the director of policy and research at Private Healthcare Australia, says these agreements are in the interests of both insurers and hospitals; the health fund wants to make sure their members can get treated in good hospitals, and hospitals want to be well paid to provide that treatment.
Have hospitals given notice to end agreements before, and what’s happened?
St Vincent’s says it has never – in its 167-year history – given notice to a private health fund that it intended to end an agreement. However, other private providers have also given their insurers notice – but they reached a resolution before the notice period ended.
In August 2022, Ramsay Health Care gave private health insurer Bupa a 60-day window before it ended their deal, but an agreement was reached.
The same year negotiations failed between insurer HCF and Healthscope, the company behind the Prince of Wales, Norwest, Northern Beaches and Campbelltown private hospitals. But they reached a deal just before HCF customers would face higher prices in February last year.
Harris said: “Invariably large hospital groups come to an agreement because it’s in their best interest to do so. There have been disputes before but they get resolved.”
What happens to patients in the event their health insurer does not renew a contract with a private hospital?
If an agreement terminates, transitional arrangements typically continue to cover patients under the original terms if they booked to attend the hospital or were already undergoing a course of treatment (such as chemotherapy, dialysis, psychiatric or rehabilitation) before the agreement terminated, according to the commonwealth ombudsman.
In the case of St Vincent’s and NIB, NIB members will remain covered as usual for any treatment at St Vincent’s hospitals while the parties work through negotiations.
The notice period St Vincent’s has given NIB ends on 3 October. If a new funding agreement is not reached but a NIB member booked a procedure before 3 October, even if that procedure takes place after that date, St Vincent’s will temporarily cover the gap.
A pre-booked pregnancy and birth will be covered until July 2025 while rehabilitation, mental health, oncology and renal services started on or before 3 October this year will be covered until April 2025.
What if a patient is admitted to hospital after the agreement has terminated and is not covered by the transitional arrangements?
If a patient goes to a hospital that does not have an agreement with their insurer, they are still covered. But they may have to pay more out-of-pocket expenses, according to the commonwealth ombudsman.
“Your insurer will continue to pay benefits… However, the benefit may not cover the full cost of your admission,” they say. “You may incur significant out-of-pocket expenses for your hospital accommodation, your time in theatre or labour ward fees.”
The hospital should provide patients with an estimate of fees outlining any out-of-pocket expenses they will need to pay before admission, the ombudsman says.
A spokesperson for St Vincent’s says that after 3 October, if a NIB member receives care in a St Vincent’s private hospital without having booked or started their treatment prior to 3 October, NIB is required to pay St Vincent’s the out-of-contract rate. That equates to about 85% of the average rate per procedure. St Vincent’s is also able to charge the patient a co-payment.
Dr Elizabeth Deveny, the chief executive of the Consumers Health Forum, says hefty out-of-pocket expenses could force customers to choose between “paying thousands or restarting their care journey elsewhere. Not everyone can afford unexpected healthcare costs, and the funding processes and consent systems should prevent this.”
Does the breakdown between St Vincent’s and NIB affect others?
St Vincent’s says there is no impact at all for patients who are members of other health funds, nor does it affect its two St Vincent’s public health networks in Sydney (Darlinghurst) and Melbourne (Fitzroy).
The issue solely affects NIB members along with those health insurers NIB underwrites. The full list of affected health funds and insurers are:
NIB
Apia Health Insurance
AAMI Health Insurance
Suncorp Health Insurance
Qantas Health Insurance
IMAN Australian Health Plans
GU Health
ING Health Insurance
Priceline Health Insurance
Real Insurance
Australian Seniors
UnitedHealthcare Global