The Times Australia
The Times Australia
.

Is the private hospital system collapsing? Here’s what the sector’s financial instability means for you

  • Written by Yuting Zhang, Professor of Health Economics, The University of Melbourne

Toowong Private Hospital in Brisbane is the latest hospital to succumb to financial pressures and will close[1] its doors next week. The industry association attributes the psychiatric hospital’s closure[2] to insufficient payments from and delayed funding negotiations with private insurers.

Meanwhile, the future of Australia’s second-largest provide hospital provider, Healthscope, remains uncertain, after its parent company went into receivership[3] last week.

Healthscope’s 37 private hospitals are being kept afloat[4] with a A$100 million loan and will continue to operate for now. But the hospitals will be sold to repay lenders, so their future depends on who buys and what the new owners decide to do.

Across the board, private hospitals are struggling with soaring costs for staff and supplies, while private health insurance isn’t paying enough to cover these expenses.

These underlying issues will not disappear magically. More private hospitals will face similar financial troubles and some will be forced to close. But we’re unlikely to see the collapse of the entire private sector.

A mix of public and private

Australia operates a unique public-private health-care mix, with around 700 public[5] and 647 private[6] hospitals.

Public hospitals are largely government-owned and provide free care, funded by taxes. Private hospitals are owned and managed by private organisations, some of which are non-profit.

The private health-care sector plays a large role in Australia, providing 41% of all hospitalisations, however 74% are same-day[7] stays.

Private hospitals are often smaller than public hospitals, without emergency departments, focusing on simpler, same-day care, and are more likely in cities. Some 83% of private hospitals[8] are in metropolitan, 9% in regional centres and 8% in rural towns.

In contrast, 27% of public hospitals[9] are in the major cities, 57% in regional areas and 16% in remote areas.

The role of private health insurance

Access to private hospitals requires private health insurance.

In 2022-23, the total A$21.5 billion was spent on private hospitals. Private health insurance covered[10] about 45% ($9.7 billion), which comes from members’ premiums. Patients contributed 11% ($2.4 billion) in out-of-pocket costs.

The government contributed a substantial 37% ($8 billion) mainly through Medicare. This is separate from the additional $8 billion[11] the government provides annually as rebates to individuals for buying private health insurance.

Surgeon does paperwork
The majority of private hospitals are in metro areas. Ground Picture/Shutterstock[12]

A key issue is this rebate money doesn’t directly flow to private hospitals, leaving them vulnerable in negotiations with insurers, as we saw with Toowong Private Hospital.

Evidence[13] suggests these rebates might not be the most effective government investment. Experts, including me, have argued for direct funding[14] into hospitals instead.

So, as more private hospitals face troubles, what does this mean?

Less choice and access for patients

Patients will experience less choice and potentially harder access for specific types of care.

In larger metropolitan areas with numerous private and public hospitals (including private wings in public hospitals), patients might switch to other private facilities or seek care as private patients in public hospitals.

However, in smaller or rural areas with limited or no other private hospitals, choice diminishes significantly. In this case, you will need to reconsider whether you need to buy private health insurance.

Currently, people earning over $97,000 (or families over $194,000[15] face an additional Medicare Levy Surcharge if they don’t hold private health insurance.

This policy is not fair to those who have no access to private hospitals and should be changed.

Read more: Who really benefits from private health insurance rebates? Not people who need cover the most[16]

While there might be slightly longer waits in the short-term for elective surgeries due to shifting patient loads, our analysis[17] suggests this won’t be a major long-term problem. The primary constraint for wait times is often personnel, not facilities.

If private hospitals close, doctors and nurses could potentially shift to public hospitals, helping to alleviate staffing shortages and reduce overall wait times[18].

Impacts for the public system

The impact on public emergency departments will be minimal, as most private hospitals lack them.

Many private hospital admissions are same-day and for simpler procedures. So public hospitals and remaining private hospitals (that are not operating at full bed capacity) should be able to absorb this extra demand in the long run, if they can attract more staff previously employed (or even facilities) in the closing private hospitals.

These hospitals will also receive additional revenue for these additional procedures.

Ilia Matushkin/Shutterstock
Public hospitals should be able to absorb the extra demand. Shutterstock[19]

Consequently, the effect on public hospital wait times for most conditions should not be substantial.

However, some complex, long-stay, or specific mental health cases (such as those from Toowong) may be hard to absorb without additional supply of specialists and funding.

What about health budgets?

In areas where patients are absorbed into existing public hospital capacity or other private facilities, the direct impact on the health budget would be minimal.

With more patients, the remaining private hospitals may gain more power to negotiate better funding contracts with insurance companies and achieve better supplier costs through economies of scale.

In areas where private hospitals (or public hospitals offering private care) cease to be viable, and people drop their private health insurance cover[20] to use public hospitals, the government would pay more directly into public hospitals. However, this increased cost would be partially offset by reduced expenditure on private health insurance rebates.

Patients would also save money on premiums and out-of-pocket costs in private hospitals, though they would lose the choice of private care.

Ultimately, where a private model isn’t financially sustainable, the government or taxpayers often end up bearing the cost anyway.

Investing more directly in public hospitals in these areas, rather than relying on inefficient rebates[21], could be a more effective solution.

Read more: Does private health insurance cut public hospital waiting lists? We found it barely makes a dent[22]

References

  1. ^ will close (www.hospitalhealth.com.au)
  2. ^ attributes the psychiatric hospital’s closure (apha.org.au)
  3. ^ went into receivership (www.abc.net.au)
  4. ^ kept afloat (www.abc.net.au)
  5. ^ 700 public (www.aihw.gov.au)
  6. ^ 647 private (www.health.gov.au)
  7. ^ 74% are same-day (www.aihw.gov.au)
  8. ^ 83% of private hospitals (www.health.gov.au)
  9. ^ 27% of public hospitals (www.aihw.gov.au)
  10. ^ covered (www.aihw.gov.au)
  11. ^ $8 billion (www.health.gov.au)
  12. ^ Ground Picture/Shutterstock (www.shutterstock.com)
  13. ^ Evidence (papers.ssrn.com)
  14. ^ direct funding (theconversation.com)
  15. ^ $97,000 (or families over $194,000 (www.ato.gov.au)
  16. ^ Who really benefits from private health insurance rebates? Not people who need cover the most (theconversation.com)
  17. ^ our analysis (theconversation.com)
  18. ^ reduce overall wait times (onlinelibrary.wiley.com)
  19. ^ Shutterstock (www.shutterstock.com)
  20. ^ drop their private health insurance cover (www.sciencedirect.com)
  21. ^ inefficient rebates (scholar.google.com)
  22. ^ Does private health insurance cut public hospital waiting lists? We found it barely makes a dent (theconversation.com)

Read more https://theconversation.com/is-the-private-hospital-system-collapsing-heres-what-the-sectors-financial-instability-means-for-you-257886

Is it too late to get a flu shot?

It’s almost spring. And while respiratory infections[1] seem to have passed their peak[2] many people are st...

Times Magazine

Choosing the Right Legal Aid Lawyer in Sutherland Shire: Key Considerations

Legal aid services play an essential role in ensuring access to justice for all. For people in the Sutherland Shire who may not have the financial means to pay for private legal assistance, legal aid ensures that everyone has access to representa...

Watercolor vs. Oil vs. Digital: Which Medium Fits Your Pet's Personality?

When it comes to immortalizing your pet’s unique personality in art, choosing the right medium is essential. Each artistic medium, whether watercolor, oil, or digital, has distinct qualities that can bring out the spirit of your furry friend in dif...

DIY Is In: How Aussie Parents Are Redefining Birthday Parties

When planning his daughter’s birthday, Rich opted for a DIY approach, inspired by her love for drawing maps and giving clues. Their weekend tradition of hiding treats at home sparked the idea, and with a pirate ship playground already chosen as t...

When Touchscreens Turn Temperamental: What to Do Before You Panic

When your touchscreen starts acting up, ignoring taps, registering phantom touches, or freezing entirely, it can feel like your entire setup is falling apart. Before you rush to replace the device, it’s worth taking a deep breath and exploring what c...

Why Social Media Marketing Matters for Businesses in Australia

Today social media is a big part of daily life. All over Australia people use Facebook, Instagram, TikTok , LinkedIn and Twitter to stay connected, share updates and find new ideas. For businesses this means a great chance to reach new customers and...

Building an AI-First Culture in Your Company

AI isn't just something to think about anymore - it's becoming part of how we live and work, whether we like it or not. At the office, it definitely helps us move faster. But here's the thing: just using tools like ChatGPT or plugging AI into your wo...

The Times Features

Benefits of Tree Pruning for a Thriving Australian Garden

Tree pruning is an essential aspect of garden maintenance that often doesn't get the attention it deserves. It's a practice that involves the selective removal of certain parts...

What is psychosocial therapy? And why is the government thinking about adding it to Medicare for kids?

The government is considering new, bulk-billed health checks for three-year-olds, to pick up developmental concerns and refer kids that might need additional support. The de...

Detect Hidden Water Leaks Fast: Don’t Ignore Hot Water System Leaks

Detecting water leaks early is crucial for preventing extensive damage to your home. Among the various parts of a home’s plumbing system, hot water systems are particularly suscept...

Why do hamstring injuries happen so often and how can they be prevented?

In a recent clash against the Melbourne Storm, the Brisbane Broncos endured a nightmare rarely seen in professional sport — three players tore their hamstrings[1] in a single g...

What Is the Australian Government First Home Buyers Scheme About?

For many Australians, buying a first home can feel like a daunting task—especially with rising property prices, tight lending rules, and the challenge of saving for a deposit. ...

How artificial intelligence is reshaping the Australian business loan journey

The 2025 backdrop: money is moving differently If you run a small or medium-sized business in Australia, 2025 feels noticeably different. After two years of stubbornly high bo...