Healthcare is constantly evolving, and government funding and regulation often struggle to keep pace. In Australia, the private health system is often at the forefront of this evolution, with the public system playing catch-up. When it comes to out-of-hospital care however, it is the public hospitals that are leading the way in delivering innovative hospital-type care out of the hospital, and the private system is lagging. This is likely because the public system has simpler, shared governance arrangements and flexibility of funding, whereas the funding arrangement of the private system are more complex.
Private health insurers have historically only provided cover for in-hospital treatments, with the exception of optional ‘extras’ packages. In recent years however — particularly in response to the COVID-19 pandemic — private health insurers have started expanding into delivering out-of-hospital care, however this has largely been driven by insurers on their own terms, in part due to a lack of legislative and public policy design. Most insurers will only provide select out-of-hospital schemes for their own policy holders (such as joint replacement rehabilitation at home), as this enables them to have more control over the services provided and the associated costs, and they can benefit from the savings of not funding inpatient treatment which is often more expensive. While expanding services in this way may improve the value proposition for private health insurance customers, these developments are strongly related to growing tendencies for for-profit private health insurers to vertically control services, in an attempt to gain greater control of treatment costs, which may be inadvertently leading Australia down a United States-style managed care pathway. This approach risks the principles of patient choice and clinical autonomy.
This expansion in the private out-of-hospital space has created a complex environment, where patients may not know what they are covered for and doctors must navigate complex funding and governance arrangements to get their patients the best care, if they want to access out-of-hospital services. This is a result of these new models not being consistently included in all insurance products, which means many privately insured patients whose insurer does not offer an out-of-hospital scheme are unable to receive out-of-hospital care unless they are prepared to pay large out-of-pocket costs. Consultation with major private healthcare providers revealed that around 40 per cent of patients are unable to access out-of-hospital care, either because their insurers do not have their own out-of-hospital program or do not have agreements with out-of-hospital providers.
It is clear that complexity, lack of transparency, and inconsistency in private health insurance is increasing and resulting in an environment that is similar to what existed before the ‘gold, silver, bronze, basic’ reforms which standardised in-hospital treatment coverage. One of the key reasons for this is the absence of standardised, national, and universally applicable regulations and safeguards for providing out-of-hospital care in the private system. This has resulted in divergent views on how out-of-hospital care should be delivered and significant variability in quality and safety frameworks, clinical pathways, deterioration protocols, and pricing mechanisms. In addition, it is unclear in the private system who is financially or clinically responsible for a patient once they leave the hospital environment.
Supporting the expansion of out-of-hospital care will benefit for patients and the health system. Studies show that eligible patients may experience equivalent or better clinical outcomes, reduced risk of infection, home comforts, reduced travel, enablement of work from home, and improved ability to manage caring responsibilities. For the system, it can improve hospital efficiency by freeing up staff and beds and contribute to cost savings across the whole health system. AMA analysis estimates that expanding access to out-of-hospital rehabilitation to all clinically eligible private patients having a total knee replacement would save around 47,000 to 94,000 bed days and $31.3 million to $62.7 million per year (in 2024). This provides an indication of the potential savings if out-of-hospital rehabilitation was available to clinically eligible patients across all possible procedure and treatment categories (such as other orthopaedic procedures, stroke rehabilitation, mental health, and palliative care). These potential savings would enable insurers to lower the rate of growth of private health insurance premiums, which could result in savings for government from reduced premium rebates, and increased uptake of private health insurance due to improved value proposition (which in turn, would lower the rate of growth of premiums further as part of a positive feedback loop). The AMA would like to see true contestability of service in the private out-of-hospital system, that is, where patients can choose the best provider from a range of options under the guidance of their doctor, funded by their insurer. It is clear that a lack of leadership and coordination of reform in the private health system is holding back this reform. The AMA is calling for the establishment of a Private Health System Authority to provide leadership on reforming the system, and drive the ‘deliberate design’ of out-of-hospital models of care with patient choice at the centre.