Millions of dollars could be saved and tens of thousands of hospital beds freed up if more out-of-hospital care was provided in Australia’s private health system, according to the Australian Medical Association (AMA).
A report released last week, Out-of-hospital care models in the private system, cites one example. According to the report, AMA analysis estimates that extending access to out-of-hospital rehabilitation to all clinically eligible private patients undergoing total knee replacement would save approximately 47,000 to 94,000 bed days and A$31.3 million ($20.1 million) to A$62.7 million per year (in 2024).
This represents the potential savings if out-of-hospital rehabilitation were 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 reduce the rate of growth of private health insurance premiums, which could lead to savings for the government through reduced premium rebates and increased uptake of private health insurance due to the improved value proposition (which in turn would further reduce the rate of growth of premiums as part of a positive feedback loop).
Historically, private health insurance has only provided cover for in-patient treatment, with the exception of optional ‘extras’ packages. In recent years, however, particularly in response to the COVID-19 pandemic, private health insurers have begun to expand into the provision of out-of-hospital care, but this has largely been driven by insurers on their own terms, partly due to a lack of legislative and public policy design.
Most insurers will only provide selected out-of-hospital services to their own policyholders (e.g. home rehabilitation for joint replacement), as this gives them more control over the services provided and the associated costs, and they can benefit from the savings of not funding inpatient care, 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 linked to the growing tendency of for-profit private health insurers to vertically control services in an attempt to gain greater control over treatment costs, which may inadvertently lead Australia down a US-style managed care pathway. This approach threatens the principles of patient choice and clinical autonomy.
Complex
This expansion of private out-of-hospital care has created a complex environment in which patients may not know what they are covered for and doctors must navigate complex funding and governance arrangements to get the best care for their patients when they want to access out-of-hospital services. This is because these new models are not consistently included in all insurance products, which means that many privately insured patients whose insurer does not offer an out-of-hospital scheme are unable to access out-of-hospital care unless they are prepared to pay high out-of-pocket costs.
Consultation with major private healthcare providers revealed that around 40% of patients are unable to access out-of-hospital care either because their insurer does not have its own out-of-hospital programme or because it does not have agreements with out-of-hospital providers.
Complexity, lack of transparency and inconsistency in private health insurance is increasing, resulting in an environment similar to that which existed before the ‘gold, silver, bronze, basic’ reforms which standardised out-of-hospital treatment coverage.
Lack of standardisation
One of the main reasons for this is the lack of standardised, national and universally applicable rules and safeguards for the provision of out-of-hospital care in the private system. This has led to divergent views on how out-of-hospital care should be provided and significant variation in quality and safety frameworks, clinical pathways, deterioration protocols and pricing mechanisms. In addition, in the private system, it is unclear 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 patients and the healthcare system. Studies show that eligible patients can experience equivalent or better clinical outcomes, reduced risk of infection, home comforts, reduced travel, the ability to work from home and improved ability to manage caring responsibilities. The system can improve hospital efficiency by freeing up staff and beds, and contribute to cost savings across the health system.
The AMA would like to see true choice in the private out-of-hospital system, where patients can choose the best provider from a range of options under the guidance of their doctor and funded by their insurer. A lack of leadership and coordination of private health reform is holding back this reform.
The AMA is calling for the establishment of a Private Health System Authority to take the lead in reforming the system and drive the ‘deliberate design’ of out-of-hospital care models with patient choice at their heart.
