More out-of-hospital-care by private entities could boost Australians' savings – AMA

Potential savings could lead to reduced premiums, increased uptake of insurance, and ultimately cost savings.

The healthcare landscape in Australia is constantly evolving, but government funding and regulation often struggle to keep pace, said the Australian Medical Association (AMA).

Interestingly, in this evolving landscape, it's the public hospitals that are taking the lead in delivering innovative hospital-type care outside traditional hospital settings, while the private health system is lagging behind. 

This difference can be attributed to the simpler, shared governance arrangements and flexibility of funding in the public system compared to the more complex funding arrangements in the private system.

Historically, private health insurers in Australia mainly covered in-hospital treatments, with only optional 'extras' packages providing some out-of-hospital coverage. However, recent years, particularly in response to the COVID-19 pandemic, have seen private health insurers expanding into the realm of out-of-hospital care. 

This expansion has often been on insurers' terms and driven by a lack of legislative and public policy design. Many insurers offer select out-of-hospital schemes for their policyholders, such as at-home joint replacement rehabilitation. 

This allows insurers greater control over the services and associated costs, benefiting from the savings of not funding more expensive inpatient treatments. While this may enhance the value proposition for private health insurance customers, it also reflects a growing trend of for-profit insurers vertically integrating services, potentially leading Australia towards a managed care system similar to that of the United States. 

Such an approach could risk principles like patient choice and clinical autonomy.

Weak points

The expansion of private out-of-hospital care has created a complex environment where patients may be uncertain about what they are covered for, and doctors must navigate intricate funding and governance arrangements to provide the best care for their patients. 

These new models are not consistently included in all insurance products, leaving many privately insured patients without access to out-of-hospital care unless they are willing to pay significant out-of-pocket costs. 

Surveys indicate that around 40% of privately insured patients cannot access out-of-hospital care due to their insurer's lack of an out-of-hospital program or agreements with out-of-hospital providers.

The complexity, lack of transparency, and inconsistency in private health insurance are increasing, mirroring the situation that existed before the 'gold, silver, bronze, basic' reforms standardised in-hospital treatment coverage. 

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The absence of standardised, national, and universally applicable regulations and safeguards for out-of-hospital care in the private system has led to varying views on how it should be delivered and significant disparities in quality and safety standards, clinical pathways, deterioration protocols, and pricing mechanisms. 

Additionally, it remains unclear in the private system who is financially or clinically responsible for a patient once they leave the hospital environment.

Possible outcomes

Expanding access to out-of-hospital care can benefit both patients and the health system. 

Eligible patients can experience equivalent or improved clinical outcomes, reduced infection risk, greater comfort, reduced travel, the ability to work from home, and improved capacity to manage caregiving responsibilities. For the healthcare system, it can enhance hospital efficiency by freeing up staff and beds, resulting in cost savings across the entire healthcare system. 

Estimates suggest substantial savings, such as 47,000 to 94,000 bed days and AU$31.3m to AU$62.7m per year (in 2024) if out-of-hospital rehabilitation were available to clinically eligible patients undergoing total knee replacement. 

These potential savings could lead to reduced private health insurance premiums, increased uptake of private health insurance, and ultimately cost savings for the government.

The AMA advocates for true contestability of services in the private out-of-hospital system, where patients can choose the best provider from various options guided by their doctor and funded by their insurer. 

However, the lack of leadership and coordination of reform in the private health system is hindering this progress. The AMA calls for the establishment of a Private Health System Authority to lead reform efforts and drive the deliberate design of out-of-hospital care models with patient choice at the core.