18 August 2015
by Sarah Whyte

Medibank accused of using dud list to reduce hospital costs

Private insurance giant Medibank has been accused of using a dud list to reduce its hospital costs by Australia's health care watchdog.

Following a break down of negotiations between Calvary Health Care and the private insurance company, the Australian Commission on Safety and Quality in Health Care said that the list used by the insurer that includes 165 "highly preventable adverse events" was not appropriate.

The list of events, including if a patient falls while in hospital, had risen from 20 events and was used in negotiations with private hospitals such as Calvary Health Care. Medibank has also refused to cover if a patient has been readmitted within 28 days of discharge.

Medibank, which has 3.8 million members, was floated by the Abbott government in November for $5.7 billion. It has continually argued that the reduction of hospital costs would reduce the number of mistakes made in hospitals, rather than improve profits.

In a statement, the commission said: "Patient safety information generated from administrative hospital datasets is not fit for use in healthcare funding models or to determine financial incentives or disincentives."

The commission also said it encouraged the use of clinical information from administrative hospital datasets, but does not approve the use of datasets that have not been tested.

But the insurer's chief medical officer, Dr Linda Swan, has rejected the claims, saying she was surprised at the commission's statements.

"Our list is based on a thorough review of Australian and international evidence and has been refined in discussions with a number of our healthcare partners, including some of Australia's most respected hospitals," Dr Swan said.

She said Medibank saw little controversy in partnering with hospitals to improve "unfortunate and preventable mistakes".

"These mistakes can cause significant grief to patients and the flow–on effects can be problematic to both the patient and the healthcare system."

Australian Private Hospitals Association chief executive Michael Roff said the insurer had been "found out".

"This exposes Medibank because they have always said it's not about money, it's about improving safety and quality and the statement says it is not fit for purpose," he said.

Mr Roff said a number of the association's members had raised concerns about Medibank's cost–cutting tactics.

"There is a significant majority of the sector worried about it," he said.

"[Medibank] are trying to send a signal to the market and their investors," he said. "It's disappointing that they have been called out for being dishonest about their intention," he said.

"They have developed a list of events that according to the commission's statement is not appropriate to the use of which they are putting it."

The contract between Calvary Health Care and Medibank will expire at the end of the month.

Health Minister Sussan Ley said she was watching the matter closely and continued to encourage all sides involved in this commercial negotiation to remain at the table and achieve "the best outcome for patients".

"This is a timely reminder for all parties that the health of patients and value for consumers must be front and centre in their negotiations," Ms Ley said.

It is understood the Government is currently exploring the need for broader reform of the private health sector.