Media releases

February 14, 2005

Medibank Private targets health care costs

Medibank Private has announced a competitive selection process to identify which hospitals it will contract with in Melbourne, Sydney, Adelaide, Brisbane and Gold Coast. This process forms part of the new Medibank Private hospital contracting framework - that enshrines quality and safety benchmarks and endeavours to achieve the best contract rates for members.

With the long-term view in mind, Medibank Private is tackling growing health care costs today through its new hospital contracting framework. This initiative, along with several supporting activities undertaken by Australia's largest health fund, aim to slow the escalation in health care costs and the resulting increases in private health insurance premiums.

This week Medibank Private will, through a series of forums followed by a formal 'request for proposal' (RFP) process, invite all acute medical/surgical and obstetrics overnight private hospitals in the metro areas of Melbourne, Sydney, Adelaide, Brisbane and Gold Coast to provide a proposal for inclusion as a Members' Choice hospital.

"As the nation's largest health insurer, covering 3 million Australians, Medibank Private has a responsibility to build a sustainable business, providing affordable health insurance. The implementation of our new hospital contracting framework is a key element to a sustainable future", said George Savvides, Managing Director Medibank Private.

"The competitive selection process aims to make patient quality and safety an integral part of the contracts we have with hospitals and at the same time scale back the elements that are influencing the rapidly escalating costs of health care. It's about improving value for our members".

As a result of the selection process there will be a small reduction of contracted hospitals in some markets where there is an overlap of hospitals servicing the area.

"If a number of hospitals servicing one area all offer the same high standard of clinical care and a subset of them have the capacity to service the needs of our members, then the hospitals that offer superior value for money will be selected as Members' Choice providers. This will ultimately save all of our members by limiting the rising payments for hospital procedures."

"Our responsibility is to all members and we must ensure a fair and equitable system that manages the growth in health care costs while still delivering quality care. In fact, through this new contracting framework we will reward hospitals that continue to achieve quality benchmarks. Over time we see this more sophisticated form of contracting playing a more significant role in the relationships we have with hospitals."

As part of the new arrangements, Medibank Private will support hospitals to implement initiatives in the area of quality and safety through a seed funding program called the Medibank Safety and Clinical Improvement Incentive Pool. Applications for seed funding will be assessed on their merits and overall viability. In the first year a total of $500,000 will be available to contracted acute overnight hospitals through the program. The cost of this incentive will be more than outweighed by the community-wide benefits delivered from reducing avoidable incidents and costs associated with quality failure.

As currently happens, members can still choose to go to an uncontracted hospital, but Medibank Private will pay a lesser amount to the hospital, so member out pocket expense may be greater. It is always recommended that members check with Medibank Private before booking into a hospital.

All the hospitals included in the process are due to renew contracts within the next 12 months. Hospitals in those areas that are currently without contracts are also invited to participate. Hospitals outside the identified areas are not part of this competitive selection process and contracting arrangements will continue as normal.

The RFP will be released to participating hospitals shortly and the process is expected to be completed by September 2005.

A broader community perspective:

Australians enjoy a community rated private health care system, where everyone can access health insurance at the same price regardless of risk factors such as age or health status helps to keep health insurance more affordable. As the population ages and technology advances inject higher costs into treatment practices, there will be even more pressure on health care costs and therefore the insurance premiums we pay.

Along with the hospital contracting strategy, Medibank Private is managing the pressure of health care costs through other initiatives such as participating in industry pricing reform on prostheses and promoting healthy lifestyle options. In addition to this Medibank Private continues to deliver low operating and management costs compared to the average for the rest of the industry.

Further Information:

A Members' Choice hospital is a contracted hospital where Medibank Private members don't have to pay for the hospital related services (other than any excess or co-payment as determined by their cover) - they will have to pay for other minor incidental costs not covered by the hospital contract (eg TV hire, newspapers).

Enquiries, please contact:
Trish Hyde, Public Affairs Manager, Medibank Private - PH: 03) 8622 5181

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