Why is Medibank changing contracts with hospitals?

Like many in the sector, we want to answer the question: “How can we ensure our members receive the best care possible and address the reality of mounting cost pressures on our health system?” 

We appreciate the critical role that private hospitals play and we want to work closely with them to solve this issue. Over the last twelve months, we have been working with many hospital groups to reduce mistakes that can occur in hospital, to both improve outcomes and reduce unnecessary costs.

Unfortunately Calvary did not agree with our approach, which has been accepted and even welcomed by so many others. Calvary also continued to ask us for higher payments than other hospitals, which is just not sustainable. In the end we felt we had no choice but to terminate our arrangement with Calvary.

What were the contract changes Medibank was seeking with Calvary?

The changes Medibank was seeking were modest.

We wanted to share the load with Calvary, as we do with other hospitals, for the mistakes that can occur in hospitals that we believe can be prevented. These include falls and bedsores. 

We think the hospital should be responsible for these mistakes and the associated costs and any readmissions to hospital as a result of them.

The list of mistakes that we proposed Calvary should be responsible for include 32 relating to events arising from surgery (infections, surgical complications and deep vein thrombosis), two relating to the development of hospital acquired pressure sores and 131 relating to hospital falls.

We believe if a hospital is responsible for the costs associated with these mistakes, this will encourage them to take the steps needed to reduce such events.

The changes we were proposing do not affect readmissions where the principle reason for readmission to hospital is cancer, chronic heart failure, chronic obstructive pulmonary disease or palliative care.

Members being treated for pneumonia, delirium, respiratory failure, heart attacks, kidney failure and pressure ulcers are also not impacted.

Our members will never have to pay for any of the mistakes that occur in hospitals and Medibank will always pay for our members hospital treatment costs, even if we don't have a contract with a hospital. The difference is - without a contract - a hospital can choose to charge members additional out of pocket expenses. Many don't and we hope Calvary also follows this path.

Why was Medibank unable to reach agreement?

Over the last twelve months, we have been working with many hospital groups to reduce a number of unfortunate mistakes that can occur in hospitals to improve outcomes and reduce unnecessary costs.

In our discussions with Calvary, we wanted to get an agreement to work with them, as we do with others, to reduce mistakes related to surgical errors, falls in hospital and hospital-acquired pressure sores.  Unfortunately Calvary did not agree.

We have not proposed any changes to the way we cover readmissions for treatments for chronic diseases, cancer treatment, chronic heart failure, chronic obstructive pulmonary disease and palliative care or for events including pneumonia, delirium, respiratory failure, heart attacks, kidney failure and pressure ulcers.

Calvary also continued to ask us for higher payments than other hospitals, which is just not sustainable. In the end we felt we had no choice but to terminate our arrangement with Calvary. 

If we continue to pay for mistakes that occur in hospitals that can be prevented, private health premiums will rise and at some stage become unaffordable for members.