Healthcare Costs Set to Rise for Thousands After St Vincent's and NIB Negotiations Fail

Thousands of patients might see their out-of-pocket healthcare costs increase after talks between St Vincent’s private hospital network and the private health fund, NIB, fell through.

On Thursday, St Vincent’s Health Australia informed NIB that it will terminate their contract in 65 business days unless a more equitable funding agreement is established.

If a new agreement isn't reached by October 3, patients with NIB health insurance may have to pay more for their care at St Vincent’s private hospitals.

St Vincent’s runs 10 private hospitals across New South Wales, Victoria, and Queensland.

Chris Blake, CEO of St Vincent’s, commented, “This is not a decision we take lightly. It’s the first time in our 167-year history that we’ve notified a private health fund of our intention to end our agreement.”

The country’s largest not-for-profit healthcare provider stated it had made every effort to reach an agreement, but NIB did not present a fair offer that addressed the rising costs of private hospital care.

Blake explained that inflation has significantly increased hospital expenses, including wages, food, energy, PPE, IT, and maintenance. For instance, St Vincent’s electricity costs were $6.5 million in 2023, and are expected to reach around $12 million in 2024.

Over the past year, St Vincent’s successfully negotiated new agreements with Medibank, HCF, and the Alliance group of health funds, where both parties made concessions. “However, NIB has left us no choice but to take this step,” Blake said.

St Vincent’s operates 10 private hospitals across New South Wales, Victoria, and Queensland. For patients seeking accommodation near St Vincent’s hospital, there are several options available, including serviced apartments and hotels, to provide comfort and convenience during their stay.

NIB’s CEO and managing director, Mark Fitzgibbon, responded by acknowledging the long-standing partnership with St Vincent’s and expressing sympathy for the financial challenges faced by both St Vincent’s and other private hospitals. Fitzgibbon also stated that NIB had extended a “very fair and reasonable offer” to St Vincent’s.

Fitzgibbon expressed disappointment that the disagreement has become public but noted that discussions will continue, emphasizing that their partnership still has several months left.

The Australian Medical Association (AMA) urged both parties to resume negotiations to reach an agreement in the interest of patients. AMA President, Prof Steve Robson, highlighted that patients are the ones who suffer in these situations, potentially facing higher out-of-pocket costs for care at St Vincent’s private hospitals after October 3.

Robson added, “These disputes erode Australians' confidence in private health insurance, especially as we face significant premium increases and cost-of-living pressures.”

Bassett pointed out that NIB's premium increase this year was one of the highest at 4.1%, while in 2022-23, it only returned 79% of premiums to patients—far below the industry’s gold standard of 90% and the lowest among major insurers.

“Today, St Vincent’s is rightfully standing up against the power and greed of insurers,” Bassett said.

The latest report from the ACCC consumer watchdog revealed that the private health insurance industry’s net profit after tax has more than doubled, reaching $2.19 billion in 2022-23 compared to $1.04 billion in 2021-22.

Bassett noted that 71 private hospital services have closed in the past year due to financial challenges. “Our not-for-profit hospitals are at breaking point, with insurance funding failing to keep up with rising costs for essentials like food, energy, and equipment,” she said.

Blake agreed, describing the situation as indicative of a “crisis in private healthcare in Australia.” He emphasized the need for health funds and hospitals to collaborate effectively and operate on a level playing field for the benefit of patients.

The CHA is advocating for reforms in the annual premium review process and a new funding model, termed the National Private Price, to ensure that funding accurately reflects the actual costs incurred by hospitals.

Meanwhile, the AMA is calling for the establishment of an independent Private Health System Authority (PHSA). According to Robson, this would improve regulation in the sector, help resolve disputes, and ensure patients receive value for their money.