Private Hospitals and the Australian Health System by linxiaoqin



                       Private Hospitals
                      and the Australian
                          Health System

  This document provides the facts about the work private hospitals are doing in the Australian Health System

                                                  Australian Private Hospitals Association ABN 82 008 623 809

                                                                       September 2012
1 Provision of services
Private hospitals are a vital partner with the public sector in the provision of a wide range of
services. The private hospitals sector is very diverse and includes a wide range of facilities and
ownership structures.

Contrary to the views expressed by some commentators, the private hospitals sector


       Merely provide ‘profitable’ services (whatever these may actually be);


       Provide a comprehensive range of services;
       Treat older patients;
       Provide training for medical, nursing and allied health professionals;
       Provide safe and quality services; and
       Contribute significantly to the balance and sustainability of the Australian health system.

Some of these facts are illustrated by the data below gathered from various authoritative

       Private hospitals treat 40% of all patients in Australia (AIHW, 2010-11a, pp. 144, Table
       In 2010-11, private hospitals admitted 3.57 million patients. This is a 3.2% increase
        since 2009-10 (AIHW, 2010-11a, pp. 144, Table 7.1).
       From 2006-07 to 2010-11, the number of patients admitted to private hospitals rose
        by 5%. Over the same period the number of patients admitted to public hospitals
        rose by 3.2% (AIHW, 2010-11a, pp. 144, Table 7.1).
       The majority of elective surgery (1,279,501 admissions or 65.6%) in Australia are
        performed in Private hospitals (AIHW, 2010-11a, pp. 260, Table 10.3).
       Private hospitals perform, on average, 38% of all treatments associated with the top 20
        (in volume) treatments provided by both public and private hospitals – with private
        hospitals performing the majority in four of the top 12. For example, in 2010-11,
        over 70% of separations for Diseases of the eye and adnexa were from private hospitals
        (AIHW, 2010-11a, pp. 157, Table 7.6).
       In 2010-11, the majority of activities reported for 16 of the top 20 most common
        Australian Refined Diagnoses Related Groups (AR-DRGs) with the highest number of
        same-day acute-separations, occurred in private hospitals. For example, Private
        hospitals provided over 90% of separations for Retinal procedures and over 80% of
        separations for Dental extractions and restorations (AIHW, 2010-11a, pp. 204, Table
       In 2010–11, there were 2.2 million occasions of service in non-admitted patient
        services in Acute and psychiatric private hospitals in Australia, an increase of 4.1%
        from 2009-10. Of these the most common services provided were Allied health

2                                                    APHA FACTS ON PRIVATE HOSPITALS
        services (578,000 occasions of service), Accident and emergency (516,000), and
        Pathology (351,000). (ABS, 2010-11)
       Private hospitals provided 8.9 million days of hospitalisation to patients in 2010–
        11, up 4.9% from 2009–10 (8.4 million). (ABS, 2010-11)
       In 2010-11, a total of 3.4 million patients age 65+ were admitted to both public and
        private hospitals. Private hospitals treated nearly 42% (that is, over 1.4 million)
        patients from this group age. Further, this age group represented 39.4% of all private
        hospital admissions in 2010-11, slightly higher than public hospitals at 37.5% over
        the same period. (AIHW, 2010-11a, pp. 188-9, Tables S7.11 and S7.12)
       In 2010-11, 6.1% of total private hospital treatments were for patients aged 85 years
        and older. Over the same period, 6.3% of total public hospital treatments were for
        this age group. (AIHW, 2010-11a, pp. 188-9, Tables S7.11 and S7.12)
       In 2010-11, private hospitals treated 84.5% (over 2.8 million) of total patients with
        private health insurance, 82% (over 290,000) of self funded patients, 73.2% (over
        61,000) and 62.7% (nearly 200,000) of Department of Veterans’ Affairs (DVA)
        patients. (AIHW, 2010-11a, pp. 171, Table 7.20)
       In 2010-11, public hospitals treated nearly 15.5% (over 500,000) of privately insured
        patients. In the same period, private hospitals treated 2.3% (over 100,000) public
        patients. (AIHW, 2010-11a, pp. 171, Table 7.20)
       In 2010-11, 7.4 million procedures were reported for same-day acute separations,
        with over 4.3 million in private sector. This accounts for more than half (that is,
        nearly 58%) of the same-day acute separations for which a procedure was reported.
        Further, 97% of the same-day acute separations in private hospitals involved a
        procedure, compared to just 80% of separations in public hospitals. (AIHW, 2010-11a,
        pp. 203-4, Table 8.12)
       In 2010-11, there were over 3.5 million overnight acute admitted patients,
        accounting for 40% of all admissions. This was an increase of 3.0% (in private
        hospitals) and 3.6% (in public hospitals) since 2009-10. (AIHW, 2010-11a, pp. 223,
        Table 9.1)
       Between 2006-07 and 2010-11, the number of separations for sub- and non-acute
        care in both private and public hospital sectors increased by 11.9% per year. Over
        this period, the average rate of increase was higher in private hospitals (17.9%) than
        in public hospitals (5.8%). (AIHW, 2010-11a, pp. 296, Table 11.1)
       Between 2006-07 and 2010-11, the number of separations for Rehabilitation care in
        private hospitals doubled. This is an average 20.1% rate of increase per year. (AIHW,
        2010-11a, pp. 296, Table 11.1)

2 Infrastructure
According to Australian Institute of Health and Welfare (AIHW, 2010-11b, pp. 4-5):

       There are 285 private hospitals and 303 private free-standing day hospitals in
        Australia. This is nearly 44% of all hospitals in Australia.

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       The private hospital sector (both private hospitals and private day hospitals)
        provide a total of 27,748 beds. This accounts for nearly 33% of all hospital beds in

3 Employment and training
    o The number of full-time equivalent staff employed in the private hospitals sector in
      Australia during 2010–11 was 58,448, an increase of 3.3% from the 2009–10
      (56,560). (ABS, 2010-11)
    o Australia’s private hospitals provided over 9 million hours of education and
      training of surgeons, doctors, nurses and other health care professionals in 2009.
      Of this philanthropic investment in the nation’s future medical workforce, the majority of
      funding for education and training comes from private hospitals. (APHA, 2010)

4 Funding and Efficiency
Private hospitals are funded by their owners and operators. The services provided to patients
treated in private hospitals are partially or fully subsidised from a variety of sources, including
private health insurance funds, the Department of Veterans’ Affairs, Medicare, the PBS, and
third party insurers.

       In 2009-10, the most recent period for which this data is available, public hospitals
        received a total of $36.2 billion to treat 59% of all hospital patients. In the same
        period, private hospitals received a total of $10.1 billion to treat 41% of all hospital
        patients. (AIHW, 2009-10a, pp. 14, Table 2.6) and (AIHW, 2009-10c, pp. 109, Table A3)

       The Productivity Commission looked at the costs of treatment within public and private
        hospitals. It found that after adjusting for casemix differences that, on a total cost
        basis, private hospital costs were $130 lower per casemix-adjusted seperation.
        (PC, December 2009a, pp. 102-3, Table 5.2)
       The Productivity Commission found that of the 20 different Major Diagnostic
        Categories (MDCs), the cost per separation were (PC, December 2009a, p. 116):
           o Lower in private hospitals for half of all MDCs

           o Lower in public hospitals for only one fifth of all MDCs

5 Safety and Quality of Services
APHA and private hospitals are proud of the standard of services provided in the sector.
Regardless of whether they are operated on a for-profit or not-for-profit basis, private hospitals
operate in a competitive environment. One of the key ways in which private hospitals seek to
compete with each other and with the public sector is on the quality of their services. There is
therefore a very strong imperative to maintain a high standard of safety and quality of services.
However, the goal of quality services never has an end point and continuous improvement and
benchmarking are essential ongoing activities.

4                                                     APHA FACTS ON PRIVATE HOSPITALS
APHA is most concerned about the duplication and overlap and accompanying compliance
burden that characterises the measurement and reporting around the safety and quality of
services in private hospitals. State and Territory licensing regimes, private health insurance fund
contracting arrangements, accreditation agencies and State-based safety and quality agencies
have all developed their own sets of measuring and reporting frameworks with which private
hospitals must comply. This is wasteful and does little, if anything, to actually assure patient
The Australian Council on Healthcare Standards (ACHS) is an independent, non-for-profit
organisation that has been an important part of the Australian healthcare industry since 1974.
Healthcare organisations can assess, monitor and improve their services through participation
in the ACHS accreditation programs. This provides healthcare organisations the opportunity to
achieve their best possible levels of performance.
The ACHS releases biennial National Accreditation Reports, the purpose of which is to provide
industry, consumers and the community an overview of the national accreditation performance.
More importantly, the Report assists healthcare organisations in evaluating their performance
and identifying areas and opportunities for improvements. In the latest Report produced by the
ACHS (ACHS, 2009-10, pp. 21-23, and Appendix B):
       36 private organisations and hospitals were recognised for their leading practices
        by being awarded at least one Outstanding Achievement (OA) rating. This
        represents more than 70% of all organisations and hospitals recognised in this
        way. These OA ratings were awarded against a range of criteria, including:
           o Care planning and delivery
           o Infection control system
           o Consumer participation in health services
           o Consumer rights and responsibilities
           o Governance structures
           o Continuous quality improvement

The Productivity Commission has stated that, Hospital-standardised mortality ratios (HSMRs)
can be used as an indicator of a hospital’s underlying quality of service. This is because of two
main reasons; 1) its intrinsic nature and 2) its relationship with other quality measures.
According to the Productivity Commission, when looking at HSMRs scores the Commission
found that:

       Private hospitals tend to have lower HSMRs scores than public hospitals by 12.2%
        on a median-score basis and 11.7% on mean-score basis. (PC, 2010b, pp. 68, Table

6 Private Patients in Public Hospitals
One area in which private hospitals and public hospitals compete directly is in the treatment of
private patients.

5                                                   APHA FACTS ON PRIVATE HOSPITALS
       Public hospitals received nearly $682 million in benefits from private health
        insurance funds in 2010-11 (an increase of 10.4% from 2009-10). (PHIAC, 2010-11,
        p. 17)

7 About APHA
APHA is the peak national body representing the interests of the private hospital sector, with a
diverse membership that includes large and small hospitals and day surgeries, for profit and not
for profit hospitals, groups as well as independent facilities, located in both metropolitan and
rural areas throughout Australia. The range of facilities represented by APHA includes
medical/surgical hospitals, specialist psychiatric and rehabilitation hospitals and also free-
standing day hospital facilities.

Current accreditation is a prerequisite for membership of APHA.

8 Bibliography
ABS. (2010-11). Australian Bureau of Statistics . Private Hospitals Australia.

ACHS. (2009-10). Australian Council on Healthcare Standards. National Report on
     Accreditation Performance.

AIHW. (2009-10a). Australian Institute of Health and Walfare. Australian Hospital Statistics.

AIHW. (2009-10b). Australian Institute of Health and Welfare. Australian's hospitals as a glance.

AIHW. (2009-10c). Australian Institute of Health and Welfare. Health expenditure Australia.

AIHW. (2010-11a). Australian Institute of Health and Walfare. Australian Hospital Statistics.

AIHW. (2010-11b). Australian Institute of Health and Welfare . Australian's hospitals as a

APHA. (2010). Australian Private Hospital Association. Health workforce training member

PC. (2010b). Productivity Commission. Public and Private Hospitals: Multivariate Analysis –
      Supplement to Research Report.

PC. (December 2009a). Productivity Commission. Public and Private Hospitals - Productivity
      Commission Research Report.

PHIAC. (2010-11). Private Health Insurance Administration Council. The Operations of private
     Health Insurers - Annual Report.

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9 Key Contacts
Michael Roff
Chief Executive Officer
Tel: (02) 6273 9000

Lucy Cheetham
Director, Policy & Research
Tel: (02) 6273 9000

Lisa Ramshaw
Director, Communications & Marketing
Tel: (02) 6273 9000

Mehrdad Khodai-Joopari
Manager, Research and Data
Tel: (02) 6273 9000

7                                      APHA FACTS ON PRIVATE HOSPITALS

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