The recently publically listed health insurer Medibank Private is currently in controversial negotiations with private health care providers such as Calvary Health Care, Ramsay Health Care and Healthscope. These organisations represent some of the major players in the delivery of care in private hospitals.

Under current arrangements health insurers negotiate the cost that health providers are reimbursed for the delivery of services. The nature of health care is that complications and side effects or adverse events can occur. For example a patient has surgery, is discharged, but then develops a wound infection at home is readmitted to hospital for antibiotics within a month. In both private and public sectors this would be considered an unplanned readmission. Given the nature of medicine there is an expected baseline rate of unplanned readmissions. There is however the potential for wide variance in readmission rates between facilities. Readmission rates   and other adverse events may reflect quality and appropriateness of care (e.g. excessively early discharge), lack of community services to prevent readmission, patient complexity (e.g. patients with multiple comorbidities) and a whole raft of other variable. Medibank asserts that some of these adverse events are identiiable and preventable and should they occur Medibank would not reimburse the event or perhaps diminish the amount of reimbursement.
This could be seen as a blatant cost saving exercise based on the premise that Medibank must make a profit in an environment of rising costs and a baseline situation where about 85% of its revenues from insurance premiums are paid out. On the otherhand Medibank could assert that he proposal will be a driver for quality improvement and improving patient safety and outcomes. The providers argue that the lost list of items that won’t be covered is unreasonable or unrealistic and that many of the items that are cited as preventable adverse events aren’t really avoidable. That may the case and whilst there should be room to negotiate over individual items the direction the Medibank has signalled is concordant with developments in the public health care sector. Indeed in other systems various models for pay for performance are in trial or already implemented.
The problem for the private health care providers is that even if admissions for adverse events are funded as per the status quo it is in their interest to try and improve outcomes as a way of reducing their own internal costs and managingflow and activity levels.
The patients are paying with their premiums and also their health. They should be expecting that their health care providers are doing thir best to improve safety and deliver quality outcomes. Afterall, there must be benefits to private health care. Is it worth paying the premium if the only advantage is timeliness and a private room without at least equivalent outcomes from treatment? It also might raise the level of competition within the private system by using published outcome measures as a form of branding to attract business.
My guess is that a modified form of the Medibank proposal will be the outcome of these negotiations and this will signal a landmark change for health funding across the whole healthcare sector.