Healthscope, Australia’s second-largest privately owned hospital operator, has faced a swift and troubling collapse that underscores the complexities of the nation’s healthcare sector. The company’s deeper issues began shortly after Brookfield purchased it in 2019. This acquisition saddled the company with massive debt and marked the beginning of long-running disputes with health insurers. Looking back in real-time at how this is playing out, the impact of this fallout is being heard nationwide.
Originally established as a powerful counterweight to the Australian public healthcare establishment, Healthscope centers now span the length and breadth of Australia, serving patients in each state and territory. The troubles started just weeks after Brookfield made its $4.4 billion acquisition. They then proceeded to load it up with $1.6 billion in debt. Mistakenly putting profit maximization at the center of decision-making led to damaging decisions such as… These decisions shaped tremendously both patients and the whole healthcare ecosystem.
A Troubling Financial Strategy
In a successful bid to bring in more revenue with growing financial pressure, Healthscope introduced a “hospital facility fee” in 2020. Patients incurred an additional $50 charge for receiving same-day services. For overnight services, the cost increased to $100, even for covered individuals with health insurance. This move sparked a massive backlash from patients and insurers. The implementation exploded into costly lawsuits, as millions claimed their out-of-pocket costs were unreasonable.
Healthscope’s management has openly criticized the health insurance industry while acknowledging that Brookfield’s ownership strategy may have been misguided.
“At the same time as it delivered millions of dollars of profits to its foreign investors, it’s left these hospitals with a massive amount of debt and rents which are much higher than the rest of the sector,” said Ben Harris, highlighting the paradoxical outcomes of the company’s financial maneuvers.
Investors no longer saw the value proposition of the deal and the company’s already tenuous financial position saw receivers called in when Healthscope defaulted on rental payments. This series of events has questioned whether these business models are sustainable under Australia’s healthcare system at-large.
Legal Battles and Industry Backlash
Since October 2022, Healthscope had notably escalated its stoush with health insurers. It unilaterally ripped up agreements with every health fund after one major provider filed suit against the firm. This hard line approach only served to raise the heat between Healthscope and insurers. These companies have historically played a critical role in Australia’s complex and multifaceted healthcare ecosystem.
“They’ve trashed the joint and now just dropped the keys and run away,” remarked Ben Harris, encapsulating the sentiment of many stakeholders who feel abandoned by Healthscope’s management.
The impact of Healthscope’s decisions has sent shockwaves through the healthcare community. Critics say the company’s recent moves have exposed a shocking divide. This gap exposes the tension between governmental obligations to provide health care and the profit-seeking interests of privately operated entities. Ryan Park, Leader of the Opposition in New South Wales, had a strong reaction to the potential for these types of models.
“My view is that this is not a model of health care we should ever be doing in NSW ever again,” Ryan Park stated, emphasizing that the public health system is better equipped to manage acute health services.
Impacts on Communities and Future Considerations
Healthscope’s collapse continues to deeply impact communities. It offered a lifeline of critical services in places where no other option existed. It is the only privately run medical service left in Darwin. Moreover, it delivers critical mental health services in some of Melbourne and Victoria’s most marginalized communities. The discontinuation of these services would worsen already dire maternal, neonatal and healthcare outcomes across these areas.
As Healthscope continues to unravel, its properties have been sold off to two commercial property trusts: Northwest Healthcare Properties Real Estate Investment Trust and HWC, managed by David Di Pilla. The Northern Beaches Hospital in Sydney has been one of Healthscope’s most contentious sites. Further, it has come under fire for its operational model and financial management.
Concerns over vertical integration within the healthcare industry have recently spurred discussion and debate. Stephen Duckett, an expert in healthcare policy, noted that while there are risks associated with such models, proper safeguards can mitigate these concerns.
“There are potential risks with ‘vertical integration’ but those risks are mitigated because it is the surgeon who chooses where to operate,” he explained.
