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‘Flashpoint’ warning as Medibank pushes cost agenda

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The nation’s largest health insurer will no longer cover the costs of many patients who become sick or injured in hospital as a result of what it deems to be avoidable medical complications or errors under the terms of a deal struck with major private hospital operator Healthscope.

In an important development for Medibank Private as it tries to squeeze down on payouts, the insurer and Healthscope have reached agreement on a two-year contract that includes provisions regarding the safety and quality of care.

While the details of the arrangement have not been publicly disclosed, it is believed to include clauses regarding liability for costs arising from hospital acquired complications and avoidable readmissions.

The deal follows an attempt by Medibank earlier this year to pressure Calvary Health Group into accepting responsibility for 165 complications the insurer described as preventable, including deep vein thrombosis and maternal death arising from amniotic fluid embolism.

The demand initially led to a breakdown in negotiations, but eventually Medibank and Calvary reached agreement – though the terms remain confidential.

A senior hospital executive has warned the issue could become a “flashpoint” for the sector.

“To use quality and safety to some extent as a Trojan horse, and taking the role of arbiter of quality and safety for the contributor is interesting,” Calvary Chief Executive Mark Doran told a UBS Australasia conference in Sydney in November. “It means you’re in conflict with the medical profession, who see themselves as the arbiter of quality and safety for their patient. If you don’t engage with them, you risk them pulling back.”

Medibank’s deal with Healthscope is significant for the insurer because the company operates 46 private hospitals across the country and provides around 165,000 episodes of care to Medibank members each year.

Healthscope Chief Executive Officer Robert Cooke insisted his company was “working in partnership” with Medibank in reducing waste and inefficiency.

“Healthscope has a longstanding commitment to improving our patients’ experience in hospital, including robust safety and quality programs,” Mr Cooke said. “Medibank’s focus on reducing hospital acquired complications and avoidable readmissions is complementary to the quality data we have been publishing since 2012.”

Outgoing Medibank Managing Director George Savvides said the Healthscope deal was one of a number of “performance-based contracts” it was seeking to strike with hospital providers, and set an example of how insurers and providers could work together to “maintain excellence…while also reducing rising health costs”.

But AMA President Professor Brian Owler said “close attention” needed to be paid to what Medibank was trying to do.

Professor Owler said that because hospital expenses and prosthetics together made up about 85 per cent of private health fund costs, it “stands to reason” these would be a focus for Medibank.

The major health funds have commissioned a report on prosthetic costs amid complaints they are paying $800 million a year more on devices compared with the public sector.

But Professor Owler warned that the insurer should not pursue cost-cutting under the guise of patient safety and quality assurance.

“What we don’t want is punitive measures that punish patients and interfere in what would otherwise be routine clinical cases in order to save money,” the AMA President said.

While some serious mistakes, such as operating on the wrong limb or transfusing the wrong blood type, should never occur, Professor Owler said complications were an unfortunate but inevitable part of clinical practice, particularly when doing high-risk procedures on patients with multiple co-morbidities.

“Of course, every effort should be made to minimise these complications, but we are never going to be able to eliminate them,” he said.

Professor Owler said if Medibank’s true goal was to increase patient safety and improve quality, imposing financial penalties was the wrong way to go about it.

He said there was already a multilayered system in place to improve quality of care, including clinical groups, peer reviews, continuous professional education and training and accreditation standards.

“Financial penalties should not be the major lever to try and improve the quality of care,” Professor Owler said. “Doctors and nurses are already very motivated to improve the outcomes of care for their patients.”

Adrian Rollins