The peak body for private hospitals – which perform 72% of the Australia’s eye surgeries – is worried about the sector’s viability and has called for expanded use of private facilities for public procedures, as a new Productivity Commission (PC) report suggests improvements to Australia’s ‘care economy’.
The Australian Private Hospitals Association (APHA) said the country’s public-private hospital blend had consistently ranked number one in the world – but that standing has “never been more precarious”.
It welcomed the release of the PC’s Interim Report Delivering quality care more efficiently, that it said recognised the vital role private hospitals play in Australia’s complementary hospital system. It also came as the nation prepares for the Treasurer’s three-day Economic Forum being held 19-21 August 2025.
“We remain positive about the role of private hospitals in Australian healthcare delivery, but we need federal and state governments to come with us,” APHA CEO Mr Brett Heffernan said. “And it doesn’t have to cost anything.
“Taxpayers get a massive return on zero investment in private hospitals. Just 633 private hospitals carry out 70% of planned surgery, 61% of acute mental healthcare, 81% of rehabilitation and 1.66 million medical treatments each year, including 54% of chemotherapy. They do so in high quality facilities with state-of-the-art treatments and services.”
Heffernan said that’s “an enormous chunk of the healthcare needs of Australians”. In fact, APHA said more than 5.14 million patients were admitted to private hospitals last year, up 3% on the year before.
But they could be doing much more “if the shackles of bureaucratic red-tape and insurer intransigence are removed”.
“Taxpayers are forking out around $400 billion for 675 public hospitals over the five-year life of the federal-state healthcare agreement. That figure is set to soar with the new agreement currently being negotiated,” Heffernan said.
“A more collaborative partnership between private and public hospitals, making the most of private facilities, capabilities and spare beds, needs to be a priority. It was relied upon by federal and state governments during COVID but has quickly been forgotten. That needs to change.”
He was pleased the PC report picked up on these issues. It suggests the Australian Government should empower Primary Health Networks with the flexibility to commission services aligned with local priorities, supported by dedicated funding streams.
“Governments are encouraged to shape the care economy by breaking down silos across sectors and making reforms that enhance inter-sector connectivity. This approach is essential for a resilient, sustainable healthcare system,” Heffernan said.
“APHA supports these reforms, emphasising the need for a healthcare model that leverages private hospital capacity to better address national challenges, such as elective surgery backlogs, chronic disease management, and hospital-in-the-home (HITH) services.
“Private hospitals already provide HITH services for public patients, but barriers prevent them from delivering these services to private patients. In particular, health insurers typically only fund HITH services that they themselves provide. An obstacle that must be addressed.”
He also noted private hospitals had provided high-quality care, expanded treatment options, and alleviated pressure on public hospitals. Their direct contribution to the economy exceeds $24 billion annually, supporting 155,000 direct jobs and many more across upstream and downstream industries.
“Yet, ongoing neglect and a lack of strategic support threaten the sector’s viability at a time when Australia needs it most. Importantly, private hospitals are not seeking taxpayer dollars, just a better deal from health insurance companies making record profits while refusing to meet health costs,” Heffernan said.
‘Health insurers need private hospitals to survive’
Earlier, on 25 June 2025, the peak body representing health insurers, Private Healthcare Australia, said health funds were delivering hundreds of millions of dollars in additional payments to private hospitals to help them through a challenging period of rising costs and a shift towards more technology driven out-of-hospital care.
Following a request from Health Minister Mr Mark Butler for health insurers to lift payments to private hospitals, the body said the most recent Australian Prudential Regulation Authority data shows health insurance payments to private hospitals jumped 7.7% in the year to March 2025. During the same period, health insurers paid private hospitals 4.2% more per episode of treatment.
This jump in payments to hospitals comes after health insurers paid more than $5 billion back to health fund members due to lower claims during the pandemic.
CEO of Private Healthcare Australia, Dr Rachel David, said health insurers were acting on Butler’s concerns about the private hospital sector by cutting their own costs and lifting payments to hospitals for the care they deliver.
“Health insurers need private hospitals to survive. We want our 12 million members investing in hospital cover to receive rapid access to high quality hospital treatment where and when they need it. With this in mind, we are paying hospitals more to help them meet rising costs for care, including higher staff wages,” Dr David said.
“The health insurance sector is listening and acting. We will continue to work with hospitals, doctors and the government on ways to improve our private health system and help modernise it so it can meet the needs of our population demanding more affordable, convenient and connected care.”
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