Can you keep a secret?

The idea of being able to choose public or private treatment within a public hospital has a tortuous path in history. The opportunity to share facilities such as operating theatres, pharmacies and ancillary services is appealing and seems like a good business option.

Expensive facilities such as these should be used to the maximum extent possible. Ideologically it sounds like a good idea, but how has it worked historically?

Modbury Hospital

The Modbury Hospital presents an historical picture of a failed attempt at privatisation. The 255-bed public hospital was built and run by the SA State government in 1970. A 65 bed co-located private hospital within the 255-bed public facility was offered in planning for the re-development of the Modbury Hospital. Originally, it was thought that this may not be profitable when considering the local demographic. The Modbury Hospital Board lobbied the government to consider their request for a co-located private facility in 1993. In 1995 governmental permission was granted for this development to proceed. In that year the public hospital was sold to Healthscope with the understanding that they would build the private facility that year.

In a State Government move for privatisation of public facilities, the government of the day engaged Healthscope to run both the public and the private facility at Modbury. The original contract was for a ten-year period with a right of renewal for a further 20 years. Healthscope took over the running of the public facility, which was a financial disaster for them. The private hospital was never built, but the Hospital Board were nominally now over seeing a facility for which they received no financial figures or evaluations. Those admitted to the Modbury Hospital were able to be admitted as "private in public" if they wished. These patients assigned their private health insurance to the public hospital to offset this privilege. Such a system could be construed as a form of double dipping as the Federal Government was already subsidising the hospital as well as providing a tax incentive for those who chose to carry private health insurance. State and Federal governments jointly contribute to the funding for patient services in public hospitals.

Healthscope reported that they were losing $1million per year while the estimated cost to the Government was $7million per year, although these figures were not publicly released.

In February 1997, in an article titled, "Feeling your purse before your pulse" in The Weekend Australian, it was claimed that the government was obliged to prop up resources to the private operator to cover the losses incurred by having to treat greater than the allocated number of patients. The Messenger newspaper reported that "the plans for the $12.6 million private hospital were in limbo" (Messenger May 24, 2000). In June 2000, the state minister for Health, Dean Brown, announced that he would no longer hold Healthscope to their contract to build the private hospital within the public hospital at Modbury.

Flinders Private

Flinders Private hospital is a 133-bed private facility co-located, but separately managed, within the Flinders Medical Centre at Bedford Park, a southern suburb of Adelaide. The private hospital was built in 1999 with a contract let to Ramsey Medical to run it. After repeated years of running at a loss, Ramsey sold Flinders Private to the Australian Community Healthcare Alliance (ACHA). ACHA were eventually forced to sell their operations to Healthscope when they were in financial difficulty.

Healthscope

In 1994, Healthscope acquired all the State Government Insurance Corporation (SGIC) Hospitals from the State government

Healthscope held management contracts with 5 South Australian private hospitals, three of which were owned by Australian Community Healthcare Alliance inc., with a further one co-located within the Darwin Hospital. The management agreement between these two bodies gave Healthscope greater marketplace holding and promoted increased strength for negotiations for services and remuneration.

In 2003, Healthscope Directors reported that they were experiencing increased difficulties in maintaining viable operations . This was believed to be due to a marked decrease in numbers of people who carried private health insurance.

A clear difference in philosophy developed between for-profit health organisations and not-for-profit health services which had been developed to provide for the needs of their communities. Healthscope increased their market in rural hospitals where there was no competition with public facilities. They increased their emphasis on rehabilitation centres and hospitals which provided specialist services. The Darwin Hospital was a good example of this, offering such a specialised service within a co-located facility. The Northern Territory government had sealed a deal with the Indonesian government to send their patients to Darwin where they had created specialist cardiology services such as cardiac catherization. This assured them of a constant income source. Hospitals which did not enjoy such guaranteed income were closed or amalgamated into other services.

The Western Community Hospital

The Western Community Hospital was a community hospital providing private services in the Western suburbs of Adelaide. It began in 1995 as a 25-bed private facility built by the community. Following a public appeal, a new site was purchased and opened in 1974 with 95 beds including a maternity unit. Following large increases in medical indemnity charges, particularly for maternity services, it became non-viable. Struggling financially, it was subjected to a sudden closure. This created great difficulties for the people of that area. It was sold to an aged care facility which did not require the hospital building. A group of local doctors with the support of their community rented the hospital facilities and provided services there, without the availability of any maternity services.