Ramsay Health Care the latest to sound alarm on private health insurance

Australia’s biggest private hospital operator Ramsay Health Care says it stands prepared to renegotiate deals with health insurers in order to keep up with soaring staff wages.

The comments from outgoing Ramsay boss Craig McNally on Tuesday come less than a week after the nation’s second-biggest private hospital operator Healthscope tore up its contracts with Bupa and the Australian Health Services Alliance, blaming the insurers’ “refusal” to maintain sustainable funding for its hospitals.

Mr McNally told the company’s annual general meeting that while negotiations for improved terms continued, the risk of wage pressures was still present.

“We have progressed discussions with our payors and negotiated two contracts for improved indexation during the first quarter,” he said in his final speech as CEO.

“We continue to face the risk of above-inflation wage cost pressures and we are ready to recommence discussions with payors if wage inflation increases above forecast levels.”

Private hospitals claim they are facing an existential threat due to higher costs and inflation, but private health insurers are reluctant to foot the bill in order to keep customer premiums down.

“The relationship we have with health funds is a really important part of the way we operate the business,” Mr McNally told shareholders.

“It’s looking at what can we do to increase the value of private health care by working with the insurers, and changing reimbursement systems is really sensitive and takes a long time.

“It’s really important that the engagement continues and that we pilot new funding models to see whether they’re effective.”

It comes as hundreds of nurses and midwives at 17 Ramsay hospitals across NSW walked off the job on Tuesday, pushing for a 20 per cent pay rise over three years and “safe staffing reforms”.

The nurses, who are also Ramsay shareholders, protested at the AGM and said both parties have not reached an agreement after 20 months of negotiations and 18 bargaining meetings.

They claimed “Ramsay have refused to acknowledge their valuable staff, most of whom have university degrees”.

One shareholder asked Ramsay chair David Thodey when the company would agree to “reasonable demands” around a pay rise, to which he responded: “I can only reiterate we’ve got to keep talking.”

“I understand the frustration ... I know that there’s a number of meetings taking place so we’ll just keep at it and we’ve got to get to a conclusion, we want to get to a conclusion,” he said.

Providing his outlook, Mr McNally expects activity growth across Australia, the UK and Europe this financial year — albeit the rate will be below the prior period.

Mr McNally will step down on December 1 and remain with the company until the end of June 2025.

Former Woolworths supermarket boss Natalie Davis, who joined the group in October as CEO-elect, will take over the top job on December 2.

Ramsay shares closed up 3.5 per cent to $39.35 on Tuesday.