Radio interview with Minister Butler, ABC Perth – 27 May 2025

NADIA MITSOPOULOS, HOST: The future of private hospitals is in the spotlight again after the collapse of Healthscope, Australia's second largest private hospital group. Now, Healthscope, which is owned by a Canadian-American investment firm called Brookfield, runs 37 private hospitals, including the Mount here in Perth. Now, the company's CEO says hospitals will not close, but did explain what caused the collapse.

[Excerpt]

TINO LA SPINA, HEALTHSCOPE CEO: The business had three core issues. One of them is there's been too much secured debt, and that's being addressed in this process. The other is rentals that the company are paying are out of the market, they're too high. That will get addressed as part of this process. The third, as it has been widely spoken about, is the industry structure with private health insurers basically having squirrelled away billions of dollars over the last few years and not putting it back into the private sector.

[End of excerpt]

MITSOPOULOS: That was Tino La Spina, he's the CEO of Healthscope. Now remember, here in WA, St John of God closed its maternity ward at its Mount Lawley hospital last year, and maternity services will close at its Bunbury hospital in a month. And last year, the private 75-bed Bethesda mental health clinic closed, and that was only operating for a year because it wasn't financially viable. So the question being asked is, what is the future of private hospitals? I want to go to Mark Butler, who, of course, is the Federal Health Minister. Minister, good morning.

MARK BUTLER, MINISTER FOR HEALTH AND AGEING, MINISTER FOR DISABILITY AND THE NDIS: Good morning, Nadia.

MITSOPOULOS: First of all, will there be any public bailout of Healthscope at all?

BUTLER: No, we don't think there's a case for taxpayers bailing out, particularly those first two issues that Tino La Spina talked about. This was a private equity play by a very big overseas private equity firm that tried to make money out of private hospitals here in Australia. They structured the company in a very bizarre way in terms of the rent that it was paying, the rental on equipment, and it's all really sort of come undone for them. The challenge now is to ensure that these hospitals, including the Mount down at the bottom on Mount Eliza in Perth, but 37 hospitals across the country are transferred in an orderly sale to a new, frankly, more stable operator.

MITSOPOULOS: So the expectation is a buyer would be easily found?

BUTLER: I think we don't have a direct line of sight of this, but the company's already made it clear that there are 10 or 12 interested parties in buying what is otherwise a pretty good business. Many of these hospitals, including the Mount, have been operating for many years, delivering lots of private procedures to Australians, about 650,000 Australian's every single year. There's a very strong national interest in making sure that this sale process is orderly. I sought a particular assurance from the company yesterday that if you've got a birth planned or a knee replacement booked at a Healthscope hospital over coming weeks, that every Australian who has that booking can be confident it will go ahead. And I received that assurance, and I'll be holding the company to it.

MITSOPOULOS: It does beg the question though, private equity firms, are they the kind of organisation that should be running hospitals?

BUTLER: My focus right now is on patients and the 19,000 hardworking staff that Healthscope hospitals across the country, and giving them confidence that this will be an orderly process. But as I said yesterday, I think there will be some reflection on whether overseas private equity firms are the right people to be running such a crucial part of our healthcare system. As the Labor Party -

MITSOPOULOS: As the Health Minister, are you comfortable with that sort of scenario? Would you rather they were not running hospitals?

BUTLER: When this overseas private equity firm first applied to buy this significant asset, where was the Labor Party? We were in opposition at the time, but we did raise questions about whether this was an appropriate sale that should be approved by the Foreign Investment Review Board at the time, and I think there will be reflection on this. I'd like to see this go to a stable operator that's well known in the Australian market. But we've got a bit of a way to go on this. The company has, they tell me, about 12 months forbearance on their loans. They'll continue to operate in the usual way. All those procedures that are booked, all those staff who are employed will turn up and continue to operate in the usual way. But over coming weeks and months I would like to see this asset, this very important asset in our healthcare system, transferred to a stable operator.

MITSOPOULOS: Are there going to be challenges- if we look more broadly now at private hospitals, are there going to be challenges for private hospitals to remain profitable?

BUTLER: There are right now some challenges, and I've talked publicly about them. Only two or three months ago, I said to all of the private health insurers that I expected them to find a way very quickly to pay more of the income they earn from millions of Australian households- to pay more of that income to private hospitals who actually deliver the care. And what we've found over recent years is that the percentage of the income that insurers earn that ends up in hospitals actually funding care has dropped. And at the same time, profits and management expenses for those private health insurers has increased. I said to those insurers quite publicly, I said, you've got a few months to sort this out, to get the ratio of your income that actually ends up with hospitals back up to its historical average, or I will act – and the period of time I gave them to do that is starting to come to an end over coming weeks. And if they haven’t done it to my satisfaction – and obviously, I'll be talking to private hospital operators, and the AMA and the nurse’s union and others who have a pretty clear interest in this – if this hasn't corrected, then as I said, I'll look at taking regulatory action as the Government.

MITSOPOULOS: What action can you take?

BUTLER: We're the Government. We have the ability to legislate here. We have the ability to make regulations that govern the operation of private hospitals. At the end of the day, these are private operations, but they deliver a public good. Private insurers and private hospitals also have significant taxpayer support to the tune of about $8 billion every year through the private health insurance rebate that's paid by taxpayers through the Australian Government, so we do have skin in the game here. We do recognise, we always have, going back to when Bob Hawke created Medicare, that private hospitals are an important part of our healthcare system. They must be viable, and I continue to bring insurers and hospitals and the doctors and the nurses and other players in the system together to find a better way forward than we currently have.

MITSOPOULOS: Okay, so just on- you talk about legislating. So it sounds like you're certainly at this point on the side of the hospitals, who do say that health insurers are not putting enough back in and they're squirrelling money away. Would you be prepared to make private health insurers pay set fees for set producers? Because as I understand it, they can pay one hospital one amount for a knee replacement, and a different hospital another amount.

BUTLER: Look, that would be a significant change to the way in which we operate our private hospital system, but some operators are raising whether or not there should be a standard price across the system in the way there is now for public hospitals. When I was first a junior Health Minister 10 or 15 years ago, the West Australian hospitals paid quite a different price to Sydney hospitals – the public hospitals I'm talking about – for the same procedure. That no longer happens. We now have a national pricing system for the 700 public hospitals across Australia, whether they're on the West Coast or the East Coast. That's a longer-term reform, though. That would require a lot of consideration, but I have said that I'm up for those long-term reforms.

And I don't think- although I think insurers do need to think about paying more of their income to hospitals, I think hospitals also have to recognise that the healthcare system is changing under their feet. They need to be more agile, more innovative about the way, for example, in which they're able to deliver hospital in the home to patients, rather than having patients stay for long periods of time in the hospital when they don't need to anymore.

MITSOPOULOS: Because one of the arguments that you’ll get from the health insurers is, well, hospitals are simply charging too much.

BUTLER: I think this is obviously a pretty competitive tension you have between hospitals and the insurers that fund them. I've tried to work through this in a collaborative way. I've got my department through the Department Secretary convening regular forums of all of the CEOs, so the CEOs of the insurers and of the hospitals, as well as the doctors and nurses and other key players in the system, to try and find a more collaborative way forward. But at the end of the day, this can be a pretty competitive field where big corporate players, whether they're insurers or big hospital operators, push their own commercial interests. My job as the Health Minister is to make sure through all of this the patient interest is the one that is at the forefront.

MITSOPOULOS: Mark Butler, the Federal Health Minister, is my guest this morning at 08.43, and I've got a specialist surgeon who's called in who wants to talk about this, and I'll get to him in just a moment. I mean, we've had, St John of God for instance has shut down maternity services out at Mt Lawley Hospital, and they're going to do the same in a month at its Bunbury Hospital. We've seen a private mental hospital closed after a year because it just wasn't viable. Do you think more private hospitals will close or offer fewer services?

BUTLER: There are particular challenges in maternity services and in psychiatry or mental health services, and I've put some proposals on the table for that forum of chief executive officers to consider. Some of them are really about the supply of workforce, particularly for mental health. We're finding it much harder to get consultant psychiatrists doing work in private hospitals, so I've put some ideas on the table for the hospitals and the insurers to think about to make that easier. Some different funding arrangements, but also considering the way in which we use overseas trained psychiatrists.

For maternity, there are just quite a lot fewer births taking place in private hospitals, similar to the case 10 or 15 years ago. It used to be about 40 per cent; now it's down to about 25 per cent of births are taking place in private hospitals. That is creating some challenges of scale for private hospitals, but there are also some issues about the way in which our insurance products are structured. Again, I've put some reform ideas. At the moment, a family needs to pay for a gold product insurance, which is quite expensive, if they're going to get maternity cover. I don't think that is a fair way to structure the insurance market. We should make it easier for families to choose cheaper products and still have access to maternity cover.

MITSOPOULOS: I'll leave it there. I appreciate your time this morning, thanks.

BUTLER: Thanks, Nadia.