Radio interview with Minister Butler, ABC Radio Brisbane – 11 June 2025

ELLEN FANNING, HOST: Well, the Federal Health Minister is Mark Butler, who's with us now. Good afternoon. You're the fellow looking into this. Why is the private healthcare system so broken?

MARK BUTLER, MINISTER FOR HEALTH AND AGEING, MINISTER FOR DISABILITY AND THE NDIS: There are a range of different things happening in the private health system. The Prime Minister, of course, is right that there is a structural issue right across the private hospital sector, that over recent years the private health insurance companies who are, essentially, the funders of the private system have been paying less of their income out to private hospitals who actually deliver the care.

What you've seen is some of the private health insurance companies see their profits increasing, their management expenses increasing while, at the same time, the margins of our important private hospitals have been shrinking. Three months ago I said to the insurers, you need to lift the percentage of your income that actually ends up being paid to hospitals to deliver care. And if you don't do that over the next few months, I'm going to look at options I can take to force you to do it.

Now, there’s some evidence of an increase over the last few months, but that time is running out and insurers are going to be put to proof on that question in the very, very near future. At the end of the day, the private hospitals are the ones that deliver the surgery, that deliver the births. They're the ones delivering the care. The private health insurance companies are the ones that fund it all. You've got to get that balance right.

But there are also, on top of that, some particular challenges in the sector. You mentioned Healthscope, Helen, which has five hospitals in Brisbane, has about 37 across the country - that has gone into receivership. It's the second biggest private hospital operator in the country. It looks after about 650,000 patients every year - giving birth, having elective surgery - and it's gone into receivership. But it's sort of a bit of a unique situation, Healthscope, because it was taken over several years ago by a North American private equity company that set up a very complicated financial structure that's basically gone wrong.

And I'm very confident - very hopeful, but also very confident - that we can see an orderly transfer of that important asset, the Healthscope entity, to a more stable operator that is able to continue to deliver services.

FANNING: Brett Heffernan, the CEO of the Australian Private Hospitals Association, says that he hasn't seen any increase in what insurers are paying private hospitals. Here he is on 7.30 last night.

[Excerpt]

BRETT HEFFERNAN, CEO, AUSTRALIAN PRIVATE HOSPITALS ASSOCIATION: The Minister threatened two months ago that he gave the health insurers three months to get their house in order and return better prices to hospitals. I can report from my members that they are not seeing any change.
 
[End of Excerpt]

FANNING: So, why won't they pay up?
 
BUTLER: We're talking to hospitals directly. I'm not quite sure what that person's role is, but we're talking to hospital CEO’s directly, as well as to private health insurance CEO’s directly. And as I said, the insurers will be put to proof. We want to see how much of their income is being paid out to hospitals to deliver services.

And there's pretty public information that we know shows that there are more services being delivered by private hospitals, more people going through them, more surgeries being performed. That part of -

FANNING: So, you're seeing some evidence? I mean, the fellow we were hearing from, just for clarity, is the CEO of the Australian Private Hospitals Association, so presumably he speaks to all those individual private hospital CEO’s that you're dealing with and your department's dealing with.

BUTLER: Yeah.

FANNING: And he's saying they've got a three-month deadline, two months they're not seeing any change. Are you seeing any change?

BUTLER: We've seen a bit of evidence but I've said to the insurance company themselves that it's not enough. We want to see very clear evidence of what has happened since I put that challenge to them a couple of months ago, and what is going to happen over coming months. And if it's not satisfactory to me, if it doesn't give me confidence that it's going to underpin a strong viability of the private hospital sector going forward, as I said, I will take action.

We are the Government that regulates this sector. Yes, it's a private sector with commercial entities, both hospitals and insurers that obviously pursue their own commercial interests. But there's also a very significant national interest, a public interest in this functioning world. They receive, ultimately, $7 or $8 billion a year from taxpayers through the private health insurance rebate and, obviously, millions of Australian households are paying their hard-earned cash to be members of these private health insurance funds and expect to get a service in return.

So yes, they're private entities, but ultimately, if they're not doing the right thing, as the Federal Health Minister, I will take action.

FANNING: We're listening to the voice of Mark Butler, Federal Health Minister, talking about the very viability of private hospitals here in Queensland, some private hospitals. Healthscope are the second largest private hospital group in the country. And as you'll hear here, Minister, our State Health Minister, Tim Nicholls, was on the program last week and I asked him about the issues facing Healthscope.
 
[Excerpt]
 
TIM NICHOLLS, QUEENSLAND HEALTH MINISTER: Healthscope has got funding. They received some further funding from their financiers of $100 million. They've reassured health ministers across the state that they can and will continue to service and provide services to those clients. The big ones for us are the Gold Coast Private, Brisbane Private and Sunnybank Private and we're monitoring the operation of all of those hospitals on a regular basis as well. We will, if necessary, step in, but most of that work is actually health fund work, it's not state-funded work. So it's mainly funded by the health insurers, the Bupas and Medibanks of the world. And really, in that sense, that is a matter- and that's why the Health Minister, the Federal Health Minister, is really riding, if you like, a shotgun on those matters and the negotiations with Healthscope on their future viability. And we've spoken about that and agreed that he takes the lead because it's Australia-wide with Healthscope in respect to negotiations about the delivery of services there. But we remain assured that those services can continue.
 
[End of Excerpt]
 
FANNING: Alright. So that's Tim Nicholls, the Queensland Health Minister. “We will, if necessary, step in.” Is that an option the Federal Government would consider?
 
BUTLER: Let's take this one step at a time. As soon as this happened, all of the health ministers, including Tim Nicholls and I, had a hook-up to coordinate our response to this. And we're meeting face-to-face on Thursday night and Friday in Melbourne at one of our regular health minister meetings, and we'll get an update as well. Now, we have a level of confidence that the operations of Healthscope will continue over coming months on a business as usual basis as your interview with Tim Nicholls indicated. They've assured us and shown us that they have as much as 12 months funding or forbearance on their loans to continue operations. And that gives more than enough time for the very significant number of interested buyers to be considered by the receiver. We really want to see a stable transfer of these important assets. Many of them have been delivering important services for literally decades, not just to Queensland, but around the country. And I have a high level of confidence that the receivers are focused on an orderly transfer of these assets to a more stable operator, frankly, than an overseas private equity firm, which has tried a financial play on this and it's ended up in tears.
 
FANNING: Yeah, well it's been hopeless financial management by the private equity. Some deal that involved selling the land underneath it, so now you've got landlords, and then you've got all the private health companies which you seem to be indicating are more interested in their profits than giving private hospitals enough money to cover the cost of doing the surgery that the people who pay the private health premiums expect. I mean, what are your options to knock heads together, and do they involve the rest of us suckers ending up having to pay higher private health premiums?
 
BUTLER: We don't want to see that. You're right. What happened was this overseas private equity firm came in took over the company, then sold all of the property at a pretty high price, sort of repatriated that value back to North America, where the private equity firm is located, and in return had to enter into some pretty high rental arrangements. The people who bought the property insisted on sky-high rents, well above the market rate, which has essentially bled the hospital operations dry. Yes, there are pressures on the private hospital system across the board, but this is a bit of an outlier.
 
FANNING: So should anyone be able to own private hospitals, given that we rely on them in Australia? We have a dual system. You want to have a baby, you've got the option of going to private hospital, a hip transplant. Can you have private equity - I'm tempted to say cowboys, but you won't reform the defamation laws. I've said it now. Would you rule out that those folks can take over? Are they the stable operators you're looking for, those sorts of entities?
 
BUTLER: I've been pretty clear that I don't want to see a repeat of this. We were in opposition when there was the transfer to the private equity firm. And we made clear at the time that as the Labor Party, federally, that the Foreign Investment Review Board should ask some pretty serious questions about whether an overseas private equity firm was the right body to run the second biggest private hospital operator. I think with the benefit of hindsight, maybe that wasn't the right transfer. But there's a lot of very reputable operators here who I understand are interested in exploring a purchase of this. That's a matter for the receiver. Obviously, as the Federal Government itself, but also, as Tim Nicholl said, playing a bit of a role to coordinate the response of all governments in this process. We're watching this expression of interest process that the receiver will undertake very closely to make sure that whatever happens is ultimately in the interests of patients, and the 19,000 very hardworking doctors and nurses and other health staff who are obviously worried about their employment future as well.
 
FANNING: After this conversation with Health Minister Mark Butler, I'd like to hear your experiences of private health. Do you rely on it? Has it become too expensive? Maybe you've let your cover go, or maybe you have really relied on it, the public system causing too great a weight and you've decided to go private and incur the additional cost.
 
Minister, I want to ask you about the Toowong Private Psychiatric Hospital closing its doors today. Fifty-eight beds for mental health support no longer available in Queensland. We are told that, from the Royal Australian and New Zealand College of Psychiatrists Queensland branch chair, that we are 300 to 350 mental health beds short in Queensland already. Is there a role for the Federal Government here?

BUTLER: Look, there is, and there's frankly a role for the College as well. There are two areas I'm particularly worried about in the private hospital sector. One is maternity services. There are just some structural issues there that mean that some hospitals are closing their maternity services, and we've put some ideas to the private hospital sector and the insurers, frankly, about ways in which they can provide better support for families wanting choice, families wanting to have a birth at a private hospital.
 
The second area is mental health. Of the psychiatric hospitals across the country, we think probably one in three beds are currently empty, and that's not because there's not huge demand for mental health support out in the community. Your listeners know that there are. There is very big demand. It's because the hospitals are really struggling to get the psychiatrists to do the work. Really, really struggling to get psychiatrists to come and admit patients and then continue to see those patients in the hospital setting once they're admitted. I've put in place -
 
FANNING: Well, I mean, if I may, just for the sake of the audience, Federal Health Minister Mark Butler with me. Part of the problem, we are told, is it's increasingly hard to recruit psychiatrists willing to admit those patients to private hospitals because of the pay disparity with outpatient practices. It's much more lucrative to see a patient in an out practice setting than it is to admit them.
 
BUTLER: Yeah, there's very clearly been a very big work practice change among consultant psychiatrists since COVID. There's much more of their work is being done consulting in their own rooms and less work that they're willing to do in private hospitals admitting patients. Now, we've put a range of proposals to the private hospital sector about ways in which we can expand that workforce. First of all, we've made it much easier for those admissions to take place through telehealth. That's a change I made only in recent months, so the psychiatrist doesn't have to drive to the hospital and do the work physically. I hope that will provide some relief. But also, I think we're going to have to look at recruiting more overseas trained psychiatrists if Australian trained psychiatrists are not willing to do this work.
 
FANNING: Wouldn't the obvious thing to do be just pay them more? Sometimes we're told they're paid as little as a third of what they'd be earned if they were looking after outpatients. Just briefly.
 
BUTLER: I've never heard that number myself, and that's not being put to me as the reason why there's been such a dramatic shift in workplace practices in the last two or three years. But suffice to say, Toowong is one example, there are others around the country where we've seen some psychiatric hospitals close. It is a very, very serious concern for me, given the level of demand in the community for high quality mental health services.
 
FANNING: Okay. So what should be done about it? I mean, there was a suggestion in Brisbane from an opposition politician that the Queensland Government should simply buy Toowong Psychiatric Hospital. Do you agree?
 
BUTLER: That's a matter for the Queensland Government to consider. There are different arrangements around the country where state governments don't necessarily buy private hospitals, but they do have a contractual arrangement with private hospitals, so that if there are vacant beds, which obviously undermines the viability of the hospital itself if they're just lying there vacant, the state government might essentially contract to use those beds. Because as your listeners know, as you know, Ellen, most state governments’ public hospital systems are overflowing with mental health demand.
 
FANNING: Yeah, we're running out of time, Mark, but I'm conscious of that. But the jolly thing shut its doors, so the time for that is over. Is there any way that you can see that this facility could be reopened?
 
BUTLER: Look, there is demand there. We're trying to make sure that this is a better product for private hospitals and private insurers so that they can underpin operations like Toowong. Whether there's a role for the Queensland Government, you need to ask that question to Tim Nicholls. Different state governments are taking -
 
FANNING: They say no. They say no.
 
BUTLER: Obviously, I'm not suggesting they would necessarily buy it, but whether they would want to think about contracting for some beds to underpin the viability of it, that would be a matter for Tim to think about.
 
FANNING: Okay. And just finally, there was a lot of controversy after Tim Nicholls, the State Health Minister, said that people who went to Toowong Private Hospital, including many military veterans who'd sustained psychological injuries in the armed service, that they were lower acuity patients. And the issue came up that – well, it's sort of catch-22 – they're not, in quote, unquote, “bad enough to access public beds, and so they end up in the private system.” Why do people suffering with mental health conditions need to be pushed to the point of being bad enough to be treated in the public health system?
 
BUTLER: I think we have seen in public systems right across the country the bar get higher and higher in terms of the acuity, the severity of someone's mental illness, to qualify for a state service. That's why there's been so much pressure on the Commonwealth to build new services that we didn't traditionally do. This was always traditionally a responsibility of state governments because the services being delivered by states just has not been able to deal with the level of demand in the community. This is not a new issue. State government services right across the country have increasingly only really been dealing with people with the highest level of acuity.
 
FANNING: Mark Butler, you've been very generous with your time. Good luck twisting the arms of the private health insurers to get them to pay more to keep these vital private hospitals open. Good luck to you.
 
BUTLER: Thanks, Ellen.
 
FANNING: Mark Butler there, the Federal Health Minister.