Funding and Efficiency

Private hospitals are funded by their owners and operators. The services provided to patients treated in private hospitals are partially or fully subsidised from a variety of sources, including private health insurance funds, the Department of Veterans’ Affairs, Medicare, the PBS, and third party insurers.

• In 2007-08, the most recent period for which this data is available, public hospitals received a total $30.8 billion to treat 60% of hospital patients. In 2007-08, private hospitals received a total of $7.7 billion to treat 40% of patients.

- Australian Institute of Health and Welfare, Health Expenditure Australia 2007-08.

• On the surface at least, these figures would seem to support the view presented by the Department of Veterans’ Affairs to the House of Representatives Standing Committee on Health and Ageing on 4 September 2006 that: “the work we have done basically suggests that we pay significantly lower prices in the private sector than we do in the public sector.”

- House of Representatives, Standing Committee on Health and Ageing, Reference: Health Funding, 4 September 2006.

• The productivity commission looked at the costs of treatment within public and private hospitals. It found that after adjusting for casemix differences that private hospital costs were $130 lower per casemix-adjusted seperation.

Productivity Commission (2010) Public and Private Hospitals

• The Productivity Commission found that of the 20 different Major Diagnostic Categories (MDCs), the cost per separation were: –
  • Lower in private hospitals for half of all MDCs
  • Lower in public hospitals for only one-fifth of all MDCs

Productivity Commission (2010) Public and Private Hospitals