Is Medibank’s transformation to provider a success or a conflict?

4 minute read


Medibank is spruiking its transformation from insurer to provider, but competitors and peak bodies are seeing and calling out conflicts of interest.


At Medibank’s 2024 AGM yesterday, chairman Mike Wilkins spruiked the more than $3.4 billion in dividends to shareholders since the company’s listing a decade ago (including a dividend increase of 13.7% this year), and the delivery of a 14.1 % rise in net profit to $570.4 million.

And he didn’t stop there – highlighting a fundamental transformation of the business from mainly a health insurer to a major health provider, investing in developing preventive care, home-based health services, and mental health support.

But not everyone is happy.

Over and above the many fights going on with private hospitals on premiums, some major spats are starting to emerge between the insurer and various healthcare provider organisations about the way the group is going about vertically integrating healthcare services, and openly trying to channel business into their insurance arm (its major revenue and profit generator) by restricting the provider services they have built or bought only to Medibank customers.

Mr Wilkins told shareholders that Medibank had grown into a major health-focused company, serving 4.2 million customers across the Medibank and AHM brands.

He said that this growth marked Medibank’s shift from a traditional insurer to a leading health company that now emphasises innovation in home care, virtual health, and mental health support.

Mr Wilkins said that a key focus has been on delivering value to customers while contributing to healthcare accessibility and capacity, as well as reducing public hospital strain.

But critics are pointing out that the only access the group is creating is restricted access for its own customers and that this is starting to develop into US style insurance group conflict.

Many peak provider organisations such as the RACGP are worried that the group’s ownership of provider services at the coalface, such as its 90% shareholding in the large GP corporate group MyHealth, represent a significant conflict of interest, given already demonstrated behaviour of channelling such services only to their customer base.

MyHealth GPs by law can’t just service Medibank customers but the college has expressed concern that the group might be using data and vertical integration to channel customers inappropriately, denying the fundamental philosophy underlying Medicare of clinician independence in decision making.

Last month the issue erupted following the release of KPMG report commissioned by Medibank on the economics of home in the home care services.

The report claimed that upwards of $7 billion could be saved by 2030 by expanding virtual hospital care in the home, a service that Medibank provides for its customers.

Several provider organisations immediately pointed out that their patients could not access these hospital in the home services unless their patients joined Medibank saying that Medibank was effectively building out provider services to “channel” patients directly to their insurance parent group. In a post on LinkedIn, Carmel Monaghan, CEO of private hospital operator Ramsay Health Care, said:

“Unfortunately, Medibank patients are unable to access funding for Ramsay’s Hospital in the Home services, as they only fund home services for Ramsay Health Care patients when it is delivered by its vertically integrated subsidiary Amplar.”

In a comment on that post, Mark Molloy, group health fund audit and compliance manager at St John of God Health Care said that Medibank was using vertically managed care via its Amplar arm and either refusing to fund private hospitals for the hospitals equivalent or forcing private hospitals to use Amplar.

Brett Heffernan, CEO of the Australian Private Hospitals Association, said at the time that health insurers’ restrictions on home-care funding were not in patients’ best interests.

“Such services are almost exclusively delivered by the insurers themselves, who seldom recognise or pay for any other providers,” he said.

“Insurance companies determining clinical needs based on what they’re prepared to pay … that’s not why anyone takes out private health insurance.”

Last year Medibank increased its shareholding from 49% to 90% in large GP corporate MyHealth for around $50.8 million.

At the time Medibank CEO David Koczkar said:

“Primary care is at the heart of the Australian health system. More investment in GP-led care is critical, so that Australians can have their immediate health needs met as well as having a greater focus on prevention.

“A proactive and coordinated system that brings together the benefits of in-clinic primary care, home-based care and virtual care is central to meeting the future challenges set out in the Australian Government’s Strengthening Medicare Taskforce Report.

“The challenge facing the entire health system is how to ensure a more connected healthcare experience that benefits patients and their families as well as the health professionals who provide that care.”

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