In my recent articles, I referenced challenges facing the private hospital sector given the current mismatch between revenue and escalating costs. This was borne out in an EY study, which has not been made publicly available though referenced at the recent APHA conference. The report indicated a negative trend from 2014, which has culminated in 15 private hospitals closing in the last 12 months. The likelihood is that more will follow.

The Covid years (notably 2020) were a catalyst to exacerbating that trend. The sector has experienced:

  • Capping on elective surgery, due to resourcing issues
  • Ongoing health issues amongst patients who delayed or did not seek treatment
  • Staff burnout, resulting in many reducing their hours or leaving the industry altogether
  • High levels of sick leave amongst hospital staff
  • Consequent staff shortages, leading to increased reliance on casual labour at a premium
  • Material shortages, which resulted in above par cost increments on supplies
  • Significant increases in the cost of utilities (electricity and gas)

For many, the culmination of the above has made recovery difficult. For others, as is evident from the significant number of private hospital closures, it became insurmountable.

Recent news of public sector nurses voting to reject a wage offer (which potentially could be as much as 23% over four years), is unfortunately a cause for angst. As a former hospital General Manager, I would be the last to decry nurses being paid what they are worth. Their technical skills coupled with the exceptional care provided – often in trying circumstances – is worthy of fair and deserved compensation. Nonetheless, the vote to reject the offer is indicative of the difficulties faced by hospital staff across the board – particularly since Covid.  As Lisa Fitzpatrick, Victorian branch secretary of the ANMF stated, it has been an awful time for her members.

Increasing salaries in the public sector will inevitably impact the private sector, who in order to effectively compete for staff, will need to match or better those on offer. For a large acute private hospital, salaries represent in the order of 60% to 70% of total revenue, and every percent is significant. Wage movements of that magnitude for nurses, who are clearly the largest work cohort in an organisation, will impact its salary to revenue ratio and further erode financial sustainability.  This has implications for all stakeholders: governments, healthcare providers, health insurance funds, staff and of course patients.

Australia has one of the world’s best healthcare systems, however the complexities of being an executive in the hospital sector have never been so challenging. Overcoming its difficulties will require genuine intent from all aforementioned stakeholders, as whilst there may be competitive tension between them, the relative strength of each is co-dependent.  Private hospital or service closures are detrimental to the community they service, degrades the value of private health insurance and places greater pressure on public hospitals.  The collective wisdom for reform is a must.

When considering talent acquisition as part of the solution, it will be necessary to recruit executives with the capability to address each of the following:

  • Stakeholder engagement – to enhance service reputation with patients, staff and specialists
  • Targeted activity growth – to strategically expand the range of services offered and attract more healthcare professionals
  • Revenue optimisation – to maximise income through efficient billing practices and diversified revenue streams
  • Diligent cost and financial management – to control expenses and improve financial sustainability
  • Innovative thinking and problem solving – to uncover productivity opportunities

The future of private healthcare in Australia hinges on effective leadership. The road ahead is undoubtedly challenging, but with concerted effort and genuine intent by industry stakeholders, it is possible to navigate these turbulent times and emerge with a more resilient and efficient healthcare sector.

If you would like further advice on attracting and retaining talent in private hospitals or in the broader Healthcare sector, please don’t hesitate to reach out to me or connect with me on LinkedIn.