A stoush has erupted within the medical community over a new model of insurer-backed private hospitals that offers care with zero out-of-pocket fees to eligible patients.
The conflict centres on the new Adeney Private Hospital in Kew, which describes itself as Australia’s first private hospital to offer patients no out-of-pocket costs.
But there is a catch: patients must be members of health insurers Bupa or Medibank to access the hospital’s surgeons, theatres, anaesthetists, imaging, pathology and medical infusions without charge.
While advocates argue the new model revolutionises healthcare by improving affordability and patient choice, the Australian Society of Anaesthetists (ASA) recently warned it represents a dangerous slide toward a US-style system that “cherry-picks” healthy patients and erodes the independence of doctors.
“Under this model… patient choice and doctor independence may be sacrificed in favour of insurer control over the therapeutic process,” the ASA said in a position paper.
Adeney is 51 per cent owned by 42 doctors and 49 per cent owned by health insurer Medibank.
In March, Melbourne mother Zoe – who requested her surname be withheld for privacy reasons – experienced major bill shock. She was hit with a $2100 out-of-pocket quote from an established private hospital for her seven-year-old daughter’s adenoid surgery.
Zoe called her private health insurer, Medibank, to check her rebate and learned she would receive just $180. “I realised the ear, nose, and throat specialist’s scheduled fee was just outrageously high,” she said. “We thought long and hard about it and decided it was simply prohibitive.”
However, the Medibank operator told Zoe that her daughter, Beatrix, might be a candidate for Adeney Hospital. Although Zoe had never heard of it, she did some research and decided to book the surgery at the new hospital.
Six weeks after having the day surgery at Adeney, Beatrix’s life has completely changed.
According to her mother, she no longer snores, sleeps soundly through the night, and has far more energy during the day.
“We did not pay a cent,” she said.
Adeney’s chief executive, Louise Shardey, said patients were travelling from across Melbourne, regional Victoria, and as far as Canberra to access the hospital.
One recent patient, an Echuca farmer, was facing a $10,000 out-of-pocket fee elsewhere to correct an eyelid droop that blocked his vision.
“Every surgeon has a duty to the hardest cases, not just the easy ones.”
Orthopaedic surgeon John Cunningham
“Living crop to crop, that cost was simply not viable for them,” Shardey said. “After searching for a no out-of-pocket option, he found us and received the care he needed.”
She said while there were no immediate plans for additional hospital sites, it “remained open to future growth”.
The hospital has treated almost 10,000 patients since its opening last March. Its broad surgical offerings span orthopaedics, plastics, urology, gastroenterology, oncology, and ear, nose, and throat (ENT) procedures, alongside vascular, colorectal, upper-gastrointestinal, breast, and general surgeries.
While many hospitals offer no-gap fees for certain surgeries, Adeney is the first of its kind to offer no out-of-pocket fees across all its procedures.
Insurers pay Adeney’s doctors higher agreed fees in exchange for a commitment that their patients won’t be charged a gap fee.
“It’s tough out there for people right now,” said Medibank group executive Rob Read. “With surgical out-of-pocket costs rising, a no out-of-pocket solution for patients just makes sense.”
However, the medical establishment is deeply divided over the long-term implications of insurer-owned facilities and their impact on the viability of established private hospitals.
Orthopaedic surgeon John Cunningham said the model relied on excluding complex, high-risk patients.
“Every surgeon has a duty to the hardest cases, not just the easy ones,” Cunningham said.
“A hospital that only accepts the easy ones isn’t practising medicine — it’s running a screening business.”
He said under the Adeney model, the insurer sits between doctor and patient, deciding who comes through the door.
“The sickest patients are the reason hospitals exist. Build one that excludes them, and you’ve built something else entirely.”
This week, an anonymous group of anaesthetists hit back at the ASA, accusing their peak body of being “hijacked” by corporate interests. They claimed the ASA was protecting established private hospital monopolies that faced significant financial disruption from the new competition.
“Out‑of‑pocket expenses continue to limit access to private care,” the anonymous group wrote in an email to the ASA seen by this masthead. “Models such as Adeney… offer meaningful and immediate financial relief to thousands of Australians.”
This masthead spoke to three of the members of the group, who requested anonymity for fear of reprisals.
One Melbourne anaesthetist said major hospital groups were panicking because the short-stay, zero-gap model was draining their most profitable patients.
“Established private hospitals failed to accommodate a new model of care that’s been developing over the past seven or eight years,” they said. “It is the shorter cases that tend to make money for private hospitals. When you create an environment where you can undertake these short cases with no cost to the patient, it suddenly becomes incredibly appealing to both patients and surgeons.”
They said anaesthetists within traditional hospitals were leveraging their influence within the peak body to stifle competition.
ASA president Dr Vida Viliunas defended the society’s stance, rejecting the suggestion that the peak body was protecting the commercial interests of established hospital giants.
She maintained that the policy reflects “longstanding principles relating to patient access, clinical independence, and the sustainability of the private healthcare system”.
She said while the group had some concerns with the co-ownership model of private healthcare, it recognised that it could deliver benefits for eligible patients by reducing or eliminating out-of-pocket costs.
Ben Harris, director of policy and research at Private Healthcare Australia, said surveys had consistently shown that Australians were avoiding or postponing healthcare due to costs.
He said competition that delivered better value for patients should be embraced, rather than feared.
“If someone can receive the same high-quality operation with no out-of-pocket costs, it’s difficult to argue that patients are worse off,” he said.
He said treating lower-risk patients in facilities designed for lower-risk surgery wasn’t cherry-picking.
“It’s good clinical practice,” he said. “Patients with complex medical needs should be treated in hospitals equipped for that level of care. That’s exactly how a safe health system should operate.”
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