Bupa Faces Allegations of Anti-Competitive Practices
Health insurance giant Bupa has been accused of anti-competitive behavior in its dealings with private hospitals, a situation that critics argue is limiting the choices available to Bupa customers. Leaked documents have revealed how the insurer’s contracts impose strict conditions on small hospitals, which often lack bargaining power against a fund that holds a quarter of the Australian market.
The main concern revolves around Bupa’s Medical Gap Scheme, with private hospitals claiming that the insurer uses the terms of its hospital agreements to prevent subcontracted doctors from charging patients any out-of-pocket costs. Former Bupa executive David Du Plessis, now working as a contracts consultant for private hospitals, supports these claims.
Du Plessis explained that the complexity of billing means hospitals that refuse to sign a contract face a difficult choice: either accept lower payments from the insurer per procedure or pass significant out-of-pocket costs onto their patients. He described this as a “wedge,” a way of forcing the hospital to hold the contract.
While avoiding out-of-pocket costs may seem beneficial for patients, Du Plessis warned that they could also lose out. Doctors are unable to use Bupa’s Medical Gap Scheme at non-contracted hospitals, meaning patients who go to one of those 99 facilities might face a double hit: out-of-pocket costs from both the hospital and the doctor.
“It’s the consumer in the end that’s also wearing the cost of this to the benefit of Bupa and its profitability,” Du Plessis said.
Bupa responded by stating that the claims about its gap scheme were baseless, emphasizing that the scheme was designed to help customers pay less, and in many cases nothing, for medical out-of-pocket costs.
Understanding the Bupa Gap Scheme
Bupa’s Medical Gap Scheme has been operating in its current form since 2021. It applies when patients are treated as “No Gap” or “Known Gap” patients in a private hospital, meaning they should only pay their excess — or up to $500 on top of that if they are a Known Gap patient.
Typically, under contracts with hospitals, an insurer details what it will pay the hospital for theatre and room fees if customers are treated as a no-medical-gap or fixed-fee patient. It is then up to doctors whether they will apply No Gap schemes on their share of the procedure.
However, Bupa’s Medical Gap Scheme operates differently by using the terms of the hospital contracts to stipulate that physicians cannot charge a gap fee either. This also means Bupa No Gap doctors cannot make use of the scheme at uncontracted hospitals.
“For those patients unaware of the Bupa deals, if they end up in an uncontracted hospital for a major procedure … they could be looking at thousands in out-of-pockets,” Du Plessis said.
Jane Griffiths, chief executive of Day Hospitals Australia, said the doctors were subcontractors and the terms were unfair. She argued that it was essentially making the hospital the policeman for the doctor’s fees, a practice unique to Bupa.
Uncontracted Hospitals in Bupa’s Sights
Since August last year, Bupa has also been trying to impose similar conditions on doctors at uncontracted hospitals. In a letter to the Australian Society of Ophthalmologists, Bupa stated that specialists could start using the No Gap scheme for doctors’ fees at some of the 99 hospitals across the country it did not have a contract with.
However, it stipulated that they could only do so if the uncontracted hospital gave and continued to comply with a written undertaking not to charge Bupa customers any out-of-pocket costs beyond the applicable excess.
Australian Private Hospitals Association chief executive Brett Heffernan called this approach “beyond the pale.” He criticized Bupa for squeezing the hospital on one end in terms of contract negotiation and squeezing the doctors on the other end to put pressure onto the hospitals to capitulate.
The association has called on the Australian Competition and Consumer Commission (ACCC) to act, alleging that Bupa’s actions are anti-competitive.
Terms Could Be Anti-Competitive
Bashi Hazard, a lecturer in competition law at the University of Sydney’s Law School, said the gap scheme could be anti-competitive if it was found to be both coercive and limiting competition in small areas.
“What we’re looking at in this situation could be a vertical restraint,” Dr Hazard said. “That is something that, particularly in regional areas, the regulator would have to take a close look at.”
Bupa defended its practices, stating that it had previously contacted some non-contracted hospitals to outline “voluntary contracting options” that could support lower out-of-pocket costs for members. The company emphasized that doctors were never asked to ensure hospital fees were waived, and any arrangements were optional, case by case, and focused on improving affordability for patients.
Power of Bupa’s Market Share
Bupa is one of Australia’s largest health insurers, with nearly 4 million customers nationally and a quarter of the market. It is seen as essential for most hospitals to contract with the insurer. Bupa is the market leader in South Australia with more than 40 per cent market share.
In states where Bupa has a huge market share, it becomes doubly problematic, according to Du Plessis. A Bupa spokesperson said patients in regional areas could have fewer choices, and “that’s why we work closely with our customers to ensure they have access to care at any of our contracted hospitals.”
Small Hospitals Feeling the Brunt
Du Plessis highlighted that the problem for many small hospitals was compounded by Bupa’s slow offering of contracts, especially to new hospitals. He noted that many providers cited difficulties with getting contracts, particularly new hospitals that are opening, and being able to establish reasonable rates with them.
“They’ve had significant delays through the negotiation. They’ll send an email to try and continue the next step of a negotiation and may not even receive a response for weeks,” he said.
When he worked at Bupa, there were about six staff to negotiate with more than 600 private hospitals, and sometimes delays were part of the strategy.
The contracts obtained by the ABC showed the long arms of these contracts. Hospitals must get permission from the insurer if they intend to open a new unit or wing, show evidence of why it is needed, the names of the doctors involved, how they will attract patients, and even guess how many Bupa patients might use it if they want to get their higher contracted rates.
While legally allowed, the Australian Private Hospitals Association said it was onerous and broke the compact with customers to only insure for services, not direct them.
Conclusion
Bupa’s contracting practices have come under scrutiny, with critics arguing that the insurer’s actions are anti-competitive and limit patient choice. The company maintains that its practices are designed to benefit customers, but the allegations raise important questions about the balance between profitability and fair competition in the healthcare sector.
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