General hospitals: A healthy prognosis
Demand for hospital services is rising. While a growing and ageing population underpins an increase in those seeking treatment, rising incomes and medical advances are also contributing to demand.
The General Hospitals industry in Australia comprises nearly 1,300 hospitals and about 82,000 beds. Private and public hospitals account for about one-third of all revenue generated by the Health Care sector.
Private and public hospital revenue has grown at an average rate of 4.9% over the last five years, and is expected to reach $43.8 billion in 2009-10.
Hospital revenue is growing faster than the increase in bed numbers, which reflects a growing number of patients being admitted to hospitals. There has been a steady decline in the number of hospital beds per thousand people, which currently stands at about 3.8 beds per thousand. A fall in the average length of stay of patients has supported rising admission rates.
Expenditure on public hospitals is expected to grow at an average rate of 5.3% in the five years to June 2010. In 2009-10, government expenditure on public hospitals will reach $34.8 billion. The Commonwealth Government currently provides around 40% of this funding, and this will rise to 60% under the National Health and Hospitals Network Agreement. Revenue generated by private hospitals is growing more slowly, increasing by an expected average of 3.8% per year over the same period.
The private sector accounts for about 32% of all hospital beds, a share that has remained relatively steady over the last five years. For-profit hospital operators account for about 55% of the private hospital sector.
While the relative size of the private sector has remained constant, market share has been moving. A decade ago there were five major for-profit private hospital operators in Australia. By 2004-05, the number was down to three (Affinity, Ramsay Healthcare and Healthscope), which accounted for a total of about 47% of all private hospital beds.
After a spate of acquisitions and disposals, the two largest for-profit hospital operators, Ramsay and Healthscope, now account for about 30% and 12% of all hospital beds in Australia, respectively. Meanwhile, Ramsay Healthcare has stated that a rationale for the company’s offshore expansion includes Australian competition regulation constraints.