Dr Gary Galambos Opposes US-Style Managed Care in Australia

The United States healthcare system has left many of us in utter disbelief with its sky-high costs, lack of coverage for a significant portion of the population, and limited healthcare services. Thankfully, in Australia, our healthcare system has been a beacon of stability and top-quality care for medical professionals and patients alike. But, in recent times, we've seen a worrying push towards the adoption of US-style managed care health systems in Australia. What's even more concerning is that this issue doesn't seem to be getting the attention it deserves.

Back in December 2020, the push for managed care in Australia reached a critical point. Honeysuckle Health (HH) and Australian private health insurer (PHI) nib lodged a submission to the Australian Competition and Consumer Commission (ACCC) for authorisation to establish a buying-group. Such groups are common in the United States where they provide collective contracting and related services for private health insurers and other healthcare payers.

Numerous Australian healthcare professionals opposed the original submission, with psychiatrist Dr Gary Galambos a guiding voice among them.

First, what is Managed Care?
Managed care bills itself as a healthcare delivery model that controls expenses while preserving the quality of clinical care. In a recent academic journal article for Australasian Psychiatry, Dr Gary Galambos and his co-authors note three elements essential for a managed care system: “selective contracting in the form of medical-purchaser-provider-agreements, financial incentives and penalties to improve efficiency, and limits to the use of health services by the insured.” However, before discussing managed care in Australia, it is important to understand the model’s history and goals.

Managed care systems first emerged in the United States during the 1970s to control healthcare costs, particularly hospital expenses. As prices continued to rise in the following decades, managed care became increasingly popular as a financial solution. Nowadays, most Americans have managed care plans through PHI and some through government programs such as Medicare and Medicaid. Despite widespread adoption, managed care has not been as effective in financial provisioning as anticipated. Unfortunately, the US continues to spend a higher percentage of its GDP on healthcare than other OECD countries, where large swaths of the population remain uninsured or have limited access to healthcare services (Looi et al. 2021, p.680).

Health Management Organisations (or HMOs) are a crucial part of the US managed care system. These organisations connect patients with an established network of healthcare providers. Patients must select a primary care physician as a 'medical gatekeeper,' referring them to specialists and other healthcare professionals. However, HMOs limit healthcare services to in-network providers and compensate them a fixed amount per patient. This payment model, known as capitation, incentivises cost-effective care and limits unnecessary medical treatment.

Australia’s Healthcare versus Managed Care
While the Australian health infrastructure has a private health sector and uses general practitioners as the first point of contact, it varies significantly from a managed care system. Take Medicare as an example.

As a government-funded, universal healthcare program, Medicare is the cornerstone of Australia's public health system. The Medicare Benefits Scheme, which lists the health services subsidised by the Australian government, operates on a fee-for-service payment model instead of capitation. Here, providers are reimbursed for each service they offer, incentivising them to provide efficient and high-quality care since they receive a set fee for each service.

PHIs, however, are a little different. First off, PHIs use various payment models, often depending on a policyholder’s plan. Nevertheless, Medicare offers all patients a rebate of up to 75% of the Schedule Fee - that is, a threshold that the public healthcare system can reimburse providers for selected procedures and services. With most inpatient services charged at a rate higher than the set cost, private insurers cover some or all of the remaining “gap” expenses.

Historically, PHIs have entered into commercial agreements (known as Medical Provider Purchaser Agreements or MPPAs) with specialists to cover the excess of hospital care. Unlike a managed care model, these agreements allow specialists to opt out, where healthcare professionals retain their autonomy and are not directed by insurers.

All this is not to say that Australia isn’t at risk of taking the managed care approach down the line. In fact, it is quite the opposite.

Honeysuckle Health: Is Managed Care on the way?
As a joint venture between Australian private health insurer nib and US-based Cigna Corporation, the HH-nib buying-group aimed to manage and administer contracts, including MPPAs, with healthcare providers and other insurance services, such as hospitals and specialists.

In Dr Galambos et al.'s (2023, p.62) recent journal article, the authors explain how such a buying-group paves the way for a managed-care system: “buying-groups provide a structure for health- management-organisations to selectively contract… through the imposition of mandated referral pathways, diagnosis and treatment protocols, and financial incentives and penalties in medical-purchaser-provider-agreements.”

Despite concerns over patient-choice, the ACCC approved the formation of the HH-nib buying group for five years on September 21 2021. However, the approval came with the caveat that the group cannot provide services to major PHIs such as Medibank, Bupa, HCF, and HBF. That said, the ACCC argued that the merger would result in public benefits by increasing competition between buying-groups and providing more options for insurers.

Well-established Australian healthcare organisations opposed the merger, with the National Association of Practising Psychiatrists (NAPP) and The Rehabilitation Medicine Society of Australia and New Zealand (RMSANZ) lodging an application for review through the Australian Competition Tribunal in October 2021. Through September 2021, Dr Galambos went on to provide multiple verbal and written submissions to the ACCC, explaining how the HH-nib buying-group challenges the quality and efficacy of Australian healthcare and psychiatry.

First, to truly understand the risk the buying-group poses, take a moment to consider the role of PHI in Australia's healthcare infrastructure. PHI complement rather than replaces Medicare, making it a smaller aspect of the overall healthcare system. That said, the market size makes PHIs vulnerable to a monopsony - a situation in which a single buyer has significant bargaining power over suppliers of a particular product or service.

During the hearing's discovery process, it was revealed that Australia's PHI landscape was indeed teetering on the edge of a monopsony, with the HH-nib buying group requesting control over 80% of all PHIs. This would give them substantial influence over healthcare funding, potentially leading a "shift away from traditional health indemnity insurance to contain costs in a superficially attractive manner for patients…[even though it may] constrain psychiatric care" (Looi et al., 2021, p. 681). The consequences of such a shift could be dire, with patient care quality, accessibility, and affordability all at risk. Here, the buying-group could essentially decide which services are financially supported and which are not, thereby profoundly impacting the healthcare system's overall quality and accessibility.

Not only would this limit patient and specialist decision-making regarding treatment, but it will also impede the doctor-patient relationship. The HH-nib buying group's unparalleled negotiating leverage could push psychiatrists to accept restrictive and conditional MPPAs, namely the Broad Clinical Partners Program (BCPP). Such programs appear to limit the number of admissions per practitioner's patient pool and require all specialists involved in a patient's care to participate in the MPPA without any chance to opt out. As a result, these agreements harm clinical independence, replacing patient-centric, trauma-informed healthcare with a homogenised, impersonal model.

While there were multiple concerns surrounding the merger, the issue of patient privacy was particularly significant. The MPPA required specialists to share patient data with the buying group, potentially resulting in the disclosure of highly sensitive and previously confidential information about Australians with mental disorders. Despite HH assuring that this data would be used to improve patient care, Dr Galambos expressed concern in a written submission to the ACCC about the company's actual use of patient information.

As the founder of MindSkiller, a mental health literacy eLearning, training and innovation platform, Dr Galambos has spent years grappling with issues related to patient data collection. However, MindSkiller, a social-good enterprise owned by clinicians, diverges from the HH-nib merger. Granting access to sensitive data to a company like HH, which identifies itself as a "health services and specialist data science company," is a concern because healthcare professionals do not lead the organisation. Without proper guidelines or controls in place for the handling of personal data, such disclosure could be harmful to the best interests of both patients and clinicians.

On July 18 2022, the tribunal ended with a Deed of Settlement after a nine-month-long legal battle. The agreements for medical practitioners include maintaining the "gap" scheme and allowing specialists to keep their medical autonomy without being forced to follow additional clinical guidelines beyond recognised specialist bodies. And on privacy issues, patients must consent for data collection, where specialists are not obliged to follow guidelines or refer to other providers if it is not in the patient's best interest.

Where to go from here?
While Dr Galambos and his co-authors (2023, p.63) note that "[the outcomes] can be considered as favourable for Australian psychiatrists and their patients, at least for the five years for which the Deed applies," the fight is not over. On April 23, Healthscope, Australia's only national private hospital operator, announced a five-year strategic partnership with HH. As stated in HH's press release, the collaboration aims to "deliver simpler and more flexible funding terms, and both parties will work together on the rising costs of providing quality private hospital care." With prominent clinicians like Dr Galambos opposing HH's move toward managed care from the outset, it's clear that the company has gained a powerful ally in Healthscope. This agreement gives HH newfound leverage to renegotiate its contract with the ACCC once the Deed of Settlement expires.

The HH and the buying group gives us a glimpse into what could be the future of PHI in Australia. This proposal, combined with the emergence of private healthcare specialty groups like Aurora Healthcare in Australia, suggests that this future could be closer than anticipated. Aurora Healthcare was created through the Luye Medical Group's restructuring of Healthe Care Specialty Services in Australia, the Novena Heart Centre and the OncoCare Cancer Centre in Singapore. As the largest privately owned specialty private hospital operator, Aurora primarily focuses on mental health and cardiology, offering healthcare services through a specific network of hospitals and providers. Specifically, Aurora continues to prioritise digital mental health services and outpatient care. That being said, clinicians and patients must pay attention to how Australia's healthcare system is evolving as the plans put forward by these companies have the potential to impact patient privacy and treatment access in the provision of private healthcare.