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The latest episode of Innovation Insider features a compelling conversation with Marc Miller, a seasoned healthcare strategist with extensive experience in private health insurance and global healthcare systems. Having spent over a decade at Medibank leading strategy, innovation, and transformation, Marc brings invaluable insights into the evolving landscape of private healthcare.
The Battle Between Private Hospitals and Insurers
Over the past six to nine months, Australia has witnessed intense disputes between private hospitals and insurers. According to Marc, this tension is not new but is now exacerbated by the financial pressures facing private hospitals. Expanding significantly pre-COVID in both acute and sub-acute care, private hospitals expected demand to continue rising. However, post-pandemic, the anticipated rebound has not materialised, leaving hospitals with higher costs, lower margins, and an urgent need for revenue.
With 85% of their revenue coming from insurers, hospitals are looking to negotiate higher reimbursements to stabilise their financial position. Meanwhile, insurers must balance affordability for members, as rising premiums and out-of-pocket costs remain the top reasons for policy downgrades and cancellations. This standoff has led to proposals for a mandated minimum payout ratio, which Marc believes the government will likely defer until after the election to avoid political fallout.
“Hospitals are obviously looking to insurers to make them whole or at least bring them back towards where they were historically,” Marc explains. “And the insurers concurrently are faced with a dilemma: we know the two main reasons why people drop out or downgrade their private health insurance are cost of premiums and out-of-pocket charges.”
Lessons from Global Healthcare Systems
Australia often prides itself on having one of the best healthcare systems in the world. However, Marc challenges this perspective by highlighting key innovations from overseas markets that Australia has been slow to adopt.
- Ambulatory Surgical Centres (ASCs): In the U.S., ASCs have revolutionised healthcare by shifting a significant volume of procedures from inpatient to outpatient settings. These 24-hour facilities deliver routine surgeries with better efficiency, lower costs, and improved patient outcomes. Australia has lagged in embracing this model, despite its clear advantages.
- Proactive Primary Care: Australia’s general practice model remains largely reactive—patients only seek care when unwell. In contrast, some global systems use sophisticated data analytics and predictive modelling to engage patients before major health issues arise.
- Hospital-at-Home and Virtual Care: While other markets have significantly advanced hospital-at-home models, Australia has been slow to scale these services, missing opportunities to enhance patient experience and reduce costs.
“Both the public and the private hospital system here have been particular laggards in embracing the new world,” says Marc. “If you look at the infrastructure we have today in Australia, it was built for the last millennium. Large acute hospitals, lots of beds – but the transition to more modern, efficient models of care has been too slow.”
The Lack of Innovation in Private Healthcare
A key theme of the discussion was the lack of innovation in Australia’s private healthcare sector. According to Marc, both hospitals and insurers have historically operated under a status quo mindset, prioritising incremental improvements rather than transformational change. Unlike the U.S., where many healthcare leaders come from medical and scientific backgrounds, Australian healthcare leadership is often corporate-driven, lacking the curiosity and strategic foresight necessary to drive meaningful innovation.
“I don’t put all the blame at the door of the hospitals. There’s been plenty of blame to go around,” Marc admits. “For decades, the insurers did very little apart from being a dumb payer of bills. When I joined Medibank, I was agitating from day one that we needed to do something fundamentally different.”
Even private health insurers, despite their aspirations to become “health partners,” have mostly focused on member acquisition and retention rather than reshaping healthcare delivery. Medibank, under Marc’s tenure, was one of the few players investing in solutions that reduced avoidable hospitalisations and enhanced care models.
What’s Next for Private Healthcare?
Looking ahead, Marc predicts that vertical integration will be a major trend in private healthcare. Instead of hospitals and primary care providers operating in silos, an integrated approach—where healthcare entities manage patient journeys end-to-end—could lead to better health outcomes and cost efficiencies.
“If you’re really going to do a phenomenal job of actually managing the health of the consumer, the patient, having all of those different levers to pull is critical,” says Marc. “Kaiser Permanente is not one of the best providers of healthcare globally for no reason – it’s because they manage patients from end to end.”
However, resistance from traditional providers, concerns about conflicts of interest, and lack of capital investment make this shift challenging. Nonetheless, international examples such as Kaiser Permanente demonstrate the potential benefits of this model, including data-driven care, proactive health management, and seamless patient experiences.
The Bottom Line
Private healthcare in Australia is at a crossroads. The ongoing battles between hospitals and insurers highlight deeper structural issues that need urgent reform. Rather than perpetuating outdated business models, Marc argues that the industry must embrace innovative approaches to care delivery, invest in data-driven decision-making, and foster a culture of strategic foresight.
“The way I see it, why would you buy a large hospital group unless you were going to do something fundamentally different?” Marc asks. “If you think you can just do a better job of what’s already been done, you’re delusional.”
For healthcare leaders, the key question is: will they continue to grind away at incremental improvements, or will they take bold steps to reshape the future of private healthcare?
Listen to the full episode to dive deeper into these critical industry challenges and insights from Marc Miller.