Medibank's Drummond calls for further action on cost-saving reforms

Latest News

Medibank CEO Craig Drummond says the company delivered growth and a better customer experience in the six months to the end of December 2019 "despite some challenges".

The company announced $178.6 million in net profit after tax, down 9 per cent, and a 20.9 per cent fall in operating profit to $218.8 million.

Premium revenue grew 2.3 per cent to $3.3 billion while the company said net claims rose 5.9 per cent to $2.8 billion due to a $151.9 million increase in claims expense and a $6.8 million reduction in risk equalisation receipts.

"Hospital claims were 6.0% higher with growth in prostheses the major driver," it said.

“Strong Service NPS for both Medibank and ahm has enabled us to maintain momentum in policyholder growth with a net increase of 11,700 resident policyholders in the first half, delivering an 8 basis point increase in our market share," said CEO Craig Drummond.

“The key driver of claims growth was a 6.4% increase in prostheses cost, which was responsible for 69% of the increase of growth in hospital claims. This is extraordinary given a subdued 1.1% increase in hospital utilisation for the half.

“We are continuing to manage affordability and claims through a range of initiatives such as payment integrity, contract management and in-home care and advocating for wider reform of the industry.

“The issues that exist in the private health system are well known and we continue to lead the way in driving more reform."

Mr Drummond welcomed reforms announced and implemented by the federal government, describing them as "progressive" steps, but said, “...there must be recognition that additional meaningful industry cost savings and enhanced industry participation can only be realised through new Government reforms."

He said, “That said, Medibank and the broader health system, including payors and providers, have an ongoing obligation and challenge to remove unnecessary costs from the system to ensure the future sustainability of our world class health system.

“In order to deliver affordable and sustainable care that meets customers’ changing demands, we are focused on supporting alternative settings for delivering care, giving customers greater choice and enhancing patient experience.

“The expansion of our in-home care capability has seen 4,100 patients utilise hospital in the home or rehab in the home in the first half, of which more than 2,500 were Medibank customers.

“We have done this while taking costs out of our own business and introducing more value for our customers in our products.

“Our Health Insurance costs are down 9.6% for the half, meaning that we have delivered an additional $10 million in productivity savings over the last six months, and are on track for our full year target of $20 million.

“We are working hard within our business to address the challenges, but Government and the broader private health industry must play a meaningful role to ensure that additional reforms happen as soon as possible. An absence of reform this year could further deepen the prudential regulator’s concerns regarding the overall sustainability of the industry.”