nib weighs in on Medibank dispute

Health insurer nib has backed rival Medibank Private in its highly-publicised dispute with hospitals group Calvary, saying hospital operators need to lift their game.

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Medibank Private has locked horns with Calvary, which operates 15 hospitals across Australia, by refusing to pay for 165 events it says are highly preventable as it looks to rein in its costs and boost its profit margins following its public float in November.

Calvary has hit back at the move, accusing the health insurer of bully tactics while the Australian Medical Association has called on the federal government to intervene in the dispute.

On Monday, Australia’s other publicly listed health insurer nib weighed into the debate, with chief executive Mark Fitzgibbon saying there was a bright future for both insurers and healthcare providers if hospitals improved their performance.

“Both private health insurers and providers such as hospitals will do very well into the future, but it can’t be on the back of tolerating inefficiencies, poor quality over-serving and cost variations,” he said.

“So I think we are heading toward a more mature future whereby both providers and hospitals in particular recognise that accepting pay for performance and accepting higher standards of quality are part of the future.”

He also said the company had seen “some evidence” of Medibank customers looking to switch insurers in light of the dispute but said the benefit to nib had not been material so far.

Mr Fitzgibbon made the comments after nib announced an eight per cent increase in its full year profit to $75.3 million for 2015/16.

Operating profit, which excludes things like investment income, was up 13 per cent to $81.7 million and the company said it would target an operating profit of between $85 million and $90 million for the 2015/16 year.

The insurer lifted its number of policyholders by 4.7 per cent during the year, almost twice the industry average of 2.5 per cent, while net premium revenue was up almost 10 per cent to $1.6 billion.

Mr Fitzgibbon also echoed Medibank boss George Savvides’ warning on Friday that rising health insurance premiums were forcing some customers to move to lower levels of cover.

But he said the trend to lower cover was not strong enough to impact the company’s growth.

nib shares closed down 15 cents at $3.35.

NIB LIFTS PROFIT, REVENUE

* Net profit up 8pct to $75.8m

* Net premium revenue up 10pct to $1.6 billion

* Fully franked final dividend up a quarter of a cent to six cents per share