Australian private hospital operator Healthscope has announced the termination of its contracts with two private health insurers, Bupa and Australian Health Services Alliance (AHSA).

This move will affect approximately 6.6 million people who have health insurance with these two companies, reported ABC News.

The decision was taken by Healthscope after the companies declined to pay a proposed hospital facility fee.

Healthscope's introduction of the fee was an initiative to bridge the gap between insurance payouts and the escalating costs of hospital care.

Contracts with Bupa and AHSA are set to end on 20 February 2025 and 4 March 2025, respectively.

Healthscope CEO Greg Horan expressed that members of Bupa and AHSA might face higher expenses when seeking treatment at Healthscope hospitals.

The rising cost of operating private hospitals has led to the closure of 70 such facilities in the past five years, indicating a sector-wide financial strain.

Healthscope operates 38 private hospitals across Australia and is owned by the North American private equity company Brookfield.

The company emphasised that private hospital cost inflation has reached unsustainable levels.

Private Healthcare Australia CEO Rachel David said that insurers are unable to cover above-inflation price increases to hospitals, and the increased costs would be passed on to members, potentially causing them to downgrade or even cancel their health insurance.

David said: "This is another unethical tactic from a $1 trillion North American private equity firm that appears intent on holding health fund members hostage while also trying to bully health funds into paying them more so they can increase their profits.”

AHSA CEO Andrew Sando criticised Healthscope for prioritising investor returns.

Sando said: "How and why the Australian Government permits foreign private equity owners, such as Brookfield, to extract more profits from the already financially challenged private health care system is unclear.”

Sando reassured policyholders that should the terminations proceed, they would still have access to a network of more than 500 other private hospitals contracted with AHSA.

Bupa CEO Nick Stone said: "Despite their [Healthscope] recent actions, we remain committed to working together to reach a mutually sustainable solution that places customers and patients first.”

He also added that alternative private hospital options would be available, without incurring additional out-of-pocket costs, from February 2025.