Australia may introduce a benchmark pricing model for private hospital funding by 2028, replacing negotiated contracts between insurers and hospitals. The proposed “Private National Efficient Price” aims to standardize costs and improve transparency but faces industry skepticism over its practicality, potential premium rises, and lack of clarity on implementation details.
The Albanese government is considering a major overhaul of Australia’s private hospital funding system by introducing a benchmark pricing model known as the Private National Efficient Price (P-NEP) by July 2028. The reform, outlined in a Department of Health discussion paper, would replace the current model where insurers negotiate individual contracts with hospitals—a system long criticized for inefficiency and constant disputes over funding. The P-NEP would apply activity-based funding similar to the public hospital system, using standardized prices for procedures based on patient volume and treatment type.
The proposed change aims to improve transparency, reduce administrative burdens, and address systemic imbalances, where profitable procedures subsidize loss-making ones, contributing to closures of mental health and maternity wards. It also seeks to encourage day surgeries and protect rural hospitals facing higher costs. However, major hospital operators like Ramsay Health Care and Healthscope, as well as private health insurers such as Medibank and NIB, are skeptical and divided on the approach.
The proposal comes amid rising costs and pressure on health funds, which are seeking premium increases of around 4% for 2026 to cover higher hospital wages and inflation. Critics warn that benchmark pricing could raise premiums further and fail to curb hospital oversupply. While the government expects limited direct impact on patients, industry groups—including the Australian Private Hospitals Association and Private Healthcare Australia—are reviewing the paper ahead of consultations in December. Final decisions are expected late next year.
