Australia / Analyst Insights
Higher private health cover boosts demand for hospital services

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by Jemise Anning
Jan 12 2016

The ageing population, shifts in government health policies and rising private health insurance are driving the Australian hospital sector’s performance. While demand for general hospitals has surged, demand for psychiatric hospitals has grown at a slower rate. The transfer of government funding towards community-based preventative treatments has offset greater acceptance of mental illness and higher demand for services. Furthermore, state governments have relocated care and funding to psychiatric units within general hospitals. Meanwhile, higher private health insurance is spurring demand for private health providers and boosting revenue growth in both industries.

Federal and state governments have focused on prevention and decreasing hospitalisation to address mental health concerns. This has driven demand and funding away from psychiatric hospitals over the past five years towards community-based preventative treatments. Prevention strategies include education and increasing awareness of mental health issues. As a result, IBISWorld forecasts that revenue generated by the psychiatric hospital industry will fall by 0.3% in 2015-16, to $884.1 million.

Australia’s ageing population represents the biggest challenge for federal and state governments overseeing the public health sector. Demand for general hospitals has surged over the past five years, driven by the ageing population. Chronic disease and illness is more prevalent among the elderly, and this is increasing the strain on Australia’s hospitals system. IBISWorld forecasts that general hospitals industry revenue will rise at an annualised 4.3% over the five years through 2015-16, to reach $62.1 billion.

Continuing growth in private health insurance has supported demand for general and psychiatric hospitals. IBISWorld expects private health cover to grow at an annualised 2.3% over the five years through 2015-16, driven by government incentives and the ageing population. Older people tend to have greater private health insurance as they require health services more frequently. Revenue for private hospitals is growing at a faster rate than that of public hospitals, within both the psychiatric and general hospitals industries.

Policy settings, the ageing population and greater private health insurance will continue to determine the hospital sector’s performance over the next five years. Demand is likely to continue to shift from public hospitals to private hospitals due to greater private health insurance cover. Within the psychiatric hospitals industry, this trend will be supported by the continued relocation of care to psychiatric units within public hospitals. While federal and state governments are anticipated to continue focusing on prevention, Australia’s ageing population will boost demand for health services. IBISWorld forecasts that general hospitals revenue will grow at an annualised 3.4% over the five years through 2020-21. Revenue growth for psychiatric hospitals is expected to be slower, at an annualised 1.9% over the same period, as the government continues to focus on community-based mental health initiatives.


Relevant industries:

General Hospitals in Australia

Psychiatric Hospitals in Australia