Medibank Private and Calvary hospitals reach agreement, ending long-running dispute

PHOTO: Health insurer Medibank Private and Calvary group's hospitals have agreed to a new contract ending a long-running dispute. (Reuters)

A long-running dispute between the Calvary group of hospitals and health insurer Medibank Private has ended with the signing of a new three-year deal.

An agreement between the two parties was due to expire tomorrow, meaning Medibank Private customers may have been charged additional fees for using Calvary hospitals.

The insurer last week released a list of 165 "Adverse Events" it would no longer cover, which included falls in hospitals and readmission to hospital as a result of a wound infection.

Calvary refused to accept the "quality and safety" measures demanded by Medibank Private as part of contract renewal negotiations.

In a joint statement by Medibank's general manager Dr Andrew Wilson and Calvary national's chief executive officer Mark Doran, the two parties said the terms of the new agreement were confidential but it would deliver better healthcare outcomes and affordability.

"We recognise that this was a robust and challenging negotiation," the statement said.

"However, we've reached an agreement that will deliver enhanced clinical safety, quality care and affordability for members and patients.

"It is good for both our organisations and all other stakeholders, be they staff or doctors."

Calvary Health Care runs 15 public and private hospitals across South Australia, the Australian Capital Territory, Tasmania, Victoria and New South Wales.

Medibank Private shares leap on inaugural profit result

PHOTO: Medibank's inaugural full-year profit as a private company came in $34 million ahead of its prospectus forecast.

Medibank Private has posted a maiden full-year profit of $285.3 million, well ahead of the prospectus forecast of $251 million when it was floated late year.

The company's shares surged 16 per cent to $2.33 in the first 10 minutes of trade in response to the better-than-expected profit.

However, while the bottom line was strong and driven by cost cutting, the company's key top line revenue growth was weaker than forecast.

Medibank's revenue stream from health insurance grew by 5.1 per cent against a prospectus forecast 6.2 per cent growth this year.

Much of the revenue growth in health insurance - which contributes 90 per cent of the Medibank's total revenue - was underpinned by the Federal Government approved 6.5 per cent increase premiums in April.

Medibank grew its membership base by just 0.3 per cent - up from 3.87 million members to 3.9 million - a number Medibank concedes is below the industry average.

The bulk of Medibank's growth in new members came in its low-margin, budget "ahm" brand.

"The sales performance of the Medibank brand is being addressed through product optimisation and customer engagement programs, while maintaining a focus on profitable growth," the company said in a statement to the market.

As expected Medibank made significant inroads in cutting management expenses, which were down $3.9 million - or 0.8 per cent - over the year.

Medibank confirmed it will pay a fully-franked 5.3 cents per share dividend to shareholders on September 28.

However, Members Own Health Funds (MOHF) - which represents rival not-for-profit health insurers - said Medibank's better than expected returns have come at the expense of its customers.