Bupa faces scrutiny over private hospital contracts as critics warn of reduced patient choice
Allegations of anti-competitive conduct
Australia’s largest private health insurers sit at the centre of a complex system that links premiums, hospital contracts and medical billing. That system is now under renewed scrutiny after leaked documents revealed contract terms that critics say give Bupa significant leverage over private hospitals—particularly smaller operators with limited bargaining power.
Bupa, which has nearly 4 million customers and about a quarter of the national market, has been accused of anti-competitive behaviour in its dealings with private hospitals. Critics argue the practical effect is reduced choice for consumers, especially when patients want to avoid out-of-pocket costs. Bupa denies the allegations and says its arrangements are designed to help customers pay less and avoid unexpected bills.
Private hospitals and their representatives have called for regulatory attention, including intervention by the Australian Competition and Consumer Commission (ACCC). They also want agreement on a new national benchmark pricing system for the private sector.
Why contract terms matter in private healthcare
In private healthcare, insurers typically negotiate agreements with hospitals covering accommodation, theatre and related facility fees. Separately, doctors decide whether to participate in “No Gap” or “Known Gap” billing schemes for their professional fees. In many cases, these two decisions—hospital contracting and doctor billing—operate independently.
The leaked documents and related claims focus on whether Bupa’s arrangements blur that separation, effectively using hospital contracts to influence how doctors bill and where patients seek treatment.
The Medical Gap Scheme at the centre of the dispute
Particular concern has been raised about Bupa’s Medical Gap Scheme, which has operated in its current form since 2021. Under the scheme, patients treated as “No Gap” or “Known Gap” in a private hospital should only pay their excess, or up to $500 on top of the excess if classified as a Known Gap patient.
The issue, according to critics, is not the existence of No Gap or Known Gap arrangements themselves—these are common across the industry—but how Bupa’s scheme is said to operate through the terms of hospital contracts. Leaked contract terms indicate that physicians may be prevented from charging patients any out-of-pocket costs when the treatment occurs at a Bupa-contracted hospital under the scheme.
Former Bupa executive David Du Plessis, who now works as a contracts consultant for private hospitals, has supported the claims. He argues that the complexity of billing creates a “wedge” that can pressure hospitals to sign agreements they might otherwise reject.
How critics say the scheme can steer patient choice
Critics describe a scenario in which patients who attend a non-contracted hospital can face a “double hit”: out-of-pocket costs from the hospital and separate out-of-pocket costs from the doctor, because doctors cannot use Bupa’s Medical Gap Scheme at a non-contracted facility.
Mr Du Plessis says this dynamic can affect patient choice in practice. Patients may be able to choose their specialist, he argues, but could face substantially higher costs unless that specialist treats them at a hospital with a Bupa contract. He has warned that patients unaware of the contractual arrangements could be exposed to significant out-of-pocket expenses for major procedures at uncontracted hospitals.
Bupa rejects the characterisation, describing claims about its gap scheme as baseless and stating the scheme is designed to help customers pay less, and in many cases nothing, for medical out-of-pocket costs. The insurer has also said the aim is to help customers avoid unexpected bills and access care with confidence.
Hospitals say smaller operators are most exposed
The leaked documents have been described as showing the “long arms” of Bupa’s contracts with some hospitals. The concern among hospital representatives is that smaller facilities may have little ability to negotiate when dealing with an insurer that holds a large share of the market.
Jane Griffiths, chief executive of Day Hospitals Australia, has criticised the approach on the basis that doctors are subcontractors and the terms are unfair. Mr Du Plessis has also warned that if doctors earn less because a hospital is off-contract, they may leave that hospital—an outcome he says would be a major disadvantage for smaller providers.
In this view, hospitals may feel compelled to accept contract terms, even if the proposed prices are unsustainable, because remaining outside the contract network could make it harder to attract and retain specialists and patients.
Dispute extends to uncontracted hospitals
Documents also indicate that since August last year Bupa has been seeking to impose a similar condition on doctors at some uncontracted hospitals. In correspondence to the Australian Society of Ophthalmologists, Bupa stated that its specialists could begin using the No Gap scheme for doctors’ fees at some of the 99 hospitals where Bupa did not have a contract.
However, the letter stipulated that this would only apply if the uncontracted hospital provided and continued to comply with a written undertaking not to charge Bupa customers any out-of-pocket costs beyond the applicable excess.
The Australian Private Hospitals Association (APHA) chief executive Brett Heffernan described this as “beyond the pale” and said the association had called on the ACCC to act, alleging anti-competitive behaviour. He characterised the situation as one where Bupa was attempting to dictate pricing to hospitals.
Bupa has disputed that interpretation. The insurer said it had previously contacted some non-contracted hospitals to outline “voluntary contracting options” that could support lower out-of-pocket costs for members. It also said doctors were never asked to ensure hospital fees were waived, that any arrangements were optional and assessed case by case, and that the focus was on improving affordability for patients.
Bupa added that hospitals were free to negotiate with other insurers, which it said could help promote competition. The insurer also stated that for uncontracted hospitals it does not set doctors’ fees or hospitals’ charges, nor ask doctors to influence hospital fees.
What the data shows on payouts to members
As part of the debate, APRA data on insurers’ benefits-ratio payments has been cited by critics. The benefits ratio reflects the percentage of incoming premiums paid out to members as benefits.
Bupa’s benefits-ratio payment is reported as 82.4%.
Medibank Private is reported at 85.6%.
HCF is reported at 87.8%.
Mr Heffernan argued that Bupa’s figure suggested it was well behind where it needed to be in fulfilling obligations to members. Bupa, for its part, has framed its approach as one intended to keep out-of-pocket costs down and reduce bill shock.
Competition law questions and regional impacts
Competition law experts say the key question is whether certain arrangements could amount to an anti-competitive restraint. Bashi Hazard, a lecturer in competition law at the University of Sydney’s Law School, said the gap scheme could be anti-competitive if it were found to be both coercive and limiting competition in small areas.
She noted that this is something a regulator would need to examine closely, particularly in regional areas where patients may have fewer alternatives and where the effects of steering or network restrictions could be more pronounced.
Bupa has acknowledged that patients in regional areas can have fewer choices, and said that is why it works closely with customers to ensure they have access to care at contracted hospitals.
Market share and negotiating power
Bupa’s scale is central to the dispute. With nearly 4 million customers and around a quarter of the market nationally, it is widely seen as essential for many hospitals to have a contract with the insurer. In South Australia, Bupa is the market leader with more than 40% market share.
Mr Du Plessis argued that high market share makes the issues “doubly problematic” in states where Bupa’s position is particularly strong. The insurer reported a full-year after-tax profit of $594 million in 2024–25, which was higher than any other private health insurer.
Claims of delays and the burden of contract conditions
Beyond pricing and gap arrangements, critics have raised concerns about the operational conditions embedded in hospital contracts. Mr Du Plessis said a compounding problem for some small hospitals is that Bupa can be slow to offer contracts, particularly to new hospitals.
He said that when he worked at Bupa there were about six staff negotiating with more than 600 private hospitals, and that delays were sometimes part of the strategy. The leaked contracts are also described as containing business rules that can limit flexibility, even for larger hospital groups.
Among the conditions cited: hospitals may need permission from the insurer if they intend to open a new unit or wing, including providing evidence of why it is needed, the names of the doctors involved, how patients will be attracted, and estimates of how many Bupa patients might use the service if the hospital wants to secure higher contracted rates.
Hospital representatives say that while such requirements may be legally permitted, they can be onerous and inconsistent with the idea that customers buy insurance for services rather than being directed in where they receive care.
Secrecy clauses and the difficulty of public debate
Another point of contention is confidentiality. Mr Heffernan said secrecy provisions in contracts can prevent hospitals from speaking publicly about terms they consider problematic. In his view, that makes it harder for hospitals to object openly or for the public to understand how contract settings affect patient choice and costs.
Bupa has said its contracting practices comply with competition law and operate under regulatory oversight.
Key definitions in the debate
Much of the disagreement turns on how different billing categories work in practice. The following definitions are used in the system described by the Department of Health and Aged Care:
No gap cover: Patients receive no out-of-pocket charges for their treatment for doctor fees. Insurers pay a higher rate per procedure than Medicare’s Schedule Fee to doctors to encourage uptake.
Known gap cover: Patients will be charged a fixed out-of-pocket amount for their treatment by a doctor, up to a maximum of $500 for general treatment and $800 for obstetrics.
Out-of-pocket charges: Patients not using No Gap or Known Gap cover can face out-of-pocket costs. This is the difference between the overall cost of the procedure and the usual combined Medicare and insurer general rebates.
Agreement or network hospitals: Agreements between hospitals and insurers relating to room, nursing and theatre fees. Sometimes they also result in fixed-fee arrangements similar to known gaps.
Private Healthcare Australia, which represents health insurers, has said No Gap arrangements are designed to avoid surprise medical bills. In the context discussed here, “No Gap” is used as a general reference to both No Gap and Known Gap charging.
What happens next
Private hospitals and their representatives want the competition regulator to intervene and are also seeking an agreement on a new national benchmark pricing system. Whether the contested contract terms amount to anti-competitive conduct would depend on regulatory assessment, including questions of coercion and local market impact.
For consumers, the dispute highlights a practical reality of private health insurance: the size of an insurer’s hospital network, and the rules attached to gap schemes, can materially affect both choice of hospital and the likelihood of out-of-pocket costs—particularly if patients are unaware of the contractual boundaries until they receive a bill.