Major Underpayment Discovered in Australian Private Healthcare Sector

A significant underpayment issue has surfaced within one of Australia’s largest private hospital operators, Healthscope, revealing an estimated $21.7 million in unpaid wages. This affects hundreds of disability service workers and possibly several nurses who may not have received their full entitlements.

Healthscope, a prominent national private hospital operator and healthcare provider, reported to the Australian Securities and Investments Commission (ASIC) in April that it had engaged external advisers to thoroughly investigate the extent of these underpayments.

The company stated in its report, “While this review is ongoing, based on analysis undertaken during the financial year, Healthscope has recorded provisions of $21.7 million.”

Operating 38 private hospitals across Australia, Healthscope is currently addressing two main issues related to staff payments. One involves historical underpayments affecting 500 current and former employees at Healthscope Independence Services—a disability support service based in Victoria. The other concerns the accrual of annual leave for nurses in hospitals across New South Wales.

Healthscope’s hospitals in New South Wales include the Prince of Wales Private Hospital, Northern Beaches Hospital, Campbelltown Private Hospital, and Newcastle Private Hospital. Following its acquisition by Canadian infrastructure giant Brookfield in 2019, Healthscope has begun making remediation payments where appropriate.

“In both these instances, we have advised the impacted staff and have taken steps to resolve the issues as quickly as possible,” said a Healthscope spokesperson. “These are both historic issues that predate Brookfield’s acquisition of Healthscope in late 2019.”

This revelation comes at a time when the $22 billion private hospital sector in Australia is grappling with a financial crisis, driven by soaring costs and wages alongside declining patient numbers post-pandemic. At least ten private maternity hospitals have closed since 2017, primarily due to workforce shortages, with five closures occurring in 2023 alone.

In 2023, Healthscope reported a loss of $648.9 million after writing down the value of its business by $919 million due to revised expectations of hospital admissions and operating costs.

The underpayment of staff at Healthscope Independence Services impacted approximately 200 current and 300 former employees. A spokesperson explained, “Employees were incorrectly classified in our payroll system, resulting in historical underpayments. Healthscope has engaged PwC to assist with identifying affected employees and calculating the remediation payments.”

Remediation payments to current and former staff have been progressively made, with final payments expected to be completed this quarter. Healthscope has self-reported the underpayments to the Fair Work Ombudsman, which is currently investigating the issue.

The spokesperson for the Fair Work Ombudsman stated, “As this matter is ongoing, it is not appropriate to comment further.”

The other issue involves the accrual of annual leave for nurses in New South Wales hospitals, arising from complex clauses in the relevant enterprise agreement. Healthscope is working with the NSW branch of the Australian Nursing and Midwifery Federation to resolve the matter, which is currently before the Fair Work Commission.

A spokesperson for the NSW branch of the union declined to comment as the matter is under consideration by the Fair Work Commission. Meanwhile, the Health Workers Union, representing some Healthscope workers in private hospitals and disability care, was unaware of the underpayment issue but expressed no surprise given Healthscope’s history in the private hospital sector.

Professor Anthony Scott, a health economics expert from Monash University, remarked that the underpayment of Healthscope employees adds to the pressures faced by private hospitals. He highlighted the sector’s challenges, including workforce shortages, increased wages for healthcare workers, and reduced uptake of private health insurance amidst a cost-of-living crisis.

In response to these pressures, federal Health Minister Mark Butler initiated an urgent review of the private hospital sector in June. This review aims to address skyrocketing costs and intense financial pressures threatening the sector’s viability, with a report expected by the end of August.