In a multi-million-dollar deal that the department chief says breaks down false barriers between private and public parts of the health system, SA Health has set up a panel of 13 private hospitals able to take public patients for elective surgery.

The patients would remain “public”, with the Government saying SA Health will manage the panel strategically to reduce delays for electoral surgery and free up public beds in times of peak demand.

The Opposition is attempting to use the decision to argue that the State Government is privatising public hospital treatment, while the nurses’ union says the Government appears to be outsourcing public beds. The union representing public sector doctors is also unhappy with a lack of consultation on the “outsourcing” announcement.

However, SA Health CEO Dr Chris McGowan told ABC Radio Adelaide today that the move, which formalises existing arrangements, is a recognition that the health system goes beyond public facilities.

He said waiting lists for elective surgery were long, particularly in the Central Area Local Health Network which includes the “very expensive” Royal Adelaide Hospital.

“… we’re not going to say to people waiting for their public elective surgery, ‘Well, while we’re getting that down, we’re going to use the private system’ – treat the health system as a system, really, not just a public system,” he said. “It’s a whole system, and we’re going to use that private system.”

McGowan revealed that 600 patients had been moved from South Australia’s public hospitals to the private system up until June this year through an ad hoc arrangement.

While he wasn’t locking in a firm prediction, he believed that the number could increase over the next 12 months to hit the low 1000s under the new system.

He said that while the private hospitals on the list were all nationally accredited, he would not be mandating “any of the processes that we use to run our hospitals” such as the prescribed nurse-patient ratios that required in the public system.

Health Minister Stephen Wade later argued that by locking in a panel of providers, the new process would save the Government money, although a spokesperson would not detail the financial arrangements saying they were “commercial in confidence”.

The Opposition described the move as “the biggest move to privatise public hospital operations since the Liberals privatised Modbury hospital in the 1990s”.

When challenged whether the term “privatisation” was too strong, Labor health spokesperson Chris Picton said: “When you’re taking away funding from public hospitals and sending it to private hospitals, when you’re taking patient care from public hospitals and sending it to private hospitals, that is privatisation. We’re seeing this government has an addiction to privatisation.”

Picton also criticised the Government for failing to release the costs of the four-year contracts with the 13 private hospitals.

The announcement today took the nurses’ union by surprise.

“I need to make clear at the outset that we have not been engaged in this process whatsoever,” said Elizabeth Dabars, the CEO of the Australian Nursing and Midwifery Federation. “In fact, we’re quite astounded and appalled by the lack of engagement on it.”

She said the new system was a “radical change” that outsourced public beds.

“In the past, there’s been a use of the private system in order to manage or address overload of that system and we have been quite comfortable and, in fact, applauded both sides of politics when they have been in government when they have made use of those services,” she told InDaily.

“So we have no objection to that, in fact, we’re quite supportive and believe it’s a good use of the system.

“What we are opposed to is the use of private services in situations other than system overload and we certainly oppose the … penalty provisions that appear to be a part of this public announcement of public hospitals having to pay for those private beds.

“Our position has always been, and remains, that we should be creating capacity in the public system to meet the needs of the system. We believe a public system is crucial and critical to meet the needs of our community. That should not be done by outsourcing.”

The doctors’ union – SASMOA – said it was blindsided by the decision to “outsource surgery to private providers”.

Senior industrial officer Bernadette Mulholland said doctors were concerned about the lack of advice and consultation on the decision.

“It would be important to understand why the current public hospital system has been unable to address the demand for surgery,” she said. “Indeed, is this not what the State Government and the Department of Health are elected and employed to do? Who is falling short?

“The short-term solution addresses the current demand for elective lists and the need for patients to get timely care however what is the long-term plan and what will it cost? These seem unanswered questions.”

Wade also announced today that waiting lists for elective surgery had reduced significantly, arguing that a $45 million Government investment had slashed wait times by 70 per cent.

“In just four months, 1315 people have come off the overdue elective surgery waitlist,” he said.

“Today, there are 593 patients remaining on the overdue list, down 69 per cent from 1908 on 20 March.”

The South Australian moves today come amid a renewed debate on the state of the private health insurance market in Australia.

Writing in the Australian Financial Review today, the head of one of Australia’s biggest private insurers essentially called for Medicare to be replaced by compulsory private health insurance.

“I may not see it in my lifetime but a sensible policy approach would be to make private health insurance compulsory for all Australians with taxation devoted to subsidising the premiums for those who would otherwise be left behind,” wrote Mark Fitzgibbon, the managing director of NIB health funds. “That is, high-income earners would at one end of the scale pay the entire premium while at the other, those with low income fully subsidised.

“It’s hardly a radical proposition when you consider Medicare is itself a compulsory ‘social insurance’ system.”

Federal Health Minister Greg Hunt rejected the idea today.

“I did see one comment today questioning Medicare, and I have to say clearly and categorically that we reject that proposition: clearly, categorically and absolutely,” he told reporters in Canberra.

“We are committed to it (Medicare) for life, forever.

“But equally, we’re committed to private health insurance. Both of those elements are part of the model that best serves Australians.”