The newly privatised Medibank Private has started flexing its muscles, leaning on hospital providers to lower their charges in a tough market for insurers.
The insurer has also begun trials with GPs to expand their services beyond basic consultations to offer more sophisticated treatment, in the hope of keeping patients out of hospital and therefore cutting the insurers' costs.
The moves come as Medibank missed its revenue growth and revenue per customer forecasts in its half year earnings, the first released since it listed on the share market.
Medibank is Australia's largest private health insurer with about 29 per cent of the market, and increased its customer base to 3.9 million as of the end of December.
Rising healthcare costs are hurting the industry, Medibank said, pushing cash-strapped customers to downgrade their insurance or move to other providers.
Federal Health Minister Sussan Ley is due to announce any day a decision on the industry's call for premium rises of six to seven per cent.
Medibank chief executive George Savvides said one way to stem falling revenue was to put pricing pressure on hospitals, where about $4 billion of its $5 billion in annual claims originate.
"If you want the largest health insurer and largest customer base to come to your hospital, you can't just charge us the same price that you charge the smallest health funds," he said.
"It takes the breath away of the CEO sitting across the table at the hospital group, because they have been charging the same prices pretty well year on year."
The pressure from Medibank was working, Mr Savvides said, but there was a mutual respect between the insurers and private hospitals.
The plan to add primary care benefits to private health insurance will require federal approval, but a trial with GPs had begun, he said.
Fund members with complex medical conditions requiring regular hospital visits - at least four trips in four years - represent three per cent of Medibank's customer base, but between 30 and 35 per cent of total hospital claims.
The potential changes will benefit shareholders and also customers' health outcomes, as well as affordability of health insurance, Mr Savvides said.
Medibank shares fell after it posted a $151.2 million net profit for the six months to December 31, and reaffirmed its guidance of a full year profit of $258 million.
The shares fell nine cents, or 3.5 per cent, to $2.47, still well above the $2.14 it began at in November.
Cost cutting benefited its financial performance, lifting Medibank's operating margin from 4.5 per cent to 5.9 per cent.
MEDIBANK BOOSTS PROFIT BY CUTTING COSTS
* Pro-forma net profit of $151.2m, up 11 per cent from $136.5m.
* Revenue of $3.27b, up 3.8 pct from 3.15b.
* No interim dividend
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