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02 Dec 2013

Creditors have been warned that Medibank Private’s health services arm has one of the worst records in the country for paying its bills on time, in a damning assessment of the firm’s operations.

Medibank Health Solutions, which has been mired in controversy over its handling of a $1.3 billion contract to provide health services for Australian Defence Force personnel, has been found to be at high risk of making severely delinquent payments to its creditors.

The embarrassing finding by credit reporting agency Dun & Bradstreet comes at a sensitive time for Medibank Private, as the Abbott Government commences steps to sell off the publicly owned insurer.

In its report, Dun & Bradstreet warned that recent experience indicated there was an 84 per cent probability that Medibank Health Solutions (MHS) would pay its debts in a “severely delinquent manner”, defined as being 90 days or more beyond terms.

The finding will come as no surprise to dozens of medical practitioners who have contacted the AMA to complain about the failure of MHS to pay their invoices on time.

Drug and alcohol addiction specialist William Huang told The Australian Financial Review that he had experienced long delays in getting MHS to pay $3025 it owed him for services he had provided.

Dr Huang said MHS refused to pay him because the presentation of his invoice was judged to be non-compliant, but did not convey its objections to him.

“They didn’t actually ever correspond with me about a compliance issue in the way the invoices should be paid,” he told the AFR. He took his concerns to the AMA and has since had them satisfactorily resolved.

But the Dun & Bradstreet report showed that Dr Huang’s experience was far from isolated.

The credit agency found that organisation had a particularly poor record of paying invoices for sums between $1000 and $2500  - just 53 per cent were paid on time, while in 14 per cent of cases it took between 30 and 60 days beyond terms to settle the bill, and in 17 per cent of cases MHS took 91 days or more to pay its dues.

Its poor payment record was, according to Dun & Bradstreet, a standout in the industry. While MHS was assessed to have an 84 per cent probability of making severely delinquent payments, the industry average was less than 13 per cent.

A Medibank Private spokesman told The Australian Financial Review that MHS had suffered a backlog in processing invoices because many contractors had not filled them out properly.

“After comprehensive communications to providers about the two numbers required on all invoices, in August we started rejecting non-compliant invoices,” the spokesman said. “This has significantly sped up the processing times, and now more than 90 per cent of invoices are compliant.”

MHS has come under attack from doctors over its handling of the Defence Force contract after it unilaterally announced big cuts to payments for doctors providing specialist services to ADF personnel, and sought to impose onerous reporting conditions on practitioners.

The operation of the contract has been dogged by concerns that Defence personnel are facing restricted access to specialist medical care because many specialists have refused to accept MHS’s terms.

In another concern for potential buyers of Medibank Private, the Dun & Bradstreet report showed MHS recorded a net loss of almost $12 million in 2012-13, a result in sharp contrast with the $1 million profit attributed to it by Medibank Private when reporting on it as a business division in its annual report.

Overall, Medibank Private reported a profit of $315 million last financial year, a 60 per cent jump from the previous year, and Managing Director George Savvides told a Senate Estimates hearing the organisation was ready for sale.

The contract for a scoping study of the privatisation was due to be awarded by the end of November, and the report is expected to be completed by the time of the 2014 Budget.

Adrian Rollins


Published: 02 Dec 2013