Bupa’s Medical Gap Scheme and associated hospital contracts are drawing scrutiny from private hospitals and legal experts, amid concerns about competitive effects and patient choice highlighted in reporting by the ABC.
In the Australian private system, No Gap and Known Gap arrangements are generally structured so that hospitals and doctors decide separately whether to participate in an insurer’s gap-cover arrangements. Hospital agreements typically cover room, theatre, and nursing charges, while doctors make independent decisions about using a fund’s No Gap or Known Gap schedule for their fees. Documents cited by the ABC indicate that Bupa’s Medical Gap Scheme connects those two levels of decision-making more closely. When a hospital signs a No Gap agreement with Bupa, subcontracted doctors at that facility are restricted from charging a gap on their medical fees to Bupa-insured patients under the scheme.
Doctors participating in Bupa’s Medical Gap Scheme also cannot use it at hospitals that do not hold a contract with the fund, effectively limiting use of the scheme to Bupa-contracted facilities. Former Bupa executive David du Plessis, now a contracts consultant to private hospitals, said the structure gives the insurer leverage over hospitals that have not entered agreements. He said that for off-contract hospitals, doctors may have to choose between lower benefits from Bupa per procedure or higher out-of-pocket charges for patients. “It is a wedge. It’s a way of forcing the hospital, who have to hold the contract,” du Plessis said, as reported by ABC.
Du Plessis said the arrangements can affect how Bupa members access non‑contracted sites. “They’re removing choice from their members. What Bupa is really in effect doing with this is saying: ‘Well, you can choose your specialist, but you’re going to bear a lot of costs with that specialist unless they go to a hospital that we hold a contract with.’ It’s the consumer in the end that’s also wearing the cost of this to the benefit of Bupa and its profitability,” he told ABC. In a statement, Bupa disputed the criticism and said the Medical Gap Scheme is intended “to help customers pay less, and in many cases nothing, for medical out-of-pocket costs.”
The ABC report also detailed correspondence showing Bupa seeking to extend aspects of its No Gap model to hospitals outside its contracting network. In a letter to the Australian Society of Ophthalmologists, Bupa said its specialists could start using the No Gap scheme for their fees at some of the 99 hospitals where the fund does not have existing agreements. The letter indicated this would apply only where those hospitals gave a written undertaking “not to charge Bupa customers any out-of-pocket costs beyond the applicable excess…”
Australian Private Hospitals Association (APHA) chief executive Brett Heffernan said the approach adds pressure at both the hospital and doctor level. “They’re squeezing the hospital on one end in terms of the contract negotiation and they’re squeezing the doctors on the other end to put pressure onto the hospitals to capitulate. This is a situation where Bupa are trying to have the hospital over a barrel and dictate pricing. It’s completely inappropriate,” Heffernan said, as reported by ABC.
APHA has asked the Australian Competition and Consumer Commission (ACCC) to examine the conduct as potential anti-competitive behaviour. Bupa said it had approached some non‑contracted hospitals with “voluntary contracting options” that the insurer says are aimed at reducing members’ exposure to out‑of‑pocket costs. “Doctors were never asked to ensure hospital fees were waived, and any arrangements are optional, case by case, and focused on improving affordability for patients,” a spokesperson told ABC.
University of Sydney Law School lecturer Bashi Hazard told the ABC that the structure of the scheme and related conditions may raise issues under competition law, depending on how they affect particular markets. “What we’re looking at in this situation could be a vertical restraint. That is something that, particularly in regional areas, the regulator would have to take a close look at,” Hazard said. Bupa said its contracting approach is consistent with competition law and operates under regulatory oversight. The insurer noted that hospitals can negotiate with other health funds, which it says can support competitive dynamics. “[For uncontracted hospitals], we don’t set doctors’ fees or hospitals’ charges, nor do we ask doctors to influence hospital fees. Ultimately, our approach will benefit the entire sector as it encourages greater participation, choice, and transparency,” the spokesperson said.
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The ABC report also canvassed concerns from smaller and newly opened hospitals about their dealings with Bupa. Du Plessis said providers commonly report extended negotiation timeframes. “I’m seeing a number of providers citing difficulties with getting contracts, with Bupa in particular, particularly new hospitals that are opening, and being able to then establish reasonable rates with them. They’ve had significant delays through the negotiation. They’ll send an email to try and continue the next step of a negotiation and may not even receive a response for weeks,” Du Plessis said. He said that when facilities are off‑contract and doctors receive lower benefits, specialists may move work to contracted hospitals, affecting case volumes at smaller providers. “That’s a huge disadvantage for hospitals,” he said.
According to the ABC, contracts reviewed by the broadcaster show that hospitals seeking higher contracted rates may need to obtain Bupa’s approval before opening new units or wings, including providing information on clinical need, participating doctors and projected Bupa patient numbers. APHA has characterised these terms as onerous and as going beyond traditional funding arrangements. Day Hospitals Australia chief executive Jane Griffiths said the structure of Bupa’s scheme places additional obligations on facilities. “It’s basically making the hospital the policeman for the doctor’s fees. This is the only insurer that does that,” she said. Heffernan also pointed to confidentiality provisions that can limit public discussion. “We see clauses in there about what hospitals can and can’t do, and one of the things they can’t do is talk to anybody about what the egregious terms of these contracts are,” he said.
The ABC report referenced Australian Prudential Regulation Authority (APRA) data showing Bupa’s benefits ratio – the share of premium income returned to members as claims – at 82.4%. Comparable ratios are 85.6% for Medibank Private and 87.8% for HCF. “So, for Bupa to be at 83 per cent, they are a long, long way behind where they need to be in fulfilling their obligations to their members,” Heffernan said. Bupa reported an after‑tax profit of $594 million in 2024-25, the largest result among private health insurers, and holds about 25% of the national market, with more than 40% share in South Australia. Du Plessis said such positions can amplify contractual impacts. “In states where Bupa has a huge market share, it becomes doubly problematic,” he said.
Bupa said that in regional locations, where hospital options may be limited, it works with customers to support access at contracted facilities. Peak body Private Healthcare Australia (PHA), which represents health insurers, supported No Gap‑style structures in general terms rather than commenting on the specific Bupa arrangements. “People with private health cover consistently tell us they want certainty about what treatment will cost. No Gap arrangements are designed to provide that certainty,” chief executive Rachel David said. The issues raised in the ABC’s reporting centre on how No Gap and Known Gap products are implemented within contracts, and how that implementation affects competition, provider relationships, and out‑of‑pocket exposure for privately insured patients.
