The financially strapped Toowong Private Hospital in Brisbane will close this week amid concerns seven other private mental health hospitals across the country are at "imminent" risk of collapse.

Australian Private Hospitals Association chief executive Brett Heffernan blamed "rapacious profiteering" by health funds over three years as the over-arching reason for the 58-bed hospital's closure and the potential loss of more private psychiatric facilities.


But Rachel David, Private Healthcare Australia's CEO, who represents health insurers, rejected the accusation.

She's calling for a new model of funding for mental health care, saying psychiatrists were not admitting as many of their patients to hospitals.

"Even if we were to double what we paid hospitals it still wouldn't stop the closure of more stand-alone mental health facilities," Dr David said.

"There is a strong preference … only to treat the most severely unwell patients in hospital."

A place of healing​

For Toowong Private Hospital patients, such as Rebecca Kuenstner, who has been going to the facility in Brisbane's west for almost nine years, it has been a place of healing.

"This has probably been the best thing that's ever happened to me," she said through tears.

"It gave me a family pretty much. It's given me that sense of belonging really.

"Especially when you live alone, it's quite difficult not having that support."


Ms Kuenstner, 37, a former member of the Australian Defence Force who was medically discharged in 2014, has benefited from being an inpatient at Toowong Private Hospital, as well as completing courses there designed for people with post-traumatic stress disorder (PTSD).

"I do come here quite regularly," she said.

"You can come back and it's a very open space where you don't feel judged at all so you can go back and enjoy a cup of tea and chat to them.

"That connection is probably the most important one after you're discharged so you're not left on your own. That was a very important part of my journey."

She said she was barely able to leave home when she first started attending the hospital in 2016.

'Just the tip of the iceberg'​

The Toowong hospital, which treated 3,000 patients annually and would have celebrated half a century of operation in May next year, was expected to close on Wednesday.

Its administrators said in a statement they were still investigating the reasons for its failure but "it is understood that the hospital was operating at a loss for several years".

Mr Heffernan, who represents more than 600 private hospitals across Australia, said one major health fund had refused to renegotiate an annual contract with the hospital for 13 months.

Another group had "simply refused point blank to contract with the hospital at all".

The Toowong hospital closure comes as a cloud also hangs over 37 private hospitals run by Healthscope, which went into receivership late last month after its lenders withdrew support.


However, Mr Heffernan said it was important to differentiate the Healthscope financial woes from the rest of the sector.

"It's fair to say that Healthscope has had its own unique problems over a number of years in terms of its financial position and its financial management," he said.

"What the rest of the sector is facing is a rampant health insurance industry."



Mr Heffernan described Toowong Private's closure as "a massive loss to mental health".

"We have a mental health crisis in this country and for an exemplar hospital to be forced out of business due to purely and simply the greed of the health insurers and the negligence of a federal government, that has known about this for two-and-a-half years but refused to act, is unfathomable," Mr Heffernan said.

"Toowong is just the tip of the iceberg moving forward. We've been advised by eight of our members, in addition to Toowong, that they are in a similar situation facing imminent closure, seven of those are mental health facilities.

"It makes a mockery of the government's claim that mental health is a national priority."

Mr Heffernan did not want to name the hospitals publicly for fear of distressing patients and staff.

He said the Toowong hospital had opened its books to Federal Health Minister Mark Butler more than two years ago to explain a shortfall in its funding.

"Two months ago, the federal health minister laid down the gauntlet to the insurance industry saying you need to fix your house, you need to pay more of what you are taking to the actual providers of health care, being the hospitals," Mr Heffernan said.

"We're two months down the track, nothing has changed. Our expectation at this point is that the federal government has no choice but to act, to intervene and to regulate the private health insurers to ensure that the traditional ratio of at least 88 cents in the dollar from premiums flows through to the actual providers of health care rather than just filling health insurers' coffers."

In a statement, Mr Butler said he had called on insurers to "urgently increase the amount they pay out for hospital services and restore funding equilibrium across the sector".

He said the federal government would continue to work on "long-term reforms to support the sustainability of the private health sector".

"Ultimately, the solutions lie with insurers and hospitals working together," Mr Butler said.

He has created a forum of private hospital and health fund CEOs with the Australian Medical Association and some patient groups to discuss potential solutions.

"I've put a range of ideas that I want them to consider seriously about changes, particularly to mental health services," Mr Butler said.

Call to change funding structure​

Dr David, who has represented health funds including big insurers such as Bupa, Medibank Private and NIB since 2016, would like to see them able to fund some of the costs of outpatient specialist appointments.

She said some consumers were avoiding seeing a private psychiatrist in their consulting rooms because of fees of up to $988 for a first consultation.

"We need a funding model that takes account of the fact that because of improvements in medication and techniques and medical understanding, a lot more mental health treatment is taking place in the community now than it did in the 1980s and 1990s," Dr David said.

"I think that health funds do need the opportunity to be more flexible in how they fund mental health care, given we are in … a mental health crisis."

While she's "still shocked" at the hospital's pending closure, Rebecca Kuenstner said she was yet to feel anger, adding with a laugh: "I've had a lot of therapy".

"Moving forward, I haven't found where I'm going to be going to or where my support's going to be in the future … if I need help," she said.

By Janelle Miles and Emma Pollard