The future of private hospitals: Maternity services are sending a warning signal

Australia’s health system is underpinned by public and private care and aims to ensure universal access while offering choice and relieving pressure on the public sector. Yet the private sector is under growing strain, and nowhere is this more visible, or more urgent, than in maternity services.

Since 2018, at least 18 private maternity units have closed across the country, including recent closures in Darwin, Hobart, Redland, Bunbury, and Sydney Southwest. In 2024 alone, five more units shut their doors. These closures are not isolated incidents. They reflect a broader structural decline driven by falling birth rates, workforce shortages, outdated funding models and rising out-of-pocket costs for services. Without intervention, projections suggest that private maternity care could disappear entirely by the end of the decade.

The decline of private maternity care tells us something important about broader system fragility. When the private system falters, the public system absorbs the impact. This undermines access for everyone, especially in high-demand areas like perinatal care. A strong private sector maintains balance, ensuring patient choice, and attracting specialist talent, particularly in regional and rural areas where private income streams help sustain workforce availability.

Perinatal care and childbirth are among the most common reasons Australians interact with the hospital system. Private maternity care plays a vital role in expanding patient choice, by offering by diverse options for models of care, including models that support continuity of carer.

Continuity of carer – having care provided by the same named caregiver across the maternity period – is the gold standard for mothers and babies. These models are associated with improved emotional wellbeing, autonomy, and more consistent experiences of care. While both public and private systems offer continuity models, public models are in high demand and can be difficult to access. Data from the AIHW reports that 68 per cent of public maternity services offer at least one continuity model, compared to 95 per cent of private services.

A strong private maternity care sector is therefore central to enabling choice and access to continuity of carer models that reflect best practice care. In doing so, it plays a direct role in alleviating pressure on the public system by meeting demand that the public sector alone cannot absorb.

Beyond continuity of carer, private maternity care also plays a key role in enabling choice of other models of care. The Australian Safety and Quality Framework for Health Care emphasises the need for all care to be consumer-centred, including through enabling shared decision-making among patients and respects different cultures.

Similarly, the Woman-centred care: Strategic directions for Australian maternity services highlights that women should be provided with and able to readily access information about all locally available maternity services. These frameworks reinforce the importance of ensuring women have meaningful choices in how their care is delivered. While both the public and private sectors offer a range of maternity care models, the existence of a strong private sector helps ensure that this choice is real and accessible, particularly by offering models that may be in high demand or limited in availability within the public system. 

Preserving and strengthening private maternity services is not about privileging one model over another, it is about ensuring Australians continue to have meaningful choices in how their care is delivered. When the private sector declines, those choices narrow, and the system becomes less responsive to individual needs.

Maternity care is a resource-intensive health care service to deliver. Delivering safe, high-quality care requires a skilled, multidisciplinary workforce, including obstetricians, midwives, anaesthetists, paediatricians, and allied health professionals. Many of these specialists work across both public and private settings to maintain a diverse caseload and access greater clinical flexibility.

This is especially true in regional and remote areas. In non-urban areas, the sustainability of specialist care is enhanced the presence of private practice options. Regional and remote communities often face structural challenges such as having smaller populations, limited hospital infrastructure, fewer training and career development opportunities, and workforce shortages. As a result, it can be difficult to justify or sustain full-time specialist roles based solely on public hospital demand. A functioning private maternity care market, such as a local private hospital or clinic, creates additional work opportunities, including a mixed caseload and flexibility that make regional practice more viable and attractive.

Without these options, specialists may be less inclined to base themselves in regional areas, contributing to workforce concentration in metropolitan centres and widening service gaps. Supporting the viability of private maternity care is therefore essential to sustaining a distributed, skilled workforce capable of meeting the needs of women and families across Australia. 

Private health insurance (PHI) is a key enabler of private care, and its role is embedded in the design of Australia’s shared health system. Public and private sectors work in tandem, with tax incentives encouraging PHI uptake and many public hospitals facilitating the use of private cover within their services. This structure distributes demand across both systems and relieve pressure on public infrastructure.

However, while PHI can cover some maternity-related expenses, maternity care is typically only available through expensive Gold-tier policies, which are in decline in favour of bronze and silver tiers. Additionally, current insurance structures remain heavily focused on traditional, obstetrician-led models of care. Private Healthcare Australia (PHA) observes that health funds can only legally pay for in-hospital care, not the management of a pregnancy in the lead up to birth. Health funds cannot fund a midwife or GP to manage a pregnancy or birth in the private hospital system at present. This narrow focus makes it difficult to establish and scale midwifery-led or GP-shared models in private settings, despite strong evidence that these models improve continuity, reduce intervention rates, and enhance patient satisfaction.

Expanding flexible insurance arrangements, such as bundled care models or broader access to midwifery-led services, offers a strategic opportunity to increase choice and improve system sustainability. When insurers and providers collaborate to design and deliver these models, they can offer more integrated, person-centred care that aligns with contemporary best practice.

There is also a clear role for the Federal Government in enabling reform. Government leadership, in partnership with insurers and providers, can create the policy and regulatory environment needed to develop and test new approaches. This includes reviewing PHI tier structures, incentivising evidence-based models, and supporting reforms that improve affordability and access across the system.

For insurance providers, the current moment presents a strategic opportunity to lead reform in maternity care. By supporting evidence-based models such as midwifery-led continuity and GP-shared care, insurers can help reduce intervention rates, improve maternal satisfaction, and offer a compelling point of difference in a competitive market.

These models are clinically effective and align with consumer preferences for personalised, coordinated care. They have also already been endorsed by peak bodies such as PHA that has called for health funds to be allowed to support midwifery-led and GP-led care in private hospital settings, as part of a broader push to make private maternity care more affordable and accessible.

The decline of private maternity services is a symptom of deeper system pressures. However, it presents an important opportunity for coordinated action and change, which requires shared responsibility across all layers of the health sector, from government to insurers and providers. 

For the Federal Government, it is a chance to lead reform that strengthens access, sustainability and equity. For private providers, it is a moment to innovate with new models of care. And for insurers, it is a strategic opportunity to differentiate through value-based offerings.

There are a number of levers that could be considered from each players perspective: 

• The Federal Government could conduct a review of private health insurance arrangements to identify opportunities to improve maternity coverage, particularly for models that offer greater continuity and value for families. Consider legislative barriers to out-of-hospital coverage.
• Private health insurers, working closely with Government, can explore revised funding approaches that support midwifery-led, GP-shared, and other evidence-based models of private maternity care. Recognising that current legislation restricts insurers from covering out-of-hospital services, including many components of these models, and addressing the legislative barriers embedded in the Private Health Insurance Act 2007 is a key first step toward enabling more flexible, patient-centred care.
• Private hospitals have a role to play in designing more sustainable, multidisciplinary models of care that reflect contemporary clinical practice and consumer expectations.
• Shared work between the Department, insurers, and providers is needed to identify and implement solutions that improve the viability of private maternity care in regional and rural areas.

These levers are not exhaustive, but they point to the kinds of system-level shifts that can unlock better outcomes. Each represents a starting point for deeper collaboration and reform. Nous has supported clients across sectors to explore these opportunities and would welcome a conversation about what’s possible for each player in the system. 

Every Australian benefits when the private health sector is strong. It is time to interrupt the trajectory of decline through strategic coordination, shared accountability, and a renewed focus on value for money and patient outcomes.

Get in touch to discuss maternity services and the future of private hospitals.

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