According to the 2021 investor presentation, doctors were told the facility would be profitable in the first year of operation, based on assumptions that 782 total joint replacements and 1069 other orthopaedic procedures were completed in the first year, which increased to 1283 and 1758 procedures respectively in the third year.

“The institute’s success and profitability is wholly dependent upon doctors performing procedures at the institute,” the presentation said.

The doctor shareholders would receive a return on investment of about 20 per cent, the presentation stated, if a “terminal” (constant) growth rate of 2.4 per cent was achieved.

University of New South Wales professor and orthopaedic surgeon Ian Harris has written a book titled Hippocrasy exposing the rising influence of profit motives in Australian healthcare where incentives cause doctors to provide patients with unnecessary and at times harmful treatment. Harris said the KPIs did not need to be written in a contract to affect surgeon behaviour.

“What they’ve done is they’ve removed the explicit KPI. But surely, there is an implicit KPI, an unwritten KPI, which is the drive to maximise profit.”

Harris said the basic arrangement of doctors owning a hospital was a problem because it created an incentive to maximise surgeries.

“Most private hospitals make money on surgery, not general medicine,” he said. “If you’re a surgeon who owns a hospital that you operate at, if you want to maximise return on investment, you want to put bums on seats or patients on trolleys. So, that’s a conflict.”

Harris said “not all surgical decisions are clear cut” and whether consciously or subconsciously, if a doctor had a financial stake in a hospital, it could influence their decision-making to over-prescribe surgeries, which exposed patients to all the risks of going under the knife.

“When you have those grey zones and in the back of your mind you’re trying to fill an empty room, that’s a conflict.”

Al Muderis’ lawyers said the primary motive of the joint venture is to provide the best patient care, and denied conflicts were isolated to this doctor-owned hospital.

“Conflicts of interests are a question for the larger health sector as a whole, since all healthcare workers in private practice provide their services for a fee and so this really needs to be asked of every health practitioner in Australia for any sort of accurate insight.”

The lawyers said doctors having stakes in hospitals had become “common” in Australia, and the arrangement can “drive efficiency and accountability”.

“Doctors generally have a vested interest in the private set-up. This is inherent in our private health sector which supplements the public health sector. This venture is not unique,” the lawyers said.

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In a statement, a Medibank spokesperson said there were no “volume-related clinical KPIs” or “any KPIs” in place but did not answer questions about how potential conflicts of interest with doctors owning the surgery would be managed.

“Clinical decisions are based on the individual needs of each person, as assessed not only by their surgeon but the patients’ multidisciplinary clinical team. In addition, peak professional medical organisations provide frameworks and oversight of the clinical appropriateness of surgery,” the spokesperson for Medibank said.

“We are confident that the strong clinical governance in place at Macquarie University Hospital will result in safe patient outcomes, ensure appropriate care is provided to patients and assist in identifying any possible conflicts of interest.”

A spokesperson for Macquarie University Hospital said it was a “highly respected institution with a strong track record of providing world-class services … with quality and safety in patient care its primary focus”.

“MUH is not a party to agreements between surgeons and private health insurers and therefore cannot make any comment on the contents of any such agreement. However, MUH would not accept KPIs to maximise surgeries at the new short-stay centre.”

The investor documents also show the financial benefits of partnering with Macquarie University Hospital, including “cost-saving benefits” that eliminate “many of the usual start-up costs for a new hospital” which would make it “virtually impossible” for others to compete.

The partnership is the third short-stay hospital Medibank has backed in recent years, alongside East Sydney Private and a new facility in Melbourne, creating fears among some surgeons that Australia is headed for an “Americanisation” of healthcare, driven by profits.

Another surgeon, who could not be identified because they were not authorised to speak publicly, said patients believed they were benefitting from the arrangement because they avoided “gap” charges but, in reality, the private health insurer saved on in-hospital aftercare by sending patients home to recover.

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The surgeon agreed that medical professionals having stakes in hospitals could lead to more surgeries being recommended.

“Where is the incentive not to operate?” said the surgeon. “If I’ve got a private hospital sitting there empty, I’m not making a return on my money, what am I going to do? Operate on people. The whole system of surgeons owning hospitals is a worry to me and colleagues.”

The surgeon said his colleagues already could perform “no-gap surgery” but it had just become “unattractive” to some peers. “Patients feel like they’re getting something. But the only reason the patients are out of pocket in the first place is because the surgeon is charging a gap. The surgeon can do no-gap surgery now.”

Al Muderis’ lawyers said he “does not charge a surgical fee in excess of the AMA prescribed rates” and insisted “all involved parties of the venture are committed to integrity and professionalism in what they do”. The lawyers said all patients would be informed of the surgeon’s stake in the hospital.

“Professor Al Muderis wants to eliminate out-of-pocket expenses for patients and for patients to have access to healthcare without additional costs to them. Professor Al Muderis advocates for no-gap programs to be standard in the health sector for the benefit of patients.”