The newly privatised Australian firm Medibank Private has started flexing its muscles, leaning on hospital providers to lower their charges in a tough market for insurers.

The insurer has also begun trials with GPs to expand their services beyond basic consultations to offer more sophisticated treatment, in the hope of keeping patients out of hospital and therefore cutting the insurers' costs.

The moves come as Medibank missed its revenue growth and revenue per customer forecasts in its half year earnings, the first released since it listed on the share market.

Medibank is Australia's largest private health insurer with about 29 per cent of the market, and increased its customer base to 3.9 million as of the end of December.


Rising healthcare costs are hurting the industry, Medibank said, pushing cash-strapped customers to downgrade their insurance or move to other providers.

Federal Health Minister Sussan Ley is due to announce any day a decision on the industry's call for premium rises of 6 to 7 per cent.

Medibank chief executive George Savvides said one way to stem falling revenue was to put pricing pressure on hospitals, where about $4 billion of its $5 billion in annual claims originates.

"If you want the largest health insurer and largest customer base to come to your hospital, you can't just charge us the same price that you charge the smallest health funds," he said. "It takes the breath away of the CEO sitting across the table at the hospital group, because they have been charging the same prices pretty well year on year."

Medibank shares fell after it posted a A$151.2 million ($157 million) net profit for the six months to December 31, and reaffirmed its guidance of a full year profit of A$258 million.

Revenue up
•Pro-forma net profit of A$151.2m, up 11 per cent.
•Revenue of A$3.27b, up 3.8 per cent.
•No interim dividend