Public hospitals wasting $1.2 billion a year says Grattan Institute

ABC NEWS (Australia)

Australia's hospitals are wasting one-point-2 billion dollars on avoidable spending, according to a new report by the Grattan Institute. The report comes as the public hospital funding stoush between the commonwealth, states and territories continues. Health program director at the institute Peter Breadon says overspending is occurring at hospitals in every state and territory

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00:00We can see within those states big differences in cost between some hospitals.

00:08So for common kinds of reasons, for going to a hospital like a caesarean delivery or

00:12a hip replacement or a knee replacement, you can see the most costly hospital and the cheapest

00:18hospital in a state, the costs will vary by $10,000 or more per visit.

00:24And so those costs all add up, that's how we found that figure of $1.2 billion.

00:30And we know that there are lots of opportunities to scale up best practices and learn from overseas.

00:36A standout example is sending people home the same day after some surgeries, which frees

00:42up hospital beds and saves costs.

00:43But there are also ways to use AI, to use workforce skills better.

00:49There are countless examples, but the problem is the way hospitals are funded doesn't support

00:54them to make those changes.

00:55They don't have the resources or the incentives to really get the most out of every dollar.

01:00Yeah, hospitals, if they need to do the work to become more efficient, they are getting

01:04bailed out by state governments if they do run out of cash there.

01:08So the incentive isn't there, is it?

01:10That's exactly right.

01:11We see that the federal government isn't tipping in as much money as it needs to, to meet the

01:15growing costs of care.

01:17But also, as you say, in most states in most years, they end up bailing out the hospital

01:22system by a lot.

01:24And that's because the budgeted money isn't realistic.

01:28They'll project often that funding in the system is going to go down in the next year,

01:32which almost never happens.

01:33So on average, over the last decade, state and territory governments are tipping in 6%

01:38extra at the end of every year.

01:41And that creates all of this uncertainty and instability in the system, with hospitals not

01:46knowing what their next budget is going to look like, often until very late in the financial

01:50year.

01:51So they don't have that security and certainty to invest in productivity improvements.

01:57And importantly, they anticipate another bailout.

01:59Rationally, they focus more on wait times and other things, instead of financial management,

02:05and getting the best value for taxpayers.

02:07So Peter, how would you describe the strain that hospitals are under?

02:12Well, it is really troubling.

02:14We've seen in the last decade, on average, an extra $3 billion go into the system every

02:20single year.

02:22And yet hospitals are still under great strain.

02:24So we see wait times are increasing.

02:28Emergency departments are often full to overflowing.

02:31And staff report that they're stressed and burning out.

02:34So that's why we need to really reset the financing of the system and build in stronger incentives

02:40to make care more productive, because we know that no matter what happens, there's going

02:44to be more public hospital care and more spending is going to be needed.

02:48But we really need governments to come together and make a deal to set the system up for success.

02:53And that means reinvesting that $1.2 billion, which could fund an extra 160,000 visits every

02:59year, and really setting up the system to get the most out of that growing investment to meet

03:05the growing care needs of Australia.

03:07And what's your reaction, Peter, to Prime Minister Anthony Albanese writing to the States

03:12and Territories to rein in spending if they want a funding deal on it?

03:16Well, I know that states and Territories are pretty grumpy, because since the Federal

03:23Government imposed a cap on its spending growth, they've shouldered three quarters of the growing

03:27cost of hospital care.

03:30But at the same time, the Prime Minister has a good point.

03:33If you want to invest billions and billions of more investment in a system, I can understand

03:39the Prime Minister wanting some reassurance that we're putting policies in place to bring

03:44cost growth under control and get the best value for money.

03:48And so we've proposed that governments should come together.

03:51Ask the Independent Pricing Authority to come up with new funding rules that ensure we're

03:56funding best practice, efficient care.

03:59And I hope that will give the Federal Government the reassurance they need to tip in the significant

04:04extra investment which is needed.

04:06Care-sized.

04:07For more information, please visit the Federal Government of the United States.

04:09Thank you, the Federal Government of the United States.

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