We hear a lot about the need to ensure a sustainable health system in Australia, and about the necessity of increasing the efficiency of patient treatments in public hospitals so that health services don't end up costing the earth. Lest anyone consider this a outlandish proposition, the Council of Australian Governments estimated in August 2011 that without changing existing funding approaches, health services would consume the whole of state and territory budgets by 2045-46.
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To guard against this eventuality, COAG agreed at that time to the phased implementation of a nationally consistent activity-based funding model from 2012. Under this model, providers would be funded based on the activity they undertook, with case-mix classifications to calculate activity. To incentivise the drive to efficiency, the Commonwealth agreed to stump up at least $16.4 billion in additional funding (over the period from 2014-20) for those public hospitals that met or exceeded the "national efficient price" benchmark as determined by the Independent Hospital Pricing Authority.
That COAG had embarked on a complex project was widely acknowledged. So too the likelihood that it would take time for activity-based funding to become successfully established. That second caveat was well justified, as the latest comparison of the average cost of care provided by over 100 of Australia's largest hospitals attests.
The survey, compiled by the Independent Hospital Pricing Authority, showed that some public hospitals are spending almost twice as much as similarly sized hospitals offering the same type of services and facilities; and that many are becoming less, not more, efficient at delivering a notional "average" hospital service to their acute admitted patients. Unhappily, the ACT's two public hospitals, Calvary and Canberra, figure in both camps. Indeed, Canberra's average acute care treatment cost was a chart-topping $6100, with Calvary not far behind at $5800. By comparison, average acute treatment at Frankston hospital in Melbourne's south-east was $3100.
Calvary and Canberra fared better than other hospitals at keeping a lid on average treatment costs. Hornsby Ku-ring-gai hospital, in Sydney's north-west, posted a 17.6 per cent increase during the comparison period from 2011-12 to 2013-14. However, the rise in treatment costs at Calvary and Canberra – 9.5 per cent and 5.2 per cent respectively – were well above the inflation rate.
ACT Health Minister Simon Corbell says the relative inefficiency of Canberra's two public hospitals is due to their inability to leverage economies of scale and the fact that clinical staff earn higher than average salaries. He's also pointed to the "long tail"of costs associated with staff on defined benefit pensions schemes. Given this was a like-for-like comparison, his explanations are unconvincing.
Were Canberra and Calvary hospitals to be national pace-setters in emergency room treatment times and reduced surgery waiting lists, their high costs would be easier for ratepayers to wear. As it is, they lag badly on these efficiency measures, too.
Unless or until the Barr government demonstrates real commitment to reducing hospital costs and overheads, the COAG nightmare of 2045-46 might yet come to pass in the ACT.
