Healthcare system wasting billions of dollar each year

As the Morrison government looks to counter the negative economic impacts of the coronavirus on a nation once again anxious about infection, it might sound like heresy to say there is room for Australia's healthcare to be leaner.

But, even accounting for the strain of the pandemic on the healthcare system, room there is. Through the eyes of a health economist, much of current health spending is porous; directed the wrong way, wasteful or even harmful. It comes down to value.

Before March, when life ground to a halt and the role of political leaders changed overnight, the imperative for governments had always been to contain public spending and make sure it delivered value.

Suddenly, Australia's governments are amassing debt, even if it's subject to low interest rates. Amid the onset of COVID-19 and the rising deficit, demand for value has escalated. The search for value has always swung a searchlight across corners of Australian public life, including healthcare. But we can find more.

There are shining examples of health prioritising value, to its own betterment. For medicines listed on the federal Pharmaceutical Benefits Scheme (PBS), the mechanisms that ensure the government extracts value from each health dollar are world class. That is because new drugs are listed only if they deliver value, quantified by the evaluation the system carries out.

The PBS embodies health delivering value as it should. This is tantalising for a health economist, and should be for anyone who cares how public money is spent. Conversely, where Australia spends most of our health budget - the local level - is where we evaluate least. That is a problem.

Aiding the search for value is Australia's overall situation. We have, until recently, done exceptionally well at suppressing the virus, and our economy, despite slowing pre-COVID, was armed with fiscal firepower to fuel multibillion-dollar stimulus packages.

This was underlined in June, when, as the world confronted a deepening global pandemic recession, Australia was the only advanced economy to have its outlook upgraded. But as Treasurer Josh Frydenberg last week revealed an $85.8 billion deficit, further stimulus dollars will need to come from somewhere. It's estimated that 20 per cent of annual healthcare spending - $34 billion in 2016 - is waste.

Such numbers raise questions. What health works, and for whom? Under what circumstances? Is emerging technology actually an improvement? How much does it cost? These are queries that decision-makers need the ability to answer.

A good sign is that during the pandemic, health services have pivoted out of necessity. Hospitals' Intensive Care Unit capacities have expanded, and states have mobilised to carry out mass testing for the coronavirus. Other innovation has been subtle, within models of care such as telehealth and virtual hospitals. Soon, perhaps, we will have a sharper picture of their value. For instance, are they effective compared with usual care? Are they more expensive?

These innovations, reassuringly, are designed by frontline health workers who know what patients need. But they are difficult to gauge. Health services need access to experts who can deliver evaluation alongside these innovations, so that decision-makers have the evidence they need to understand value. So how do we cultivate evaluation expertise?

The Embedded Economist program piloted by NSW Regional Health Partners helps health services build that capacity. Backed by the Medical Research Future Fund, the scheme moves economics from the periphery into the core of health workers' thinking; it is being delivered in five sites across NSW and South Australia.

Consider a nurse unit manager of a busy surgical ward, juggling a budget against the safety of patients and staff. Wound dressing technology is advancing, but so is the cost. New negative pressure devices reduce rates of infection, often at $300 per dressing.

But evidence shows that, used correctly, this dressing can prevent surgical site infections. Each successful case could be someone who recovers at home, freeing up a bed in a pandemic, and reducing the risk of infection in hospital. A hospital-related infection, studies show, can cost $40,000. So evaluating wound dressings could boost the value of healthcare, thanks to the dedicated expertise of health economists. This is what they do.

In the world beyond the pandemic, Australians deserve healthcare much better equipped to evaluate itself and its needs. This won't be as easy for our leaders to unveil at ribbon-cutting ceremonies as, say, a new hospital. But it will be every bit as much an investment in our health infrastructure, that can start helping our economy now.