Hospitals need a budget reset

Wait times for elective surgery blew out during COVID and still aren’t back to where they were before. In 2024, about 17 per cent of West Australians waited longer for surgery than is clinically recommended – that rate has tripled from 2019.

Emergency department waits have stretched out too. In 2024, less than half of West Australians presenting to an ED were seen on time.

Hospital staff are burnt out and stressed.

Patients are getting more complex to treat, because they’re older and have more chronic diseases. That will only continue as the population ages. In the next 10 years, average hospital spending per person could increase by a third.

These are sobering numbers for a service we all count on in our hour of need.

More money sounds like the easy answer. But governments have already tipped in more — a lot more.

Over the past decade, total spending on WA’s public hospitals increased from $6.4 billion a year to $10b a year, in today’s dollars.

Governments will need to spend even more. But they should also spend smarter.

There’s no shortage of good ideas to get the best value out of every hospital dollar.

NSW has set targets for same-day surgeries for common procedures, such as gall bladder and tonsil removals.

In Queensland, highly trained nurses perform simple endoscopies, freeing up gastroenterologists for complex cases.

London doctors use AI note takers, so they can spend more time with patients and less time on paperwork.

On average, a hospital visit in WA costs about $500 more than an almost-identical visit elsewhere in the country. And even within WA, there’s a lot to learn.

A gall bladder removal at the cheapest hospital in WA costs $9000 less than at the most expensive — even after accounting for hospital size, region, and patient characteristics. The cost of a knee replacement varies by $6700. Even for a hernia repair, the gap is $4800.

If the State’s most expensive hospitals reached the middle of the pack, WA could save $170 million — enough to pay for an extra 23,000 admissions.

But better ways of working spread too slowly. That’s partly because it’s hard for hospital leaders to focus on productivity when they’re trapped on a financial roller coaster.

The WA Government sets the overall budget for hospitals. The allocation is often too low to maintain even current service levels, and ignores population growth, ageing, and other cost pressures. Some years, budgeted spending even falls, even though that almost never happens in reality.

It’s no wonder that hospital leaders, faced with dozens of competing priorities and no funding certainty, can’t plan and invest for productivity.

To break the cycle, we need a budget reset.

The WA Government must end wishful-thinking budgets and give hospitals fair, predictable funding. Hospital spending should reflect population growth, ageing, and cost growth.

The Federal Government also needs to step up and pay its fair share. Since 2017, it’s capped its contributions to hospital spending growth at 6.5 per cent. When there’s high inflation, like we had for several years, that doesn’t cover many new admissions at all. The cap should change to cover reasonable growth in hospital demand and costs.

It can’t be all cheque and no check. The era of scot-free bailouts must end. The health department should set clear performance standards and enforce them — including firing CEOs and boards who run big deficits.

Getting the overall budget right will create a strong foundation for better financial management.

But hospitals aren’t paid all in one big chunk — they get a fixed payment for every admission. Those payments are anchored on the average cost of each procedure in hospitals across the country. But that includes a lot of waste. Australia’s pricing rules cut out a lot of cheap hospital visits, and keep in a lot of unusually expensive ones.

The independent hospital pricing authority should review those rules to cut $1b of waste out of the system nationwide. The new prices will nudge hospitals to adopt cheaper methods when they’re available — such as same-day surgeries, which are much more common overseas.

The State Government should adopt the new rules as soon as they’re developed — and as a sweetener, the Federal Government should make its funding cap more generous if WA does.

Public hospitals are too important to be held hostage to bogus budgets. Getting hospital funding right would mean West Australians could count on getting the care they need, when they need it.