How to get hospital funding right

Wait times for elective surgery blew out during COVID and still aren’t back to where they were before. In 2024, about 19 per cent of Tasmanians waited longer for surgery than is clinically recommended. That’s shot up from just 2 per cent in 2019.

Emergency department waits have stretched out too. In 2024, only half of Tasmanians 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 public hospitals in Tasmania doubled from $1.2bn a year to $2.5bn.

Governments will need to spend even more. But they should also spend smarter. A typical hospital visit in Tasmania costs about $630 more than a near-identical one elsewhere in the country.

There’s no shortage of good ideas to learn from 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.

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 rollercoaster.

The Tasmanian government sets the overall budget for hospitals. The allocation is often too low to maintain 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.

Faced with unrealistically low budgets, hospitals run a deficit. Then the government swoops in at the last minute with a bailout, but tries to wrest back savings with another impossibly tight budget the next year. Rinse and repeat.

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 Tasmanian 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. For every extra $5 the Tasmanian government has coughed up since 2018, the federal government has matched just $1. 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 help with certainty. 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 $1bn 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 Tasmania does.

The Tasmanian government should also bring costs down by taking advantage of bulk buying. Hospitals need a lot of the same things, from masks to MRI machines. Governments should negotiate better deals on big contracts. Tasmania could supercharge this effect by teaming up with other states to combine their buying power. NSW leads the way, purchasing uniforms, bedsheets, meals, and a host of other supplies centrally.

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