Public hospital funding needs ‘deeper’ reform than COVID boost, report says

By Jackson Graham

Monday October 18, 2021

hospital-rush
The COVID-19 pandemic contributed to a 16% increase in the expected number of deaths in 2020 the first half of 2021. (gpointstudio/Adobe)

Public hospitals were “not starting from a position of strength” before the pandemic, due to being squeezed by funding formulas, a new report arguing for reform says. 

The report, released by the Australian Medical Association, says the underlying demand for public hospital services will increase by 4.3% per year over the next decade to 2030-31 if changes to funding formulas don’t occur. 

The report points to a range of situations as Australia eases COVID-19 restrictions that will place additional pressure on public hospitals from late October to May next year — pointing out public hospitals are already operating at close to 100% capacity — but it also aims to look at hospital funding beyond the immediate crisis.

“Public hospitals are not starting from a position of strength, and do not have the capacity to scale up to meet the demands of a COVID-19 crisis or normal influenza season,” the report states. 

“We need reform right now that is deeper than simply a COVID-19 funding boost.” 

In 2014-15 the federal government commenced an “activity-based” funding model that meant it contributed 45% of the cost of public hospitals each year and state and territories have funded the remainder. 

But during the pandemic, the federal government has had a 50-50 agreement with states and territories to pay COVID expenditure in hospitals. 

The AMA’s report calls on the federal government to increase its annual activity-based funding to 50%. 

The federal and state governments have saved $32.4 billion in hospital funding from July 2016 to July 2019, the report says. 

The association calculated the savings based on caps to commonwealth hospital funding at 6.5% yearly growth, and because of efficiencies at hospitals that reward services delivered at lower prices. 

“The current funding formula squeezes public hospital finances year-on-year,” the report says. 

“These savings should be reinvested as a first step, alongside the introduction of new models of partnership funding between the commonwealth and the states and territories, and the re-introduction of select pay-for-performance targets.” 

Association president Dr Omar Khorshid said the report was sent to the prime minister and every state and territory leader. 

“Repurposing resources in a constrained system by stopping one type of healthcare in favour of another will only lock us further into cycles of crisis,” Khorshid said in a statement

“Likewise, arguing over who spends what on a funding model that doesn’t currently include what our hospitals and patients need is nothing but distraction politics.  

“We need a national partnership approach where Federal and State and Territory governments work together to implement structural reform to focus on public hospitals seeing people on time and providing quality care.”


READ MORE:

AMA: Australia cannot open up without urgent hospital modelling

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