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

By Jackson Graham

Monday October 18, 2021

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.”


AMA: Australia cannot open up without urgent hospital modelling

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