Allan government commits extra $1.5bn to struggling Victorian hospitals, rules out mergers

The Allan government has pledged to throw the state’s hospitals a $1.5bn lifeline after months of threatening to strip back vital budgets. It has also ruled out any forced mergers.

The Allan government has pledged to throw the state’s hospitals a $1.5bn lifeline after months of threatening to strip bare vital budgets.

The government also committed to not forcing any mergers on hospitals, including Victoria’s iconic Royal Children’s Hospital which had privately lobbied the Department of Health to be spared.

Hospitals had been bracing to lose more than $1bn in state government funding despite dire warnings such significant cuts would force a critical reduction in frontline services and jobs.

Some health services had been forced to submit multiple budget action plans to satisfy strict government mandated cuts.

But on Wednesday – just two days after the Herald Sun revealed new polling which showed a disastrous drop in support for Labor because of the ongoing uncertainty around the health system – the government confirmed an additional $1.5bn in top-up funding for hospitals over the next year.

The announcement surprised many hospital CEOs and board chairs who will have the new budgets explained to them at a meeting on Thursday morning.

“We know our hospitals have just seen their busiest year on record – that’s why we’re giving them the funding they told us they needed,” a government spokeswoman said.

“We’ve worked with hospitals to develop their final budgets – making sure that every dollar prioritises patient care.

“We backed our nurses with a 28 per cent pay rise and now we’re backing our hospitals – because only Labor is on the side of our healthcare workers and hospitals.”

The Royal Children’s Hospital will be spared from a rumoured merger.

Opposition health spokeswoman, Georgie Crozier, demanded more detail around the announcement.

“Victorians can’t trust Labor on health given the directives of the Minister in May, and the government’s demands to Victorian health services.,” she said.

“The government is panicking about community sentiment and the ongoing crisis across Victoria’s health system.

“Victorians also know the government’s funding cuts and amalgamations will lead to a loss of services, a loss of jobs and worse outcomes for patients.

“The government has spent years developing their secret health services plan and in the interests of transparency need to immediately release it.”

The government and hospitals have been locked in tense negotiations in recent months amid demands to meet tough new financial targets they warned would risk community care.

Monash Health had been working to find savings of $350m while the Alfred Hospital was trying to cut $180m from its budget.

The Royal Melbourne Hospital was bracing for cuts of $230m over the next two years, Bendigo Health was looking to reduce costs by $120m and Grampians Health was facing a $50m deficit.

The Royal Children’s Hospital was facing tens of millions of dollars in cuts and job cuts.

It is not yet clear how the $1.5bn will be split among the state’s hospitals, but the government has committed to releasing further detail on Thursday.

The Allan government has ruled out any mergers of hospitals. Picture: David Crosling

Polling released this week showed health was now a critical issue for the Allan government, with the ALP’s primary vote share dropping to 31 per cent, six points lower than the 37 it recorded at the 2022 election.

At the same time the Coalition’s primary vote increased to 40, its highest level since June 2021.

Once preferences of minor party voters are distributed, Labor and the Coalition would be tied 50-50 on a two-party preferred basis, according to the poll of 1514 Victorians.