Health insiders warn billions of budget dollars needed to save our struggling hospitals

The Allan government will be forced to fork out billions, to bail out the state’s cash-strapped hospitals — many of which face cutting staff and frontline services just to survive, insiders have revealed.

The Allan government will be forced to stump up billions of dollars to bail out struggling Victorian hospitals in next month’s state budget.

Health insiders say hospitals operating in the red will need significant funding boosts or be forced to cut staff and critical frontline services.

Among them, Royal Melbourne Hospital sources say the facility is facing a deficit worth “hundreds of millions of dollars” — its first in five years.

As Treasurer Tim Pallas prepares to unveil his tenth consecutive budget, government sources said addressing the hospital shortfall would be a priority.

However, it would likely involve an expected realignment of health services including forced amalgamations of some services.

The Royal Melbourne Hospital is facing a deficit of “hundreds of millions of dollars”. Picture: Andrew Henshaw

The Victorian Healthcare Association has previously warned hospital cash reserves have hit record lows sparking warnings of service cuts.

And leaked data showed hospitals were in more than $1.46bn of debt, with expectations that would grow to $3bn by the end of the financial year.

Under the state’s funding system, hospitals operate with sizeable debts until their budgeted cash is handed out before the end of financial years.

The government then hands out “top ups” when costs have outpaced the expected outlay.

Over the past five years the Royal Melbourne Hospital has recorded a surplus of between $0.05m and $0.4m.

A Victorian government spokesperson rejected suggestions the hospital was on track to hit $500m.

But they admitted the state’s hospital system was facing sustained and extraordinary demand following the Covid-19 pandemic.

Victorian Treasurer Tim Pallas is preparing to deliver his 10th budget. Picture: NewsWire

“Health services right across Australia and the world have experienced unprecedented pressure on operating costs and workforce as a result of inflation and the pandemic — that is why we’ve made record investments to ensure they can keep delivering world-class care to all Victorians,” she said.

“Every Victorian deserves to be able to receive the care and treatment they need, no matter where they live – and it has always been Labor governments that deliver this.”

Health whistleblowers agreed Victorian hospitals were being held back by a pandemic hangover.

“In the time of Covid, Victoria released the brakes and threw resources at hospitals in order to keep the community safe. Price increases are sticky and it is proving difficult to wash the Covid costs out of the system,” one senior source said.

They have also raised concerns over the adoption of a new national health funding model, introduced in 2021, they say has not been properly adjusted to Victorian requirements.

“It has left us with a system that is not fit for purpose and it doesn’t reflect Victoria’s structure,” the source said.

“Other states have modified it in some simple ways to make it workable. Victoria has implemented it with the wide-eyed naivety of a toddler and is now paying the price.”

Shadow Health minister, Georgie Crozier, said the state of Victoria’s hospital system was the fault of poor economic management by the Allan government.

“Labor cannot manage money and Victorians are paying the price,” she said.

“Health services can’t deliver the care Victorians need if they are hundreds of millions of dollars in deficit and literally running out of cash.

“These warnings confirm what we already know — Labor’s financial mismanagement will force cuts, closures and amalgamations across our health system in the upcoming State Budget.”

The Royal Melbourne Hospital refused to comment.