Hospitals ordered to find millions of dollars in savings or face the prospect of amalgamation

Victorian regional hospitals could be forced to close after being ordered to slash costs by millions of dollars ahead of the state budget.

Regional hospitals are warning they face “inevitable closures” or sweeping job losses after a Victoria-wide order to slash costs ahead of this year’s state budget.

Leaked internal briefings reveal bosses at multiple country health services have warned the forced “unrealistic” savings targets are unsustainable.

Some reported multimillion-dollar deficits last financial year and say there is no way to cut costs without affecting frontline services.

The directive to slash costs came from the Victorian Department of Treasury and Finance to all 76 health services and had individual targets across the next three financial years, under what are called Financial Management Improvement Plans.

Some services have been ordered to find millions of dollars in savings, but are being urged by the Department of Health to start with “back of house” functions, such as corporate services, and by making administrative roles redundant when they become vacant.

Regional hospitals have been ordered to find millions of dollars in savings.

Hospital chiefs have raised doubts the targets can be met, stoking fears about frontline services being put at risk and potential closures.

One senior leader at a hospital in regional Victoria said they had not seen a directive like this in the two decades.

“A lot of hospitals say it can’t be done without cutting (jobs) or reducing services,” they said.

Senior health sources say the Health Department has also refused to guarantee hospital deficits will be covered in order for them to continue operating with losses, and that they are being urged to use tied funding – money given by benefactors for specific purposes – as operational cash.

Hospital chiefs have raised doubts the targets can be met. Picture: Getty

It comes at a time the government is also considering forced mergers of hospitals to reduce the number of health services from 76 to as few as 12.

Two options are being assessed by a panel: a “partnership model” where hospital boards and chief executives sit under larger health network boards, and a “consolidated model” that would replace the current local system with large regional networks and six metropolitan networks.

The Allan government is desperately trying to rein in spending, with the state on track to reach $178bn in net debt by 2026-27, $156bn more than the $22.3bn Labor inherited when it came to government in 2014. The massive debt will equal $70,000 for every Victorian household.

Senior sources said transport and health were two areas where the government would take a scalpel.

Sick regional Victorians could pay the price of the Allan government reining in spending.

Jobs are expected to be cut through the merging of the Major Transport Infrastructure Authority with the Victorian Health Building Authority to create a new Victorian Infrastructure Delivery Authority.

Hundreds of public sector positions created while mega projects were at their peak are also being made redundant.

One senior figure said the government would be looking at the health sector more broadly than just the Health Department, which may not have as much fat as some of the public hospital services.

Health Minister Mary-Anne Thomas on Thursday confirmed the government had ordered regional hospitals to look at ways to cut their budgets.

“We’ve asked hospitals to look at the ways in which they can ensure that the funding that they receive is focused on delivering patient care,” Ms Thomas told ABC Radio.

“We’ve asked health services to look at their use of consultants to look at their use of public relations staff to see if there are processes that they’re duplicating.”

She, however, guaranteed that there would be “no hospital closures under my watch”.

Health Minister Mary-Anne Thomas on Thursday confirmed the government had ordered regional hospitals to look at ways to cut their budgets. Picture: Ian Currie

Ms Thomas said she was “acutely aware” of the challenges regional and rural hospitals were facing, including major staff shortages.

But when asked whether the government was partly to blame for the pressure facing the state’s health system, she continued to point the finger at the Covid pandemic.

“Around the world, every health system was impacted by this once in a 100-year global pandemic,” she said.

Earlier on Thursday, Australian Medical Association President Dr Jill Tomlinson President said there were “no opportunities to cut” budgets at regional hospitals.

“Any, any cuts must be through improved efficiencies and look, there is, there is no redundancy in the healthcare system and that that just cannot be overemphasized,” she told the ABC.

“We don’t have opportunities to cut.”

She called on the government to commit to an urgent meeting to discuss solutions.

Shadow minister for health Georgie Crozier said hospital closures or job losses would be devastating for regional Victoria.

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

“These funding cuts by stealth are the real-world consequence of Labor’s financial mismanagement and it is patients across rural and regional Victoria that will suffer.”

A government spokesperson said public health services had been asked to look at options to reduce any back-of-house inefficiencies.

They said there would be no cuts to frontline health budgets when the state budget was handed down on May 7.

“There are no plans to close any Victorian hospitals – unlike the Liberal National Party, we are not in the business of shutting down, privatising or slashing funding to our hospitals,” they said.

“We have a world-class health system in Victoria – it continues to be our largest investment, and this will continue to be the case.”