Victorian hospitals: Labor government orders cost cutting amid rising debt

Already underfunded hospitals are being told to cut costs by millions of dollars as the Victorian government continues to grapple with mounting debt.

The Allan government has told hospitals to slash costs. Picture: David Crosling

Hospitals across the state are being told to slash costs by millions of dollars and dramatically overhaul office and administration services as the state government continues to grapple with mounting debt.

Rural health bosses have been told to find savings of between $4m and $10m over the next three years, but were specifically warned to not cut frontline jobs, including nurses and doctors, to avoid public concern.

Metropolitan hospitals have also been told to find efficiency.

Hospitals are being been told to overhaul office and administration services. Picture: Mark Stewart

The message was relayed to hospital CEOs several weeks ago by the Department of Health with some operators being required to cut back-of-house costs by up to 50 per cent and report back potential savings within a matter of weeks.

A Department of Health spokesperson confirmed the cost-cutting plan was underway, but claimed inefficiencies and said it would not affect any “frontline services or staff”.

“We regularly engage with health services on their finances and activity to assess spending, including looking at back office and administrative functions,” the spokesperson said.

“Across public health services in both regional and metropolitan Victoria there are disparities in back office and administrative spending – to rectify this the Department has requested that services, particularly those in the higher range, simply look at options to reduce any inefficiencies.”

The Department of Health says the plan is a way to ‘reduce inefficiencies’. Picture: David Crosling

The move has concerned hospital bosses and industry figures, who warn the state’s hospitals are already underfunded.

Victorian Health Association chief executive Leigh Clarke said any requests to find cost savings would widen the increasing gap between health funding and the true cost of delivering services.

“Hospitals have been left with a structural deficit following many years of funding not keeping up with the costs of delivering services,” Ms Clarke said.

“Without addressing that structural deficit, any further decreases to funding will ultimately be borne by health services and flow onto the delivery of frontline functions, including clinical.”

The Herald Sun understands that some regional hospitals are having more than $4 million cut, which is massive hit for the smaller services.

A number of health boards have also been called to meetings to discuss “collaboration” with other regional health services where the centralisation of payroll and other admin tasks was discussed.

Opposition health spokeswoman Georgie Crozier said the government was stripping hospitals by stealth.

“At a time when people in regional Victoria are crying out for vital health care, Labor is slashing budgets and jobs,” Ms Crozier said.

Opposition health spokeswoman Georgie Crozier says the government is stripping hospitals by stealth. Picture: Andrew Henshaw

“Under Labor, Victoria is broke and its people in the regions who are being punished with cuts to essential services.”

Sources told the Herald Sun there was major concern the cost-cutting measures, especially in administration, could have real impacts on the operation of hospitals.

It comes as after the state quietly released it’s blueprint for reforming the state’s elective surgery system.

The document outlined that centralising administration and sending outer suburb patients to regional hospitals were among the key new approaches.