Hospitals put on notice: No bailouts if budgets blow out

Victoria’s hospitals won’t have their funding topped up if they run over budget as the debt-ridden state government tries to save money, prompting fears among health leaders that jobs will be at risk or services amalgamated.

The Allan government has written to the state’s health services to spruik the $8.8 billion in spending contained in last week’s budget, but also warn that hospitals have a role to play in reining in rising cost blowouts.

Health Minister Mary-Anne Thomas says her government’s $8.8 billion investment in hospitals comes with a “new level of accountability”.Credit: Penny Stephens

One letter, seen by The Age, made clear there would be no further funding provided beyond what was committed in the budget. The government’s tough talk has again stoked fears that Victoria’s hospital funding shake-up will lead to amalgamations and erode patient care.

The messages, sent following the budget, also reveal that Health Minister Mary-Anne Thomas has invoked powers under the Health Services Act to issue her own hospital service delivery agreements for the remainder of this financial year. A hospital’s statement of priorities is usually negotiated and jointly signed off by its board.

A source, who sits on a hospital board and is not authorised to speak publicly, confirmed they had received their statement of priority letter in recent days.

“This is supposed to come from the department in line with the financial year – i.e. last July – to allow us to plan the financial year ahead,” said the source. “We’ve got it six weeks before the end of the financial year.”

The Australian Medical Association’s Victorian president, Dr Jill Tomlinson, said she had heard hospitals “will be told to very strictly [adhere] to a budget and that health services will not receive additional top-up funding”.

Tomlinson said the AMA was seeking advice from the health minister about how this funding had been costed so hospitals were able to meet future demand while maintaining high-quality patient care and worker entitlements.

“AMA Victoria would certainly have concerns if tightening of fiscal constraints meant that any hospital was unable to be adequately staffed or to replace outdated equipment,” she said.

The Victorian government’s $8.8 billion spend over five years was promoted in last Tuesday’s budget as kick-starting “a profound change in the way our hospitals are funded, so they can more effectively and efficiently deliver world-class care”.

However, that figure included almost $1.5 billion in funding for the current financial year, and one health service executive said many services were still running in deficit.

The executive, who spoke on the condition of anonymity, said that while their service had just enough to cover wages and basic expenses such as food and medicines, they were unable to plan to replace equipment that had reached the end of its life, or to recruit overseas staff. Some services had not received money in a recent capital funding round, the source said.

“The funding we get is only funding for the provision of services, so there’s little opportunity to do anything except just meet day-to-day costs,” they said.

The senior health official said it felt like health services “were being suffocated until amalgamation is the only option”.

The Age revealed last week the government was looking at a radical plan to amalgamate Victoria’s health services into a much smaller group. The government said it was waiting for advice from an independent committee.

Health service costs have risen by an average 9.8 per cent every year for the past five years, according to the state government. The biggest cost increases have been in medicines, followed by needles and masks. Utility and insurance budgets have also recorded above-average blowouts.

Last month, The Age revealed that for the financial year to January, 41 of Victoria’s 75 health services did not have 14-day cash supplies to cover operating expenses.

Opposition health spokeswoman Georgie Crozier said she feared the government’s funding stance could lead to service cuts, job losses and forced amalgamations if costs didn’t come down.

“These communications are deeply concerning for rural and regional health services and for their communities,” Crozier said.

“Labor cannot manage money, cannot manage our health system, and as a result, Victoria patients will suffer.”

The Victorian government spokesperson said the health funding announced in this year’s budget would provide hospitals with greater financial certainty for the next five years.

“An investment of this size comes with a responsibility and requirement for financial discipline and accountability, as the community would expect,” the spokesperson said.

On Sunday, Thomas said the Health Department would soon begin working with Victoria’s health services to negotiate targets and budgets for the next financial year.

The government has long maintained that the budget, which delayed upgrades to regional hospitals to manage Victoria’s infrastructure pipeline and deal with spiralling costs, won’t result in cuts to frontline services.

Victoria has the nation’s largest debt pile. Net debt is expected to reach $187.8 billion by June 2028, leaving the state with an interest bill worth $25 million a day.

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