By Annika Smethurst and Broede Carmody
Victoria’s health minister sought an urgent $422 million cash bailout for the state’s hospitals, bypassing cabinet to ensure health services could pay their staff and suppliers, documents reveal.
The dire financial state of health services last year has been exposed in a flurry of correspondence showing the state government went within days of being unable to pay the bills.
Health Minister Mary-Anne Thomas last year sought “urgent” payments totalling $422 million to the state’s health services. Credit: Penny Stephens
A ministerial brief, released under freedom of information laws, identified more than 20 health services that were forecast to finish the 2022-23 financial year in the red.
The brief, dated June 9, warned that without additional funding, the hospitals would be unable to make payroll payments and would have insufficient operating cash to pay creditors.
“At this stage of the review, advice from the corporate finance area is that there are insufficient funds to meet health service needs,” the Department of Health warned in the brief prepared for Health Minister Mary-Anne Thomas.
“This may have reputational risks for individual health services, the public health system and government.”
Melbourne Health, which operates as the Royal Melbourne Hospital, was projected to have the largest deficit for the end of that month – more than $104 million. Melbourne’s Austin Hospital was facing a $50 million deficit, while Alfred Health had a forecast $48.2 million shortfall.
The department said it was reviewing its own budget to identify any existing funds that could be reprioritised to help prop up ailing health services.
In an accompanying letter to Treasurer Tim Pallas – also released to the state opposition under freedom of information – Thomas requested hundreds of millions of dollars before a meeting of the cabinet’s budget subcommittee to ensure payments could be processed in time.
“I am writing to you seeking your support for my department to make urgent payments of $422 million to health services in advance of the scheduled [expenditure review committee] meeting on Wednesday 14th June 2023,” she wrote.
“I understand that there have been discussions between our departments in terms of the need to support and fund the $422 million for cash deficits, noting that further work is being done to support the expected end-of-year financial operating position of services.”
Together, the documents highlight the rush to ensure critical funding was provided within days.
Thomas’ letter was written on June 9 – also the date of the department briefing – and she told Pallas that approval for the extra money was required that same day.
“Your support is required by Friday the 9th of June 2023, to ensure payments can be processed and paid to health services by Tuesday the 13th of June 2023,” she wrote.
Shadow health minister Georgie Crozier said it was another example of Labor’s financial mismanagement directly impacting frontline health services, and called on the government to provide greater funding certainty for hospitals in future budgets.
“Is it any wonder why our health system remains in crisis under Labor when hospitals are running out of money and cannot afford to pay nurses, doctors and staff on time?” Crozier said.
“A year on from this bailout and the situation has only worsened.”
In response to questions from The Age, an Allan government spokesperson said the government had supported hospitals throughout the COVID-19 pandemic and beyond.
“Hospitals Victoria will work closely with all health services to ensure they are directing expenditure to where it is needed – in the delivery of frontline care,” the spokesperson said.
This year, The Age revealed that more than half of Victoria’s health services did not have 14-day cash supplies to cover operating expenses.
While the May budget tipped a record $13 billion into the public health system, hospitals were also told their future budgets would be locked in for the first time since the pandemic with no top-up spending.
Thomas insisted at the time that hospitals had to get rid of “waste and duplication”, specifically excessive marketing spending and unnecessary travel.
But health insiders warned the new rules could lead to bed closures, surgery delays and even the end of some breast screening and kidney dialysis services. One health service encouraged employees to turn off the lights when they exited a room to save money.
After a public backlash, the government last month dropped its plan to end future hospital bailouts, instead announcing an extra $1.5 billion in health funding. Pallas has not ruled out extra taxes to pay for the new spending.
The Allan government has also retreated from a plan to restructure and amalgamate all the state’s health services and extend payroll tax to independent GPs.
Thomas confirmed on Tuesday that the extra $1.5 billion for hospitals had now been allocated.
“Hospitals have received their budgets, and my department is now working through with individual hospitals ahead of the statement of priorities process which will commence shortly,” she said.
Craig McGregor, the secretary of the Victorian Allied Health Professionals Association, said it was not clear if the $1.5 billion figure was a one-off.
“I want to see that expenditure allocated on the basis of patient need, as opposed to being directed by electoral impetus,” McGregor said.
The state’s finances remain under pressure. The May budget predicted Victoria’s net debt would rise to $187.8 billion by June 2028, leaving taxpayers with a daily interest bill of $25 million.
Support for the Allan government has dipped to its lowest level in years, with a July survey by Resolve Political Monitor – conducted exclusively for The Age – showing Labor’s primary vote had dropped 1 percentage point in the previous two months and was just 27 per cent.
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