Secret report claims health system underfunded by $100 million a year

THE State Government is underfunding the Tasmanian health system by $100 million a year and trying to contain budget blowouts by cutting staff, a secret report shows.

The Royal Hobart Hospital is struggling under high patient loads.

THE State Government is underfunding the Tasmanian health system by $100 million a year and trying to contain budget blowouts by cutting staff, according to a secret report.

An RDME Consulting report, which the Government has kept under wraps since March, quotes a KMPG report which puts the persistent “structural deficit” at $96.4 million in 2015-16, rising to $100 million in 2016-17.

“Tasmania has the lowest health funding as a proportion of GST receipts and significantly lower than any other state,” the report says.

“Over a period when the state has experienced significant growth in GST receipts, health spending has not increased in line with this.”

Health Minister Michael Ferguson on Wednesday night said the report did not take into account spending increases in the last State Budget.

Health Minister Michael Ferguson. Picture: LUKE BOWDEN

The report blames the Government’s refusal to take into account credible estimates of demand growth as one reason for the health system’s consistent budget overruns.

Demand for health services is growing at between 3 and 4 per cent a year, as health spending rose at an effective rate of around 1.7 per cent, the report said.

It pointed to the employment of “third party” agency staff as a major contributor to cost overruns.

And it says Treasury had failed to accept demand projections that had turned out to have been accurate.

As a result, the RHH Emergency Department, which was designed to cope with 45,000 presentations a year, was now being swamped by 62,000 patients a year.

“The current Emergency Department at the Royal Hobart Hospital is under pressure,” it notes.

“The pressure is the result of ignoring or discounting demand projection and a failure to link demand ‘gap’ analysis to facility planning.”

The Royal Hobart Hospital’s Emergency Department is receiving thousands more presentations a year than it is designed to handle. Picture: MATHEW FARRELL

State Parliament on Wednesday heard the Government had refused to release the RDME report under Right to Information legislation because it was exempt due to copyright laws. The report describes a spiral of tight budgets, cost overruns and cutbacks.

“The danger of posting unrealistic budget expenditure numbers is that the THS spends a lot of time and effort in budget management strategies trying to close what has been described as a structural gap,” the report says.

“These strategies often involve a reduction in FTE [full-time equivalent staff].

“The current 2017-18 list of savings strategies includes a reduction in 100 FTE,” it says, noting the target of $5 million in staff-related savings will be missed.

Labor health spokeswoman Sarah Lovell said the report was damning and Mr Ferguson should go.

Labor health spokeswoman Sarah Lovell. Picture: LUKE BOWDEN

“The report reveals the Tasmanian Health Service was forced to adopt savings strategies to deal with the funding shortfall, including cutting 100 jobs,” Ms Lovell said.

“The damning revelations in this report fly in the face of everything Michael Ferguson has said in almost five years as Health Minister.

“The Department of Health and Human Services commissioned an assessment of health expenditure drivers from KPMG in 2017. This analysis shows a difference between actual and budgeted expenditure that is structural [persisting] and increasing.

“KPMG observes that the annual increase in THS budget is largely for new initiatives and is therefore not addressing the structural deficit.”

Mr Ferguson said the report did not account for spending increases since the March state election.

“This report predates this year’s State Budget which includes a $465 million increase in health investment compared to the prior Budget,” he said.

“This year’s Budget contains almost $2 billion more for health than the former Labor-Green government’s last Budget. We have not cut staff, in fact we have employed an additional 630 FTE frontline staff and opened 120 additional beds since 2014.

“Over the next four years, we will recruit an additional 478 full-time staff as we deliver our six-year, $757 million plan to build a better health system.”