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Current Issues
Hospitals in Australia
E-Brief: Online Only issued January 2001; updated 21 October 2002; 30
April 2003
Amanda Biggs, Information/E-links
Social Policy Group
Introduction
Hospitals, particularly public hospitals, are seldom far from the media
spotlight and the attention of the community. Issues around funding, waiting
lists, bed closures, Commonwealth-State relations, private health insurance
and rationing of services all work to highlight the increasing difficulties
faced by hospitals in providing services to patients. Key drivers of increasing
costs in this area include technology, the ageing of the population and
increasing demand for and use of services. Less discussed, but possibly
important additional contributing factors include the impact of wage and
salary increases (hospitals are very large employers) and the ability
of hospitals to adapt their structures (physical and staffing), procedures
and methods of care to the possibilities and demands of modern medicine.
The Australian Institute of Health
and Welfare (AIHW) reported recently that hospitals accounted for
some $14.35 billion of expenditure in 1999-00 and provided almost 5.9
million episodes of admitted patient care (3.9 million in public hospitals
and 2 million in private hospitals) using the equivalent of nearly 220
000 full time employees. In 1999-00 there were 52 947 public hospital
beds, a decline from the 53 885 beds reported in the previous year.
Most of these statistics can be found in the AIHW's Australian
Hospital Statistics 1999-00.
Reports, papers and statistical collections of relevance to the hospital
sector are issued by a wide range of Commonwealth, State, Territory and
non-government agencies. In addition, the sector is characterised by a
variety of interested parties. This e-brief aims to draw together the
disparate collections of data and the key stakeholders as well as providing
background on issues of importance to the hospital sector. The focus of
the e-brief is on hospitals, including both the public and private sectors.
More links relate to the public hospital sector due to both its larger
size and the high degree of government involvement in the sector.
Brief legislative overview 
Under Australia's federal system, the States and Territories have the
primary responsibility for the provision of health services, including
public hospital services. However, following a referendum in 1946, an
amendment to the Constitution inserted section 51(xxiiiA), which gave
the Commonwealth the power to legislate on:
the provision of maternity allowances, widows pensions, child
endowment, unemployment, pharmaceutical, sickness and hospital benefits,
medical and dental services (but not so as to authorize any form of civil
conscription), benefits to students and family allowances.
This provision has, in part, enabled Commonwealth governments to become
increasingly involved in the funding and provision of public hospital
services while the primary responsibility for the delivery of the services
has remained with the States and Territories. However, this division of
roles and responsibilities between the jurisdictions has never been fully
clarified and has enabled successive Commonwealth and State/Territory
governments to simply shift the blame to each other for perceived shortcomings
in the funding and provision of public hospital services. These issues
are explored in more detail in the Senate Community Affairs Committee's
First
Report and Final
Report on its inquiry into public hospital funding.
The Health Care (Appropriation)
Act 1998, gives legislative effect to the Commonwealth's funding commitments
for public hospital services under the Australian Health Care Agreements.
The provision of public hospital services in each jurisdiction is governed
by State and Territory legislation.
Licensing and approval of private hospitals is the responsibility of
the State and Territory governments. The Commonwealth government plays
a significant role in the regulation of private hospitals through various
provisions of the National Health
Act 1953 and the Health Insurance
Act 1973. One important aspect of this regulation is the requirement
that a hospital be 'declared' by the Commonwealth before the hospital
can receive health insurance benefits.
Australian Health Care Agreements
The Australian
Health Care Agreements (AHCAs) express the commitment of Australian
governments to the provision of public hospital services. A separate agreement
is signed between the Commonwealth and each State and Territory and the
current agreements are in operation from 1 July 1998 to 30 June 2003.
Known formerly as the Medicare Agreements, the AHCAs provide the basis
for the Commonwealth's financial contribution to the provision of public
hospital services. This funding is not provided directly to public hospitals
but rather, is provided to each State and Territory Government to help
fund its public hospital services. While each agreement specifies the
amount of funding which the Commonwealth will contribute to each State
and Territory for public hospital services, there is no corresponding
requirement for the States and Territories to commit to a particular level
or amount of funding over and above the Commonwealth's contribution.
The AHCAs specify the role of the Commonwealth and State and Territory
Governments in the provision of public hospital services and articulate
several key principles which hold that:
- public hospital services must be provided free of charge to public
patients;
- access to public hospital services must be on the basis of clinical
need and within a clinically appropriate period; and
- people should have equitable access to public hospital services regardless
of their geographical location.
These principles are also enshrined in the Health Care (Appropriation)
Act 1998, which gives legislative effect to the Commonwealth's funding
commitment. Also included in the agreements is funding for palliative
care, mental health and quality improvement.
Funding under the agreements is indexed annually by several means to
take account of changes in the age, sex and distribution of the population
as well as changes in prices. This latter index, the hospital output costs
index (HOCI), has been the subject of controversy during the process of
establishing a suitable price index, with the States
and Territories disagreeing with the Commonwealth over the issue,
claiming they were being underfunded by the Commonwealth. The First
Report and Final
Report on public hospital funding of the Senate Community Affairs
Committee include an analysis of the issues involved and an overview of
the differing views of the participants.
Private health insurance has been another area
of contention with regard to the AHCAs. The agreements include provisions
(in Part 7) which enable the Commonwealth to adjust the funding for each
jurisdiction according to changes in the level of coverage of private
health insurance. The relevant clauses provide that funding by the Commonwealth
may increase if the level of private health insurance falls by a uniform
rate of 1 per cent nationally (an issue which was unresolved under the
previous Medicare Agreements). The clauses also provide that funding by
the Commonwealth may decrease if the level of private health insurance
increases relative to the rate at December 1998. However, following negotiations
with the Australian Democrats to ensure the passage of the National Health
Amendment (Lifetime Health Cover) Act 1999, the Commonwealth undertook to offer
each State and Territory a deal which would ensure that no jurisdiction
would be worse off in the event that private health insurance coverage
increases above the level at which Commonwealth funding would have been
reduced.
The First
Report of the Senate Community Affairs Committee's Inquiry into Public
Hospital Funding includes an analysis of the funding for public hospitals
provided by the Commonwealth, States/Territories and the non-government
sector during each of the three Medicare Agreements (1984-88, 1988-93
and 1993-98), together with data on the funding effort of the different
jurisdictions in the first two years of the Australian Health Care Agreements.
Senate Inquiry Into Public Hospital Funding
In mid-1999, less than 12 months after accepting the
terms of the Australian Health Care Agreements,
State and Territory leaders and health ministers attempted to pressure
the Commonwealth Government into conducting an inquiry into the Australian
health system. The Government ruled out holding
such an inquiry and in August 1999 the Senate issued terms
of reference to the Senate Community Affairs References Committee
for an inquiry into public hospital funding. The Committee called for
submissions and held public hearings in each capital city during November
1999 and February, March and April 2000. A list
of submissions and a transcript of
each of the public hearings are available. To access the transcripts,
click on the link above and scroll down the alphabetical list of Committee
inquiries to the heading 'public hospital funding' which contains links
to each of the public hearings.
On 12 July 2000 the Committee issued its First
Report which addressed the inquiry's key terms of reference. This
report did not contain conclusions or recommendations but provided a synthesis
of the evidence presented to the Committee together with background on
public hospitals and public hospital funding since the introduction of
Medicare. The report also canvassed a variety of options for reform which
had been raised during the inquiry. The Committee convened Roundtable
Forums on 18 August 2000 and 20 November 2000 in Parliament House Canberra,
at which invited experts, practitioners and consumers considered and discussed
the options for reform. A transcript of the proceedings is available here. To
access the transcript, click on the link above and scroll down the alphabetical
list of Committee inquiries to the heading 'public hospital funding' and
then click on the links for 18/8/00 and 20/11/00. The Committee's final
report (Healing our hospitals: report on public hospital funding)
was tabled on 7 December 2000.
The Government Response
to the Committee's report was tabled out of session on 28 September 2001.
Key stakeholders
Participants in health policy debates have been described by the late
Dr Sidney Sax as a 'strife of interests'. Nowhere is
this strife of interests more evident than in the hospital sector where
disagreement and strident views are commonplace. Surprisingly, in an industry
in which science and evidence play important roles, a lack of knowledge
in several key areas results in anecdote being the only means of support
for particular viewpoints.
Key stakeholders include the Commonwealth, State and Territory governments
and their bureaucracies, professional and industrial associations, research
institutes and think tanks, hospitals, and consumer representatives.
Governments
The following links provide access to hospital-related data via the home
pages of the health department in each jurisdiction. Within each jurisdiction
the availability of information and data varies but all have some hospital-related
material on their web sites. None of the sites has all of its hospital-related
material gathered together in a single location or linked, although Victoria
does come close.
Commonwealth Government
The Commonwealth Department of Health
and Ageing has responsibility for national leadership in this area
and oversees the funding and reporting arrangements under the Australian Health Care
Agreements. The home page of the Department's Acute and Co-ordinated
Care Branch can be found here. Other material
of interest includes:
State and Territory Governments
New South Wales
Although the hospital-related material is not immediately obvious on
the New South Wales Health Department
site, a considerable amount of data, reports and other publications are
available. Some useful subsites include:
Victoria
The Victorian Department of Human
Services site contains a considerable amount of useful hospital-related
material:
Queensland
Relevant information on the Queensland
Health site includes:
South Australia
The South Australian Department of
Human Services site includes:
Western Australia
The Western Australian Department
of Health site includes
- a profile of the Hospitals
Program
- the Central Wait List
Bureau subsite of the Metropolitan Health Service Board includes
several items of interest, including access to surgery waiting times
(via a keyword search) and an elective surgery newsletter
Tasmania
The Tasmanian Department of Health
and Human Services site includes a small amount of hospital-related
material:
- the DHHS Services Directory with links to services. This includes
policy on elective
surgery and information on hospitals
and the ambulance service
- what appear to be links to Tasmanian hospitals are available here, however
only two actually provide an appropriate link
Australian Capital Territory
The ACT Health site has links
to the two public hospitals in the ACT:
Northern Territory
The Northern Territory Department
of Health and Community Services has links to:
Non-government stakeholders
Other stakeholders include:
Research institutes/think tanks
There are several research institutes whose work is of relevance to the
hospital sector. Organisations prominent in this area include:
Centre for Health Program Evaluation
The Centre for Health Program
Evaluation (CHPE)
is a research and teaching organisation which comprises two independent
research units:
- the Health
Economics Unit, which is part of the Faculty of Business and Economics
at Monash University
- the Program
Evaluation Unit which is part of the Department of General Practice
and Public Health at the University of Melbourne
CHPE produces a wide range of health-related studies and papers, an increasing
number of which are available online
here.
Centre for Health Economics Research and Evaluation
The Centre for Health Economics
Research and Evaluation (CHERE) is an independent research unit within
the Faculty of Medicine at the University of Sydney. Administratively,
it forms part of the Central Sydney Area Health Service. CHERE conducts
research across the health spectrum, with a particular focus on the relationship
between health and health care and individual and social welfare. Only
a limited number of publications are currently available online, but a
list of publications can be found here.
National Centre for Social and Economic Modelling
The National Centre
for Social and Economic Modelling (NATSEM) at the University of Canberra,
has produced several recent reports which analyse and model the available
data to assess the distributional aspects of public spending on health
care and public hospitals. One report, issued in 1998 (Public expenditure
on hospitals: measuring the distributional impact, by Deborah Schofield),
examined public expenditure on hospitals through Medicare and concluded
that 'public expenditure on hospitals was very pro-poor, with persons
in the lowest income quintile receiving five times the expenditure that
persons in the top quintile received'.
A more recent report issued in February 2000 (Lifetime Distributional
Impact of Government Health Outlays by Ann Harding et al) examined
health spending more generally. This study used a microsimulation model
to examine the impact of public health outlays over people's lifetimes.
The results of the study suggest that, over a lifetime, health outlays
under Medicare redistribute resources from the affluent to the poorer,
from people without children to families with children, and from men to
women.
Statistical and other collections
Australian Institute of Health and Welfare
The key agency which collects, collates, analyses and reports on hospital-related
data is the Australian Institute of
Health and Welfare (AIHW). Examples of relevant AIHW reports include:
- a comprehensive collection of data on public and private hospitals
in Australia, including the number of hospitals and available beds,
staffing, workload, costings and patient profiles, together with trends
over the last six years can be found in the annual Australian
Hospital Statistics
- expenditure on public and private hospitals by the Commonwealth and
each State and Territory government as well as the non-government sector
is reported in Health
Expenditure Australia
- comparisons of hospital-related data (public and private) between
metropolitan and rural and remote areas can be found in Health
in Rural and Remote Australia
- international comparisons are included in the report International
Health: how Australia compares
- a comprehensive overview of public and private hospital-related data
together with commentary and analysis can be found in the biennial Australia's
Health
- the latest available national data on waiting
times for elective surgery in public hospitals is reported periodically
by the AIHW
- detailed workforce data for both public and private hospitals is available
in reports on the medical
force and the nursing
labour force
Australian Medical Workforce Advisory Committee
The AIHW also works with the Australian Medical Workforce Advisory Committee
(AMWAC) which has produced a range of reports, including benchmarks for
the Australian medical workforce and Australia's current and future requirements
in individual medical specialities. AMWAC was established in the mid-1990s
by the Australian Health Ministers' Advisory Council to advise on national
medical workforce matters.
Australian Bureau of Statistics
The Australian Bureau of Statistics
produces several collections of data which are relevant to the hospital
sector. These include regular surveys such as Private
Hospitals Australia (also available fulltext through ABS@Parliament)
and occasional papers, including Hospital
Statistics, Aboriginal and Torres Strait Islander Australians.
Productivity Commission
The Productivity Commission, in its role as the Secretariat for the Steering
Committee for the Review of Commonwealth/State Service Provision,
issues an annual report which compares
the performance of governments across several important areas of responsibility,
including public hospitals. The Productivity Commission also issued a
research
paper on private hospitals in Australia in December 1999. This paper
provides a detailed profile of the private hospital industry, an analysis
of the sector's financial performance, explains the regulatory and legislative
framework within which the industry operates and assesses the degree of
competition in the private hospital market and the drivers of demand for
private hospital services. While the report does not contain policy recommendations,
the Commission does canvass future policy issues, including legislative
and regulatory controls on the industry.
Quality and Safety Issues
In 1995, the Quality in Australian Health Care Study was published in
the Medical Journal of Australia. The publication of the results of this
study caused some consternation at its findings that 16.6 per cent of
admissions to 28 hospitals in New South Wales and South Australia 'were
associated with an adverse event' and that more than half of these adverse
events were considered preventable. Extrapolated Australia-wide, these
findings implied that adverse events in hospitals annually caused some
18 000 deaths, 17 000 cases of permanent disability and 280 000 cases
of temporary disability. Although the original paper is not available
online, a later article,
also published in the Medical Journal of Australia, provides a follow-up
analysis of the causes of the adverse events from the Quality in Australian
Health Care Study.
Subsequently, a Taskforce on Quality in Australian Health Care was established
to assess the findings of the study and to report on future directions.
The Taskforce's final report
in December 1996 was followed by the establishment of a National Expert
Advisory Group on Safety and Quality in Australian Health Care which issued
an interim report in April
1998 and a final
report in July 1999.
In January 2000, the Commonwealth Minister for Health and Aged Care,
Dr Wooldridge, announced the establishment
of the Australian Council for
Safety and Quality in Health Care, which presented its first
report to Australia's Health Ministers in July 2000. The Council reported
that 'there is a high level of consensus among all key players that the
time has come to act decisively'. At their 27 July 2000 meeting, Health
Ministers 'agreed in principle
that funding of $50 million would be provided for the Australian Council
for Safety and Quality in Health Care to lead a five year national program
of work to improve the safety and quality of care'.
The Australian Council on Healthcare
Standards (ACHS) was established in 1974 (initially as the Australian
Council on Hospital Standards). The ACHS develops and maintains standards
which it utilises to assess and accredit hospitals, both public and private.
A report released by the ACHS in August 2000 assessed the performance
of public and private hospitals on twelve sets of indicators (including
day procedures, obstetrics, paediatrics and psychiatry). A 2001 edition
containing data for 1998, 1999 and 2000 is available here.
A chapter of the Senate Community Affairs Committee's Final
Report on public hospital funding discusses quality improvement programs
at some length.
Private sector involvement in public hospitals
The involvement of the private sector in public hospitals has been an
area of some controversy. The term privatisation is often used in a generic
sense to cover all types of private sector involvement in public hospitals.
At one end of the continuum are co-locations, where a private hospital
is located on the same grounds as the public hospital and some sharing
of facilities usually occurs. Further along the continuum are long standing
arrangements whereby religious/charitable organisations provide beds and
services for public patients under arrangements with State and Territory
governments.
At the other end of the continuum are, for example, BOO (Build Own Operate)
and BOOT (Build Own Operate, Transfer) arrangements that entail a high
degree of private sector involvement, including the provision of finance
to build a privately-owned hospital which is intended to provide public
hospital services that are purchased from the operator by the State or
Territory government. These arrangements have proved controversial in
some States, including New South Wales (Port Macquarie), Victoria (Latrobe),
South Australia (Modbury) and Western Australia (Joondalup). The Productivity
Commission's 1999
report on private hospitals includes a useful discussion of the various
types of private sector involvement in the provision of public hospital
services. The interface between private and public hospitals is discussed
in the Senate Community Affairs Committee's Final
Report on public hospital funding.
Information on the private hospital sector more generally is available
from organisations such as the Australian Private Hospitals Association
(APHA). This site also contains links to individual private hospitals.
Private health insurance
The nature of the relationship between private health insurance, Medicare
and public hospitals is unresolved. In order to stabilise and increase
the proportion of the population covered by private health insurance,
the Commonwealth Government has embarked on a series of initiatives, the
most controversial of which has been the non-means tested 30 per cent
rebate. Background material on the rebate is available here.
Information on other current Commonwealth initiatives such as Lifetime Health
Cover is also available.
As the number of people covered by private health insurance increases
and as existing members upgrade their cover, so the cost of the rebate
to the Commonwealth increases. The 2001-2002 Portfolio Budget Statements
for Health and Ageing indicate that the rebate will cost the Commonwealth
Government approximately $1.9 billion in 2001-02. Critics of the rebate
claim that these funds would be better spent on public hospitals but the
Government's view is that the rebate has been a successful element of
its private health insurance initiatives, which aim to strengthen the
private health sector and promote choice for patients. The impact of changes
in the level of coverage of private health insurance on funding for public
hospitals through the Australian Health Care Agreements was discussed earlier. A chapter of the Senate Community Affairs
Committee's Final
Report on public hospital funding discusses the impact of the rebate.
The private health insurance industry is regulated by the Private Health Insurance Administration Council
(PHIAC), which releases quarterly
and annual data on the coverage of private health insurance by State
and Territory. Figures for the September Quarter 2001 indicate that 44.9
per cent of the population is now covered by private health (hospital)
insurance, slightly less than the same quarter in the previous year (45.8
per cent). Coverage was last at this level in the 1980s. The PHIAC site
also provides links and contact information
for private health insurance funds. Circulars and other material of interest
to the private health industry can be found on the site of the Private
Health Industry Branch of the Commonwealth Department of Health and
Ageing.
People with private health insurance account for the vast majority of
private hospital services. Since the passage of amendments in 1995 to
the National Health
Act 1953, health funds have negotiated Hospital-Purchaser-Provider
Agreements with private hospitals in order to provide their health
fund members (who hold an appropriate level of cover) with no or low out-of-pocket
costs for hospital charges. The Australian Private Hospitals Association
has claimed that as a result of the strong bargaining position that health
funds brought to these negotiations, private hospitals had received no real increase in
benefits from health funds during the last four years. While applauding
the recent increase in the level of coverage of private health insurance,
private hospitals remain concerned that their viability is threatened
by the bargaining power of some health funds. The two parties have recently
agreed to a Voluntary Code of Practice
for Hospital Purchaser Provider Agreement Negotiations Between Private
Hospitals and Private Health Insurers.
Since 1995, Medical
Purchaser Provider Agreements (between doctors and health insurance
funds) and Practitioner
Agreements (between doctors and hospitals) have been permitted as
a means of limiting or eliminating gap payments for privately insured
hospital patients. However, due to the opposition of much of the medical
profession, including the Australian Medical Association, progress has
been relatively slow. Legislative amendments in 1997 enhanced the attractiveness
of Practitioner
Agreements. In 2000, the Health Legislation Amendment (Gap Cover Schemes)
Act 2000 amended both the National Health
Act 1953 and the Health Insurance
Act 1973 to permit no gap or known gap cover without the need for
formal contracting arrangements between doctors and health insurance funds.
In its data for the September Quarter 2001, PHIAC reported that 74 per cent of all in-hospital
medical services for insured patients were provided with no out-of-pocket
costs for patients.
Individuals, private hospitals and medical practitioners who have problems,
complaints or inquiries about private health insurance matters can contact
the Private Health Insurance Ombudsman. Links to
a wide range of health funds and other organisations can be found here.
S Sax, A Strife of Interests: politics and policies
in Australian health services, Sydney, George Allen & Unwin, 1984.
For copyright reasons some linked items are only available to
Members of Parliament.
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