Hospitals in Australia

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


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 Back to top

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 Back to top

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 Back to top

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 Back to top

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 Back to top

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:


The Victorian Department of Human Services site contains a considerable amount of useful hospital-related material:


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

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 Back to top

Other stakeholders include:

Research institutes/think tanks Back to top

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 Back to top

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 Back to top

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 Back to top

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 Back to top

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 Back to top

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 Back to top

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 Back to top

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.

Back to top