Impacts on South Australian hospitals
600 hospital beds; or
an entire hospital; or
cost of employing 3000 nurses; or
elective surgery waiting times.
As outlined in Chapter 3, the Parliamentary Budget Office's (PBO)
submission provided a detailed state-by-state breakdown of the difference in
Commonwealth hospital funding between the government's policy announced in the
2014‑15 Budget and the former government's hospital funding arrangements
under the National Health Reform Agreement 2011. The government's 2014‑15
Budget marked a fundamental policy shift away from the previous government's
activity based funding model, which established a national efficient price for
hospital services. Instead, it reverts to the former block funding model based
on CPI and population growth.
Reduction to South Australian hospital funding
8.2 The PBO calculates that South Australia will receive $4.2 billion
less in hospital funding from the Commonwealth over the period 2014-15 to 2024-25
than if hospitals were funded according to the 2011 agreement.
The annual funding differences are set out in Appendix 4.
Consistent with PBO figures, South Australian (SA) public hospital services
would see 'a loss of around $4.6 billion over the next 10 years' as a
result of the 2014‑15 Budget, according to the SA Government's
The 2014-15 Budget had forecast $444 million less in SA public
hospital funding over the forward estimates.
In addition, the SA Government identified that the SA health sector would
lose a further $211 million from the termination of agreements that directly
support public hospitals, including:
$120 million from the National Partnership Agreement on Improving
Public Hospital Services; and
$42 million from the National Partnership Agreement on Financial
Assistance for Long-stay Older Patients.
The SA Government's submission equated the combined reduction of funding
to the health sector from the 2014-15 Budget ($655 million over four
- Removing 600 hospital beds; or
- Closing an entire hospital; or
- The cost of employing 3000 nurses; or
- Doubling elective surgery waiting times.
Figure 3 below shows the difference in funding for South Australian
hospitals between the AHRA and the 2014-15 Budget.
Figure 3—Impact of 2014-15 Budget on South Australian hospital
Departure from shared commitments
The SA Government expressed the view that the Commonwealth was
'reneging' on funding commitments,
The South Australian Government has demonstrated a strongly
collaborative approach to national health reforms and has been disappointed at
the Commonwealth reneging on its commitments under the National Health Reform
Agreement and associated National Partnership Agreements.
SA Premier, the Hon Jay Weatherill MP, was critical of the manner in
which the Federal Government had announced the cuts, particularly because the
government avoided discussion of the proposed cuts at a COAG meeting just days
before the budget.
The Premier explained his reaction:
It was a shock to every minister, chief minister and first
minister around the table. I think I speak for all of them when I say that they
were angry about the fact that they had been misled in that way. At its very
lowest, it was misleading to have a briefing about the budget and not flag such
dramatic changes that were on the way.
The SA Government submitted that the end of the 2011 agreement would
increase the 'potential for cost-shifting' between the Commonwealth and states
The submission highlighted that the Commonwealth's contribution to national
hospital funding would reduce from 31 per cent in 2014-15 to 23 per cent in
2024-25, whereas the 2011 agreement had aimed to 'gradually increase the
Commonwealth share of hospital funding to 50 per cent'.
Rather than contributing to the solution, their submission argued that
Commonwealth funding decisions 'leave the State bearing the risks associated
with growing public hospital costs but without the resources required to meet
the expected growth'.
The SA Government submitted that future Commonwealth funding:
...does not fully address the expected growth in public hospital
expenditure, taking into consideration population growth and the ageing of the
population, health CPI and increased costs for medical technology.
The end of funding under the National Partnership Agreement on Improving
Public Hospital Services was regarded by the SA Government as a significant
departure from earlier agreement. Despite not meeting emergency and elective
surgery targets, the committee heard that 'South Australia expected to continue
to receive reward funding acknowledging its significant efforts against these
ambitious targets for the remaining two years'.
It was submitted that the Commonwealth was incorrect in treating '[a]ny
failures... to meet the targets' as 'a breaking of the agreement'.
According to the SA Government, decisions in the 2014-15 Budget,
including cuts to hospital funding, 'would be felt at the community level,
particularly by the most vulnerable'.
This includes older Australians who often 'remain in hospital longer than would
otherwise be necessary' while they wait for suitable aged care.
The SA Government urged the Commonwealth's:
Careful consideration of the impacts of primary health care
services, preventive health and high quality aged care and disability services...
on the demand for public hospital services.
The Health Consumers Alliance of SA submitted that the additional
funding cuts to hospitals would 'add further stress to an already strained
public hospital system'.
For example, even before the federal government's cuts, the following stressors
had been identified:
Over the last few months we have seen the queuing of
ambulances at the Royal Adelaide Hospital, as the public hospital system has
exceeded capacity. Patients have been triaged by Emergency Department staff
whiles still in ambulances, in the hospital car park. Also of concern are the
continuing reports of mental health patients being held in Emergency
Departments for many days, being isolated in windowless rooms, physically and
chemically restrained. This has all occurred prior to the impact of the
Commonwealth Government’s 2014 Budget cuts being felt.
Emergency waiting times would significantly increase following the cuts
to hospital funding, according to the SA Government:
SA Health modelling shows the average emergency department
wait times in South Australia are likely to increase to at least 66 minutes -
up from the average current 20 minute waiting time.
In addition, SA public hospitals would see increasingly complex cases as
a result of funding cuts, with a 'significant impact on wait times for public
An Ernst & Young analysis commissioned by the SA Government explained that:
It is estimated that acuity (or complexity of illness) would
increase as public hospitals triage cases as normal – but under greater
financial constraints. This would cause the less complicated cases (e.g. dental
extractions, other knee procedures) to seek out the private system. This would
in turn leave the more complicated cases (liver and heart transplants) inside
the public system.
Premier Weatherill summarised that '[b]y 2019-20, more than 56,000
patients per year will be left untreated in the public system, growing to more
than 107,000 patients per year by 2024-25'.
Further, the committee heard that elective surgery waiting lists times in
SA would increase, reversing a 'consistent improvement' seen in recent years.
For example, a total hip replacement would have occurred after 99 days in 2014-15
but increase to 213 days in 2017-18.
Table 1 below shows the full extent of the elective surgery waiting times. The
SA Government told the committee that:
...it is reasonable to expect that if Commonwealth funding had
continued that further improvements to waiting times could have been made...
The South Australian government had made a commitment to deliver a new strategy
to keep waiting times low and focus on areas of growing demand over the next
Table 1—Growth of elective surgery
waiting times in South Australia due to funding cuts
Faced with more patients and more acute cases, hospitals in SA could be
less prepared to treat them, as the state would 'have difficulty adopting new
and more expensive life-saving technology'.
Hospital redevelopment was also slowed by the 2014-15 Budget, with the SA
Government submitting that it had suspended projects at the Queen Elizabeth
Hospital (stage 3A), Modbury Hospital, Noarlunga Health Service (stage 2A) and
Flinders Medical Centre, redirecting funding into a 'Health Capital Reconfiguration
State Government response
Like several other states and territory governments, the SA Government
has reallocated funding to mitigate the effects of reduced Commonwealth
hospital funding, but cannot entirely address the shortfall. The SA Government
website 'Federal cuts hurt' summarises measures proposed by the 2015-16 State
In our State Budget we have committed to make up for half of
the cuts with the removal of the emergency services rebate and other income
But a shortfall of $332 million still remains.
Before the Council of Australian Governments met in April 2016, Premier the Hon
Jay Weatherill reiterated that 'the states and territories simply cannot afford
to bear the brunt of these cuts'.
The committee commends the SA Government for refusing to pass on
the most immediate impacts of the Federal Government's funding cuts to public
hospitals across the state, but notes that the shortfall in funding remains
SA public hospitals must be supported in their efforts to reverse
worrying trends in the length of waiting times and the number untreated
patients. In 2016, SA was one of only two states (along with Tasmania)
assessed as not meeting any targets in the Australian Medical Association's Health
and Hospitals Report Card 2016. Particularly concerning for the committee
was the marked decrease in the number of SA urgent emergency department
patients seen within the recommended time, falling from 70 per cent in 2011‑12
to approximately 58 per cent in 2014-15.
The committee believes that state and territory governments cannot
continue to cover the Commonwealth's planned funding reductions, which will
grow steadily over time to a total of $4.2 billion by 2024-25.
Long term funding certainty allows for better planning for
infrastructure, managing staffing, waiting times and lists, and delivers
increased efficiencies overall. When hospitals are forced to operate on
year-to-year budgets, there is no capacity for planning ahead and making
efficient investment in staff and services.
The committee believes that without long term funding, state and
territory public hospitals will not be able to achieve efficiencies and
adequately serve Australians. The committee calls on the Federal Government to
create a long term, sustainable, funding model for hospitals which allows for
appropriate contributions from governments, both state and federal.
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