A report from the Grattan Institute has revealed that Australian public hospitals waste an estimated $1.2 billion annually on avoidable expenditures that do not enhance patient care. This financial mismanagement could instead fund an additional 160,000 hospital visits each year. The findings, detailed in the report titled Smarter Spending: Getting Better Care for Every Hospital Dollar, highlight a troubling trend: despite public hospital spending increasing by an average of $3 billion per year over the past decade, hospitals continue to face significant pressure.
Current conditions in hospitals exemplify this strain. Emergency departments are overwhelmed, with ambulances often left waiting outside. Surgical wait times are lengthening, and healthcare staff are reporting high levels of burnout. As the population ages and health issues become more prevalent, the demand for hospital services is projected to rise. Public hospital spending per person is expected to increase by a third over the next decade, from $2,500 to $3,300.
Peter Breadon, the report’s lead author and Health Program Director at the Grattan Institute, emphasized the need for reform: “Budgets are under pressure. Smarter spending can make every dollar go further, reducing the need for tax hikes or cuts to public services.”
Discrepancies in hospital costs are evident across the country. For example, the average cost of a knee replacement in Victoria differs by $13,600 between the highest and lowest cost hospitals. In Queensland, the difference stands at $11,000, and in New South Wales, it is $9,000. If the most expensive hospitals improved their efficiency to match the median cost within their state, taxpayers could save an additional $1.2 billion each year.
“Cutting costs doesn’t mean cutting quality,” Mr. Breadon stated. “There are plenty of ways hospitals can safely deliver care for less.” Some hospitals have successfully implemented strategies to reduce patient complications, such as falls and pressure sores, which prolong hospital stays. Innovations in other countries also offer lessons; for instance, in England, doctors utilize AI notetakers, allowing them to spend more time with patients rather than on paperwork. Meanwhile, in Canada, a third of patients receiving hip or knee replacements are able to return home the same day, thereby freeing up valuable hospital resources.
The report also highlights a critical issue with budgeting practices. State governments often establish unrealistically low budgets at the beginning of each fiscal year, only to provide significant bailouts to hospitals facing deficits later on. These top-ups average around 6 percent of total spending and contribute to fiscal instability. The report calls for an end to this cycle of “budget rollercoaster” and advocates for a more predictable funding model.
For the federal government, the recommendation is clear: its contribution to public hospital funding should increase in line with the growing demand for care. However, this should be contingent upon states undertaking necessary reforms to enhance operational efficiency. Suggested reforms include promoting shorter hospital stays, bulk purchasing of supplies, consolidating specialized procedures, and implementing best practices from successful institutions.
Consequences for hospitals that fail to manage their budgets effectively should also be considered, with potential repercussions for hospital executives and boards. “Australia’s hospitals are approaching breaking point,” Mr. Breadon warned. “As public hospital costs keep rising, the danger is we make the same mistakes as the UK, which resorted to brutal austerity to rein in costs, with devastating impacts for patients.”
In conclusion, reforming the funding system is essential for ensuring that public hospitals operate more efficiently and provide the care that Australians need. As demand for services continues to grow, the need for smarter spending has never been more urgent.
