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Finance and Public Administration References Committee
Implementation of the National Health Reform Agreement

GILBERT, Mr Paul Francis, Assistant Secretary, Australian Nursing Federation (Victorian Branch)


CHAIR: Welcome, Mr Gilbert. Information on parliamentary privilege and the protection of witnesses and evidence has been provided to you. The committee has your submission and the attachment received yesterday. I understand that there are two amendments to the submission, which have been provided to the committee. I invite you to make a short opening statement, at the conclusion of which I will invite members to put questions to you.

Mr Gilbert : Primarily we rely on the written submission and the attachment provided yesterday. We engaged the services of Professor Hayward to undertake research into who could be perceived to be at fault in the circumstances that we found ourselves in at the start of this year. It would come as no surprise to any of you that there has been considerable blame attributed to both sides in the media. We do not consider ourselves to be experts in Commonwealth-state funding arrangements, so we engaged Professor Hayward to undertake research that we have relied upon in formulation of our submission. Since December there have been substantial cuts to health services in Victoria—closure of beds, extension of existing bed closures, extensions of existing theatre closures, additional theatre closures, impacts on community in-patient and outpatient mental health services right across the state—and they have invariably been blamed upon the $107 million cut. That has been referred to in the correspondence we have received from those health services, referring directly to the federal budget cuts.

Our concern was triggered by a couple of things. One is that ordinarily public health services enter into a statement of priorities with the Victorian Department of Health, which indicates what services they intend to provide in the forthcoming year. Those SOPs, as they are called, are usually completed by October. They remain, as far as I am aware, not completed. They would have been a good benchmark on which to judge the impact of the federal cut because you could have said, 'Looking at what was going to happen before anyone knew about the federal cut, we could say this is what has happened as a consequence of the federal cut.' We have been unable to do that for two reasons. One is that there has been no statement of priorities issued by any public health service to our knowledge. The other is that the data that is ordinarily publicly available by way of quarterly reports on elective surgery emergency department waiting times and those kinds of things have not been updated since June 2012. Prior to that, they had been updated quarterly in accordance with what was the state government's electoral commitment. We have no baseline figures on which to judge whether the $107 million can be attributed in its entirety to what we have now seen happen in Victoria by of cuts. That is the background to it. We are unable to ascertain the extent to which the $107 million might have been blamed for cuts that had already occurred within the health system, for which no data existed in terms of the impact of those cuts.

Senator DI NATALE: We heard from a number of different health services that have been prepared to state quite openly that the $107 million that have been withdrawn by the Commonwealth has resulted in changes to their services. For example, Colac Area Health closed their emergency department overnight and they state unambiguously that that was a result of the change in federal funding in December. Are you saying that you do not have other examples where you can make the same statement with any degree of certainty?

Mr Gilbert : I am saying that each health service said that those decisions were based on the $107 million cut. I do not know whether Colac Area Health already had a plan to do that before the $107 million cut was announced. If they were planning to do it, it would have been in their statement of priorities that would have come out in October in the ordinary course of events. This year there was no statement of priorities so we do not know whether the hospital intended to do such a thing anyway. It was already in substantial financial trouble before the cuts were incurred.

Senator DI NATALE: When you have statements from, for example, the CEO of the Austin and the CEO of Colac Area Health stating very explicitly that the changes in services are a direct result of the $107 million cut and would not have occurred otherwise, are you doubting those statements?

Mr Gilbert : I am saying that there were substantial cuts going on in, for example, elective surgery procedures that were indeed publicly announced at Christmas before last and they were ready impacting on health services. Simply because a statement says that it is because of something is not of itself evidence to me that that is the case.

Senator DI NATALE: On the timing and retrospectivity: what is the ANF's view about the nature of the timing? It is halfway through the financial year, and they are then being asked to pay back money?

Mr Gilbert : I guess if the ABS statistics had shown an increase in population we would not be sitting here. The reality is that they showed a paper decrease in population. We have asserted in our submission, and endorsed Professor Duckett's view, that they should be spread across the forward years—not applied retrospectively and not implemented without notice but in fact spread across the forward years.

Senator DI NATALE: You mentioned that this was a paper change; it does not reflect what is actually happening in terms of population changes. Do you have concerns about that?

Mr Gilbert : We negotiate a lot of agreements wherein we might, in hindsight, wish we had used a different set of words. The agreement, as I have read it, has been complied with. And, as I said, if the data had shown an increase in population I am sure there would not have been the debate we are having today. I am concerned, especially having read the ABS submission, that there will be data coming out in June 2013 that will seriously alter those population figures. I would like to think governments will address that change with the same level of enthusiasm.

Senator DI NATALE: I suppose I am not asking you whether what was done was according to the letter of the law. What I am asking is whether you think it is fair that hospital funding is cut on the basis of a change in the population that is a change on paper only, when in reality there has actually been a significant increase?

Mr Gilbert : A lot of people presumably wish that the agreement said something else—not only on ABS statistics, I might say, but also on the measure used for hospital cost increases. But what I am saying is that what occurred was consistent with the terms of the agreement. It might be prudent for people to look back and see what the terms said. But the ABS statistics were the ABS statistics; it was foreshadowed by the statistician that those figures would be the subject of amendment in the near future, in both June and August of this year. And no other set of figures was available to use. So, if you are going to use ABS population statistics, then they were the ABS population statistics.

Senator DI NATALE: But, given that we are going to get a revision in June, do you think it would have been reasonable to hold off until June before actually pulling out $100 million from the public hospital system?

Mr Gilbert : I do not think they should have done it midstream, and I think that would have been an option to have avoided doing it midstream.

Senator DI NATALE: Turning to implications of the recent announcement, we have an announcement that $100 million will be put back into Victoria's public hospital system. Do you think other states, such as Queensland and New South Wales, who have also suffered significantly as a result of these cuts, should have their funding restored?

Mr Gilbert : That is a debate that they can have with the Commonwealth government. Obviously we have lobbied very strongly to the Commonwealth government on Victoria's behalf about the impact it has had in Victoria and why we think it should be addressed. Those other states, as I understand it as a spectator, have made significantly greater cuts to their public health system than Victoria has. I am sure that the Commonwealth, were they inclined to address that in those states, would have to look very hard at whether that money would ever go anywhere, given the massive cuts that have already been announced in Queensland and New South Wales in the health systems there, completely separate from the federal government's population change adjustment.

Senator DI NATALE: Does the ANF have a position on whether the funding should be restored to those states?

Mr Gilbert : I cannot speak on behalf of the other states; I can only speak on behalf of Victoria.

Senator DI NATALE: Are you concerned that it is only a one-off payment—that we may face exactly the same issues in terms of retrospectivity and the hit to next year's budget?

Mr Gilbert : I cannot see logically how that can happen. As I said, there are ABS data coming out again in June that will, effectively, retrospectively result in a difference of 86 per cent versus 14 per cent. So, we will end up with only 14 per cent of the impact of that intercensal change applying from June 2013. Whether or not the federal government jumps in at that stage and says, 'We'll adjust the funding under the federal state agreement because of that change', I do not know. We would be concerned if the funding was not reinstated in the coming years as well. But to reiterate what Professor Duckett said, the most difficult part of this has been its instantaneous and retrospective impact.

Senator DI NATALE: That is something that has come through in all the submissions. We have focused a lot on the ABS population data, but there is also another factor that influences the cuts, and that is the 0.9 per cent inflation, which is very unusual. That low health inflation number has also contributed to the decrease in funding. We have been told that there has been a three per cent increase in wages within the public hospital system and that wages are about 70 per cent of the total cost of running a hospital. How do you get to an inflation figure of 0.9 per cent when there has been a three per cent increase in wages, which account for 70 per cent of your budget, and all of the other costs have not significantly decreased?

Mr Gilbert : In our submission, we speculated for a moment on that point. We looked at the basis on which private health insurance have their increases approved, which from memory was around 5.6 per cent. That was based on, among other things, the cost of delivering health services via the private health system. I am sure that you will have an interesting time this afternoon with the Australian Institute of Health and Welfare and the ABS on what is the appropriate measure for the growth in health delivery costs. The current federal-state funding agreement refers to the entire health index rather than the hospital's index, from memory.

Senator DI NATALE: So it includes a whole lot of costs that are not related to running a hospital?

Mr Gilbert : That is the assertion that I have read in John Deeble's submission.

Senator DI NATALE: That has been consistent. Clearly, we are using a health inflation figure that does not reflect the cost of running a hospital.

Mr Gilbert : I am not an economist. I can only say what I have seen and read, in the same way that you can.

Senator McEWEN: Taking you back to earlier on in your evidence, you were saying that, before the federal government implemented the funding agreement, there was evidence of cuts to services in the Victorian public hospital system. Is that correct?

Mr Gilbert : Correct.

Senator McEWEN: Were those cuts implemented or were they planned?

Mr Gilbert : They had been implemented, and presumably they were planned. But because of the absence of a statement of priorities we are unable to ascertain that. Some of them were already mentioned in the statement of priorities from the preceding year. It would have been reasonable to assume, given the $616 million over two years, that there would have been more cuts in those statements of priorities that will never eventuate.

Senator McEWEN: What kinds of services were being cut and what impact did that have on your members?

Mr Gilbert : Primarily, from a publicly stated point of view, it was a reduction in elective surgery. A reduction in elective surgery does not directly impact on our members in the sense of providing surgery. But what it does do is impact on emergency department presentations and those kinds of things. When you have people waiting longer for surgery, things go wrong and you get more emergency department presentations. Hospitals were operating substantially fewer beds last year than they were the year before. Consequently, it is difficult to have patients come in to an emergency departments who require admission and there is no bed for them. That obviously impacts on things. In order to create bed space, people are being discharged earlier than they would prefer and not necessarily with the support that they need.

Senator McEWEN: You are clearly of the view that elective surgeries in Victoria had been reducing.

Mr Gilbert : It was publicly announced that there would be a reduction by 9,200 procedures. That was early last year or late the year before.

Senator McEWEN: All right. And that was attributable to a reduction in Victorian government funding to its own health system?

Mr Gilbert : It was announced by the state government.

Senator McEWEN: You mentioned the problem of ascertaining the true status of the provision of service vis-a-vis funding to the Victorian hospital system because of the lack of data. Can you go back to that? You said that normally in October of each year data is provided by the Victorian state government about activity in its hospital system but that this has not been forthcoming.

Mr Gilbert : Ordinarily, there are publicly available statistics on the Department of Health's website. I even looked today and those statistics have not been updated since June of last year.

Senator McEWEN: Do we know why?

Mr Gilbert : No. They had been being updated quarterly, which was an election promise of the Ballieu government in Victoria. But that has ceased.

Senator McEWEN: What was the value of producing those statistics on a regular basis?

Mr Gilbert : Transparency. It was about the community being able to understand how long it took to get a knew replacement in Geelong. You could drill down to that level. You could get a response of, 'People in Geelong needing a knee replacement were waiting 610 days.' I just made that figure up, but that is what you could do with that data.

Senator McEWEN: All right.

Mr Gilbert : There was also collectively data, if you like. You knew that there were 6,212 people supposedly waiting for a particular type of surgery at any given time and you could compare that to the previous quarter to see if it was getting worse or better.

Senator McEWEN: You may not be able to answer this, but in your experience are other state governments continuing to provide that information?

Mr Gilbert : I do not know the answer to that.

Senator McEWEN: Fair enough. Do you and your members welcome the overnight announcement?

Mr Gilbert : With great enthusiasm, yes.

Senator McEWEN: Are you confident that the Victorian government can manage that reinjection of funds?

Mr Gilbert : We have received from almost every health service a document called a change impact statement. It is part of their obligations to consult about change. Each of those change impact statements sets out the changes that have occurred, purportedly as a consequence of the federal health cut. It would seem apparent to us that if these were solely caused by the federal health cut that has now been reversed then all of those things should be reinstated. The beds that were closed should now be reopened, the theatres that were closed should now be reopened and so on. In our submission, initially we said that there need to be some targets attached to the money if the government decided to give it back. That would ensure that it was used for its intended purpose. I understand from the media reports of last night and this morning that it will be given directly to the health services. We will be pressing those health services to use that money to immediately reinstate what it is that they have proposed to cut or have cut already that related to—according to them—the federal health cuts.

Senator McEWEN: You are right about those reports. The decision of the federal government has been to direct the funding directly to the providers of the services, thereby getting it straight to the people who need it and not having to go through the Victorian government, which has demonstrably not delivered health services appropriately.

CHAIR: I want to press one issue, which is what you believe the impact of these cuts will be. Are you saying that when the hospital board—whether from Colac or the Austin—comes out or the CEO comes out and says that this money is coming off their budgets this year you do not believe them?

Mr Gilbert : I am wary of simply answering your question in the black and white way that you would like me to because I do not know what drives their choice of words.

CHAIR: This is one of those rare movements when they have been really clear. We have an unprecedented mid-year financial cut for 18 months of back pay. We have the data in Victoria to be able to get that down to the hospital level quickly. We have CEOs, board members and doctors all coming out and saying, 'This is what we are doing because this is exactly how much money we have lost to the dollar.' You seem to be going to an enormous amount of trouble to avoid saying, 'These are due to the Commonwealth funding cuts,' when everyone else is saying that. I will let you answer that before I follow up.

Mr Gilbert : To assume that each health service is able to state exactly what it would like to say without interference from those who control the system would be naive in the extreme. The government of Victoria determines who it appoints to be on boards and who it no longer desires to be chief executive officers. I have not heard a practicing on the ground doctor say what you have asserted. I have heard doctors who also happen to be CEO assert it.

CHAIR: Those people are doctors.

Mr Gilbert : I have not heard, as I said—

CHAIR: They do not often agree on much, either. I understand that there is a place for a bit of cynicism in politics. But you seem to be going to extraordinary lengths to draw together some sort of conspiracy, all in an attempt to avoid pointing the finger at the source of the cut that we know happened—at least until last night's announcement—in this year. Patients today, tomorrow and for the rest of the year were effectively being punished and made to wait longer because of the Commonwealth changing its numbers, on which everyone had based their behaviour and budgeting on for 18 months.

Mr Gilbert : I do not say that the Commonwealth has changed their numbers. But the numbers changed.

CHAIR: It is a Commonwealth instrumentality. It is the ABS.

Mr Gilbert : The ABS changed the numbers, yes.

CHAIR: They did that rather than phase in those changes, rather than scale them over a number of years, rather than push them into the out years and rather than do anything that would have alleviated the trauma for patients and even indeed your members. You now seem to be trying to say that there is some of sort of other force here that may be at work, but you cannot put your finger on it.

Mr Gilbert : I am not saying that. I am saying that there were $616 million of cuts over this year and last year in Victoria already.

CHAIR: Those changes to the budget were different to what we are talking about here. I am not asking about that. You have had your chance to talk about that. I am asking you about mid-year reductions and hospital CEOs and board members, who are appointed for fixed terms—unless they have all been sacked, and that has not happened—have said: 'This is how our budget has changed. This is what it was in November; this is what it is in December. This is how we are meeting those targets.' There is an enormous degree of transparency about this.

Mr Gilbert : I disagree.

CHAIR: About the finances?

Mr Gilbert : No. The statistics that support the transparency of where the system stood prior to that decision to reduce the federal funding do not exist. They have not been made public in the way that it normally would be.

CHAIR: Excuse my cynicism, Mr Gilbert. But I seem to only hear these complaints when your friends are not in office and the coalition is in office.

Senator DI NATALE: On that point, we have had a very clear statement from Colac Area Health saying, 'We are going to close our emergency department overnight as a result of these cuts.' We have had the CEO of the Austin come out and say, 'We're going to reduce elective surgery because of these cuts.' You either believe him or you do not. All I can draw from your conclusions is that you believe that both of these entities are lying.

Mr Gilbert : No, I think that there is more to it than that alone.

Senator DI NATALE: So you do not take—

Mr Gilbert : We are not taking sides on this. I know that you are very keen to draw me into saying that we are. We have been as critical as anybody about the cuts and the timing of those cuts. What we are saying is that to simply turn around after two years of cuts in Victoria and say that everything that is now wrong with the health system has happened as a consequence of this cut is crazy.

Senator DI NATALE: No-one is suggesting that. That is a straw man argument. I am no great friend of this current state government in Victoria. However, we have a situation in which a cut was made by the Commonwealth government. We have the CEOs of two significant hospitals making very clear and unambiguous statements that the impact of these cuts is fewer surgeries and the closure of the emergency department overnight. You either accept that or you do not. It seems to me that you do not.

Mr Gilbert : I will put it this way. They were already in deficit because of existing budget cuts. More budget cuts were placed upon them. Yes, you can blame the last budget cut and ignore the previous budget cut. It depends on whether you are trying to cast a particular picture or not.

CHAIR: Don't you think that there is a difference between having an annual budget that you can plan for and a sudden cut? More than one hospital is in deficit occasionally, because it is a challenge to manage a budget that large and we have independent boards in Victoria. But don't you consider a change in the middle of the financial year to be profoundly different? They had budgets in place, they were managing them, they were doing the best that they could do address the competing demands on their hospital or health service. Then in the middle of the year the rules changes.

Mr Gilbert : The organisation—

CHAIR: It is like changing your members' salaries in the middle of an EBA. You would not tolerate that.

Mr Gilbert : The ANF has been unambiguously critical of the timing and the way in which that cut was done. We absolutely stand that ground. It should not have happened in the way that it did. We do not ever want to see it repeated. It is a flaw in the way that agreement was structured that it allowed that to happen. We are strongly opposed to it happening.

CHAIR: There has been some discussion around different population numbers and ABS assessments being used to make different Commonwealth and state payments—in this case, local government payments. Do you have a view on, firstly, that particular issue? If you are not familiar with it, I will accept that.

Mr Gilbert : I am not familiar with that.

CHAIR: Health is on the losing end of that particular comparison. Is that something that would concern you—a higher number for roads or something and a lower number for health?

Mr Gilbert : I do not know anything about it, so I am hesitant to answer. One could have been on the old stats and one could have been on the new stats.

CHAIR: This is the concern. If those decisions are being made concurrently and new stats are being used to cut funding and old stats are being used to increase it or maintain it then surely that is an inconsistency in the use of the ABS stats which the Commonwealth should address?

Mr Gilbert : If they were used at the same time, I would agree, yes.

Senator McEWEN: Mr Gilbert, just going back to the Colac health service, which Senator Di Natale asked you a question about. You said earlier in your evidence that, in your understanding and your members' understanding, that service was already in some financial difficulty before the implementation of the funding agreement. Is that right?

Mr Gilbert : A $3 million deficit springs to mind, but I do not have that data with me. There has been ample discussion about that in the Colac media. It is in the public sphere. I do not know anything more than what I have read in the paper about that.

Senator McEWEN: So the closure of its emergency department could well have been on the cards as a result of other funding problems?

Mr Gilbert : It could have been, but the funding problem could have been the straw that broke the camel's back.

Senator McEWEN: Fair enough. Also, Mr Gilbert, with regard to your comments about the statements from CEOs of various health services about the funding cuts, it was put to me earlier today by someone who is more familiar with the Victorian health system than I am that, when the government implemented its funding agreement, the Victorian Minister for Health, David Davis, contacted all the CEOs of the health services and assisted them in preparing their responses. Do you have anything to say on that?

Mr Gilbert : It has been put to me that there was one example where a health service proposed to deal with the cuts by way of not closing any beds or reducing theatre sessions and that that proposal was rejected in favour of one that closed beds and reduced theatre sessions. I think Minister Davis, as is his role, for the good of Victoria, in his view, ensured that the impact was as severe as it could be in order to generate the positive outcome.

CHAIR: I want to get this clear. You are alleging that the minister intentionally made this more severe in order to generate PR? Is that what you are alleging? You are allowed to. You are under parliamentary privilege. But I want to get clear what you are alleging here. That is a fairly serious allegation.

Mr Gilbert : I am saying that that is what has been relayed to me—that a large regional hospital did propose to deal—

CHAIR: Going back to what you said there, Mr Gilbert—are you saying that the minister acted that way?

Mr Gilbert : I am saying that a hospital changed its proposal to deal with the cuts to one that had a greater media impact. I am saying that that was consistent with the minister's message. Whether the minister ever had communication with that health service, it will never know.

Senator McEWEN: We will ask him.

CHAIR: I am sure we will. But, Mr Gilbert, surely you would prefer a minister for health that actually spoke to the hospitals? If he did not, the same question would be asked by a Labor senator bowling up a hard volley to you outside off stump and you would be whingeing about how the minister did not bother to contact the hospitals.

Mr Gilbert : I did not complain—

CHAIR: You are trying to draw threads here and imply that there is a conspiracy here.

Mr Gilbert : I did not complain about the minister's contact. I said the minister was doing what in his view was the right thing for Victoria. I did not complain about what he did. What I complained about—if it is to be referred to as a complaint—was that some health service responses would not have had the media impact that they had had they not changed them subsequent to submitting them to the department.

CHAIR: That is a fairly serious allegation. We will obviously have a chance to hear from the department in response to it. Thank you for your evidence.

Mr Gilbert : Thank you.

Proceedings suspended from 10:15 to 10:31