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Tuesday, 1 November 2011
Page: 12381


Ms MARINO (ForrestOpposition Whip) (20:45): I rise to speak on the National Health Reform Amendment (Independent Hospital Pricing Authority) Bill 2011. The government's agenda for healthcare reform hinges on the proposition that the government believes that health services can be delivered in a standardised way for a standardised price. At its best, this is supposed to provide a uniform standard of service and outcome for a uniform or at least comparative price. At its worst, it could be a discriminatory funding tool which is unable to recognise practical differences in health service delivery in various geographical, economic and social environments and could lead to a deterioration of the services provided by regional and remote health services and the communities they serve.

These hospitals will be entirely dependent on a decision made by what the government says will be an independent hospital pricing authority as to whether they will qualify for continuing block funding or be subject to activity based funding at a specified level. I have no doubt that there are many hospital administrators who are very concerned about what funding model will be used in their specific case and whether they will receive sufficient funding for the quality and safety of the services they provide. They will also look at the government's national health reform process delivery document and wonder how they will manage the layers and layers of bureaucracy they will have to deal with. They are well aware that the devil will be in the detail that they are yet to see.

The activity based funding concept lies at the heart of the government's proposed partial takeover of health from the states and territories, which may or may not ultimately lead to a more general takeover in the future, something the government originally intended. We do know that the Labor government has not delivered on its fanfare of 2007 election promises. The government promised a magic fix of hospitals by mid-2009 but failed. The government also promised to take over hospitals but has not done so. The government promised that the Commonwealth would be the dominant funder—the promise of 60 per cent Commonwealth funding was later dumped by the minister.

The government's national health reform was, thanks to the actions of state Liberal governments, at least converted from yet another debacle of a federal Labor takeover to some semblance of federal-state partnership. That state Labor leaders were prepared to sell out their constituencies and communities to prop up their federal party was sadly not unexpected, but, at the time, we could even see some Labor premiers choking on the bitter pill fed to them by the Prime Minister—they knew the deal being offered at that time was not in their states' best interests. Led by Western Australia, and joined by Victoria and New South Wales as Labor tumbled in those states and Liberal governments were elected, the states have managed to develop a partnership of sorts. Health consumers in Western Australia were, and remain, sceptical that a Canberra based, top-down bureaucratic maze of administration will be capable of running hospitals from a distance of 3,000 or 4,000 kilometres. I am sceptical that the government's proposal for a centralised Canberra health administration to be responsible for the day-to-day operations of hospitals would ultimately have been anything short of a disaster for regional Western Australian health services. As we know, a government responsible for pink-batt fires in people's roofs and cash for clunkers actually running hospitals is the stuff of medical nightmares.

A real partnership with states is a better alternative by far. This current proposal by the government will be heavily reliant on the Independent Hospital Pricing Authority, the body that will compare the cost of service provision across states and territories and set standardised funding models. The functions of the Independent Hospital Pricing Authority include the following: determining the national efficient price for healthcare services provided by public hospitals where the services are funded on an activity basis; determining the efficient cost for healthcare services provided by public hospitals where the services are block funded; developing and specifying classification systems for health care and other services provided by public hospitals; determining adjustments to the national efficient price; determining data requirements and data standards in relation to data that is to be provided by states and territories; determining public hospital functions that are to be funded in the state or territory by the Commonwealth—except where otherwise agreed between the Commonwealth and a state or territory; advising the Commonwealth, the states and the territories in relation to funding models for hospitals and costs of providing healthcare services in the future; considering cost-shifting and cross-border disputes; and doing anything incidental to or conducive to the performance of any of its functions.

Given this government's poor policy performance, some of these deserve much closer examination. The setting of a national efficient price for any health service will have to ensure that it does not disadvantage one section of the community over another, whether that is through block or activity funding. The cost of a particular service varies considerably, and it might surprise some members to know that generally neither the largest nor the smallest health service providers are the most efficient. Large tertiary hospitals are geared up for highly complex cases and can struggle to efficiently deal with less complex ones, whereas small regional hospitals can struggle to gain economies of scale.

The cost of providing a similar service in such a range of settings can, and will, continue to vary significantly. This will make the setting of standard pricing a difficult process. Although activity funding has some obvious financial advantages and is favourably mentioned, especially in Victoria, it does have a number of drawbacks. There is always a minimum base, or 'block', of funding which is not case load dependent as it is needed to underpin the running of a health service. This base funding covers administration, building and maintenance, and support services, and much of it is not reflective of hospital patient or clinical activity.

It is for this reason that hospitals are funded on a historical basis rather than an activity basis, and block funding is often the alternative name for historical funding rather than a calculated expected cost of base funding needed. For example, the cost of running a small country hospital in Western Australia may be a little over $1 million per annum whether that hospital has a bed average of two or 10. This can be because to be considered a hospital as opposed to a nursing post a certain minimum capacity needs to be maintained, such as a 2:2:2 nurse roster and cleaning and catering services. These costs exist before a single patient arrives. It is not just small hospitals or health services that face this issue. The provision of a specialist service in a tertiary teaching hospital also has to maintain a minimum capacity, even without high patient loads. There have been examples around the world of specialist units struggling to find adequate case loads to justify their existence. It is a major issue in regional communities to rationalise services, especially clinical services, whether that is the cutting of a specialist service in a tertiary hospital or the downgrading of a regional hospital to a nursing post. Therefore, the solution to this is usually to incorporate a mixture of block and activity funding in broader funding models, and generally this can provide a reasonable outcome. The block funding component is usually not that difficult to determine but will most frequently relate directly to historical funding for practical reasons.

The key for the Independent Hospital Pricing Authority will be to determine the cost variance of actual activity in different settings and make a determination on how much of that variance is actually reasonable. Hospitals will be funded according to the level of activity, the level of complexity and the cost of the service that they are providing. I will watch these decisions and the process quite closely. I hope in striving to deliver designated activity based funding services defined by the IHPA that hospitals are not forced to take shortcuts that lead to a reduction in frontline services and safety for patients—something that is particularly critical in regional, rural and remote areas, as you would understand, Mr Deputy Speaker Scott.

Hospitals will need to be able measure quality outcomes in a wide complexity of individual circumstances. I urge the minister to consider carefully the make-up of the authority in consideration of this point. We have heard about some of the appointments. There will need to be a balance of those with a thorough understanding of the needs of regional, rural and remote health services in particular with those with the capacity to set and enforce efficiency. Health experts have warned about their concerns with activity based funding and the need for an achievable time frame in relation to the delivery of this.

In relation to another function of the authority, that of determining public hospital functions that are to be funded in the state or territory by the Commonwealth, as a general rule of thumb the Commonwealth is responsible for primary care at the doctor and the chemist and for aged accommodation. The states are primarily responsible for hospitals. The state government in Western Australia, for example, is investing significantly in the Harvey Hospital in my electorate and has plans to completely rebuild the Busselton Hospital at a cost of well over $100,000 million. Millions have been invested in the Bunbury Health Campus. These investments are necessary to meet the key health needs of a dynamic and rapidly growing region.

We need the Commonwealth to perform its existing defined role in the provision of aged accommodation. Country hospitals around Australia are housing aged-care patients who cannot get into Commonwealth funded aged-care homes. Some are expected to move far away from family and friends to find a federally funded bed, and for some in particular regional areas there are no beds at all. The government needs to take this obligation seriously and fund aged-care providers sufficiently to make those beds available. Around the country, thousands of apparently 'funded' beds have not been taken up by service providers because federal funding is not sufficient. Providers are often losing money on the beds they do take up. This inequity is impacting on ageing Australians and their families all over the nation. We need the government to get this program, which it is in charge of, right. So much of what is in this bill comes down to trust. Can we trust the government to get the process right? Unfortunately, on past performance, the evidence does not support that.

Mr Deputy Speaker, I thank you for this opportunity.