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Tuesday, 1 November 2011
Page: 12388


Mrs MARKUS (Macquarie) (21:11): Government has an obligation to ensure that the health services it provides are relevant and effective for patients. Government has an obligation to provide quality health services while also achieving value for taxpayers' dollars. Today we address an amendment to the National Health Reform Act 2011. The National Health Reform Amendment (Independent Hospital Pricing Authority) Bill 2011 seeks to establish a new authority, the Independent Hospital Pricing Authority, the third and final statutory authority committed to under the then Rudd Labor government health reforms.

The main objective of the Independent Hospital Pricing Authority is to promote improved efficiency in, and access to, public hospital services by providing independent advice to the Commonwealth, state and territory governments in relation to the efficient costs of services and developing and implementing systems to support activity-based funding for those services—in other words, to deliver value for money in the provision of health services. At first glance this is a commendable objective. However, as we have come to expect from this incompetent Labor government—a government more skilled in spin than substance—the legislation is long on rhetoric but short on detail.

The people of Macquarie—a vast electorate that spans both the Hawkesbury and the Blue Mountains in Greater Western Sydney—are fortunate to have the services of many hospitals: the Blue Mountains District Anzac Memorial Hospital at Katoomba and Springwood Hospital, in addition to St John of God Hospital at North Richmond and the Hawkesbury District Health Service at Windsor.

There are some serious flaws in this legislation that may prove more of a hindrance than a help, particularly for the delivery of health services to the people of Macquarie. The first is that the pricing authority is supposed to be established and operating by July 2012 with the main functions being, firstly, to determine the national efficient pricing for healthcare services provided by public hospitals where the services are funded on an activity basis, secondly, to determine the efficient cost of healthcare services provided by public hospitals where the services are block funded and, thirdly, to publish this and other information for the purpose of informing decision makers on the funding of public hospitals. The mechanism for the authority to determine pricing is through the activity based funding, known as ABF. This model relies on a classification system to define and count hospital activity, each patient classified according to their diagnosis, surgical procedure and other data. There are around 670 patient classifications with a different price paid for each one. This funding model is already being used in the private hospital sector and by Medibank. The outcome of the ABF model is to determine the Commonwealth's contribution to hospital funding and there is support for this model which could provide estimated annual savings of between $0.5 and $1.3 billion.

A significant flaw in the legislation is that it does not acknowledge the economic modelling that underpins the differences between private hospitals providing public services, and public hospitals. A submission by Catholic Health Care Australia, a major private/public hospital provider, states that for the bill to be effective it needs to have regard to the unique nature and the slightly different legal status under which public hospital bed services provided by the private sector actually operate. The Hawkesbury Hospital at Windsor operates in this way. It is a private hospital with a private/public arrangement where public patients in the Hawkesbury arrive at the hospital and are treated as public patients.

It appears that only the largest hospitals—a minority of the nation's hospitals—will actually operate under an activity based funding model. I call on the government to clarify what funding models will apply to smaller and regional hospitals and how they will survive if their needs and their circumstances are not considered. Hospitals in my region are entitled to know exactly what it means for them.

There is a great deal of scepticism about the start date, given the enormity of the task ahead in setting an efficient price for every hospital activity across every jurisdiction and then deciding which hospitals will be funded solely by ABF and which will continue to be provided with block funding, and there is cause for the concerns expressed by a number of submissions to the Senate inquiry. All the work of the authority in setting pricing is for 'advice only' to the states and territories, who will still have the power to decide what to pay. This sounds similar to the Petrol Commissioner, Grocery Watch, or Fuel Watch. Are we revisiting these approaches? On the one hand, the authority will provide certainty on pricing, but as the advice is not binding and the states and territories retain their discretionary powers to determine the price paid, uncertainty will prevail and fights about the adequacy of public hospital funding by each level of government will continue.

Another function of the authority will be to investigate cost shifting and cross-border disputes. The authority can report on its website instances of cost-shifting disputes and make recommendations to the minister, but those recommendations are not going to be publicly available. This raises questions of transparency and accountability, especially when the two subcommittees to be established by the Independent Hospital Pricing Authority—the Clinical Advisory Committee and the Jurisdictional Advisory Committee—have limited public reporting requirements. The coalition has been critical of the establishment of subcommittees as there is no formal mechanism in the bill to facilitate cooperation. This could give rise to issues of duplication, or even triplication, with the inevitable consequence of a blowout of costs. Given the government's poor record of managing programs, how likely is it that without formal guidelines this major hospital reform will also end up in a costly, unworkable mess?

I note that in a number of submissions to the inquiry there were questions raised about why the private sector was not consulted. It is essential that the private sector with expertise in activity based funding, governance and nongovernment hospital service provision, be represented on the Independent Hospital Pricing Authority board of management and on its subcommittees.

While the coalition does not oppose this bill, we are sceptical about what it can deliver. When you look at this bill closely, it is more about creating the illusion of reform, because of its lack of detail, guidelines, transparency and accountability. The one thing it does is create another bureaucracy funded to the tune of almost $100 million over the forward estimates and, when fully functional, will have, I understand, a full-time staff of 42 and could cost about $31 million this year. It remains to be seen whether the authority can justify this price tag and deliver real reform, or whether it will be another case of waste and lost opportunity to fund other major issues such as mental health, transport, infrastructure, education and environment.