Title Finance and Public Administration References Committee
Outcomes of the 42nd meeting of the Council of Australian Governments
Database Senate Committees
Date 27-04-2016
Source Senate
Parl No. 44
Committee Name Finance and Public Administration References Committee
Page 6
Questioner CHAIR
Gallagher, Sen Katy
McKim, Sen Nicholas
Responder Prof. Owler
System Id committees/commsen/ce3a78d6-52bd-4518-b490-c32bab4a4f69/0002

Finance and Public Administration References Committee - 27/04/2016 - Outcomes of the 42nd meeting of the Council of Australian Governments

OWLER, Professor Brian, President, Australian Medical Association


Evidence was taken via teleconference—

CHAIR: I now welcome Professor Brian Owler, the President of the Australian Medical Association. Information on parliamentary privilege and the protection of witnesses in giving evidence to Senate committees has been provided to you. You have made a submission to the inquiry—submission 5—do you wish to make any alternations or amendments to that submission?

Prof. Owler : No.

CHAIR: I invite you to make a short opening statement. At the conclusion of your remarks I will ask members of the committee to ask you questions.

Prof. Owler : Thank you. The submission basically speaks to the AMA's view on pubic hospital funding and the results of the recent COAG meeting. Obviously, the AMA was hoping that there would be a more significant amount of money that would be dedicated towards public hospital funding. Our analysis of the public hospital systems through our annual Public Hospital Report Card shows that the system is under enormous pressure and is dealing with an incredible amount of patient demand for not only emergency department services but also elective surgery. I think we are a long way from being able to meet that demand. While we have had improvements in performances with extra funding for emergency departments, elective surgery, unfortunately we have started to see a decline. So the AMA has been very concerned about the funding formula that was put forward in the 2014 budget—basically, CPI and population as the formula for funding public hospitals. We are pleased that there is acknowledgement that there should be a better method of funding based on activity-based funding and the National Efficient Price, but I acknowledge also there are some concerns about the National Efficient Price and its calculation and utility.

That is probably a summary of the current situation. Obviously, I am happy to take questions.

CHAIR: Thank you very much, Professor Owler. Senator Gallagher, do you have questions?

Senator GALLAGHER: I do. Thank you, Professor Owler, for appearing today and for the submission that you have provided to the committee. I might go straight to the last page of your submission; it is really your summary of what is needed going forward. In your first point there you are, basically, arguing that new investments, or additional investments, are still required for public hospitals with the reinstatement of the NHRA funding as the upper benchmark. There are different figures that go around. The Parliamentary Budget Office says that there has been a $7.9 billion reduction over what was expected through that agreement. There are other numbers used by the Commonwealth. Do you have a figure that you attach to that?

Prof. Owler : I do think that the figure is debatable. Obviously, for the $57 billion promised towards 2024, most of that funding was in the later years. What I can state unequivocally is that the arrangements that were put forward for funding from 2017 in the original proposal were going to be grossly inadequate. I still do not think that we have seen an adequate amount of funding that has been put forward for funding public hospitals. Our Public Hospital Report Card really shows a system that is under enormous stress. I think we will see a decline in the performance and in the range of services that our public hospitals are going to be able to provide, unless there is an acknowledgement of the importance of our public hospitals in providing care to patients right across the community—not just those without private health insurance but, indeed, the breadth of the community. While I would hesitate to place a figure on what is needed, I think that is something that we need to have a rational discussion about in terms of what the need is and how we are going to address the current problems and the ever-increasing demand being placed on our public hospitals.

Senator GALLAGHER: In terms of your submission, on page 2 the AMA refers to the $2.9 billion agreement as:

…an inadequate short-term public hospital funding down-payment to appease desperate States and Territories ahead of the Federal election.

What leads you to that conclusion?

Prof. Owler : Talking with state leaders and ministers, it is very clear that they feel that the funding that they felt would enable them to fund their public hospitals going forward was towards the $16 mark. We saw a lot of figures bandied around before the COAG meeting, but that was certainly the ballpark figure that I think the states generally would have preferred to enable them to fund their hospitals to the same extent. So $2.9 billion is a reduction. We were going to see 50 per cent growth funding; it is now down to 45 per cent with the cap of course. So I do think it is inadequate for funding our hospitals going forward. Again I point to the ever-increasing demand that our hospitals are seeing.

Senator GALLAGHER: Do you have the figure for the growth in demand for, say, emergency department presentations? Do you have that figure of what it is growing year on year?

Prof. Owler : The figures are growing at around three to four per cent. The real growth is not what is sometimes reported in the media—for example, 'GP type patients are flooding our emergency departments.' What our hospitals are actually seeing—and this is well documented, particularly in New South Wales through the Bureau of Health Information—is that the triage category 2 and 3 patients, the sickest patients in our community, are presenting to the emergency departments much more frequently. So that is where the growth in hospital presentations is occurring. So it is not patients who should be seeing their GP; it is actually quite sick patients, which obviously take up an increased amount of resources and clinicians' time as well. That is the sort of thing that our hospitals are struggling to cope with.

There is also an enormous unrecorded demand—while some states have now started to record this—and I refer to the hidden waiting list. So, while we have public hospital lists for elective surgery, there is what we call the hidden waiting list. These are the times that it is taking people to get to see particularly a specialist in an outpatients' clinic. In some cases that can be a two-year wait, and that is not recorded in most states anywhere. That is even before a patient is assessed and then placed on the waiting list for a surgical procedure. We know very well that a lot of that information and unrecorded demand exists.

We really are not meeting the demands that are out there for healthcare services, and I do worry that patients are suffering needlessly. Elective surgery is about patients who are in pain and have significant problems. It stops them from working and contributing to the community and they often end up sicker as a result of longer waiting times. I think that is the sort of thing that we need to be looking at if we are serious about trying to come up with a figure for funding our public hospitals and to make sure that the Australian community gets the sort of health care that we think it needs.

Senator GALLAGHER: In terms of the funding shortfall, I think there is agreement from the states and territories and from professional groups that, through the budget cuts and even post the COAG deal, there is not enough money going into public hospitals to deal with demand. How do hospitals deal with that in a practical sense? What does it mean for each hospital if they do not have enough money to operate?

Prof. Owler : We have seen in Western Australia the Fiona Stanley hospital cutting hundreds of FTEs because they do not have the budget to fund their hospital. What often happens is positions go unfilled; they save money by not employing people or replacing people when they retire; and they close outpatient clinics. So often the services offered are reduced.

Other hospitals we have seen extend their closure period, so they shutdown elective surgery for longer periods. We have recently seen that attempted at Westmead hospital for a period, as I recall, of about six weeks, some of which would have been over the Easter break and a period of time where most anaesthetists and surgeons were at a conference but certainly not for a six-week period. The only reason for doing that is to try to save money, or the budget, of the hospital. That is the sort of thing that hospitals do.

What I think annoys many people is this constant notion that there are enormous savings to be had by just being efficient. I would agree, as would every doctor and nurse, that there are efficiencies to be found in the system. But to suggest that people have been ignoring that or do not work every day to actually make our hospitals more efficient, and have not actually been doing that for decades, ignores the improvements—the incredible improvements. You only have to look at the reductions in the relative lengths of stay for very common procedures that have taken place. So our hospitals are more efficient. They can obviously be more efficient in the future and people keep striving towards that, but that is not the simple answer to solving the public hospital funding problem that exists in this country.

Senator GALLAGHER: You go to that in your submission when you talk on the funding of other reform initiatives—well, we are not clear where that funding is coming from—and the focus in the COAG agreement to reduce avoidable readmissions and to try to keep people out of hospital in the first place through some of the primary healthcare reforms. Could you expand on that a little in terms of what the AMA's view is on how much that would actually assist hospitals, even if it is implemented and successful?

Prof. Owler : It is very convenient for people to look at the notion of keeping people well and out of hospitals as the answer to public hospital funding. But while it is absolutely important, and we know that the greatest challenge facing developed countries in terms of their healthcare systems is keeping people with multiple chronic diseases well and in the community and out of hospital, it is not going to mean that people can ignore public hospital funding or somehow develop large savings because they are keeping people out. It is important to do both and I think that is where we need to be investing not only in hospitals but also in general practice to help them with chronic disease management.

There are initiatives that have obviously been recently announced through the primary healthcare review. The AMA supports those initiatives but also seeks to make sure that there is funding to support GPs and other healthcare workers in actually putting that into practice, so that we can actually reduce at least some of the demands, particularly for these more complex patients with chronic disease.

Senator GALLAGHER: Finally, looking at your report card and looking at it year-on-year, it certainly shows a system under enormous pressure. It shows areas where there has been some moderate improvement, or maintaining the same. Also, I think this year's one highlights some red flags around deterioration of performance. Often funding cuts take a while to work through the hospital system and to have an impact on the statistics, which are always released a year or two later. Then, similarly, it is hard to improve performance quickly because it takes so long to ramp services back up with funding injections. Is it your view that the funding cuts of, say, the last couple of years are showing yet in the statistics or do you believe there will be further deterioration in performance?

Prof. Owler : No, I think there will be further deterioration. We have just started to see the figures indicate that the system is now coming under stress. There are two aspects to that: one is funding and the other is the lack of federal policy focus on public hospitals. And while it is all very well to suggest that the states, as managers of the public hospitals, should be allowed to look after their own hospitals without any interference from the Commonwealth, I think what we do want to do is make sure that we have a hospital system that actually addresses the healthcare needs of all Australians. It should not matter where you live in this country, you should have access to a very similar level of health care. It should not matter particularly which city you live in, but at the moment we have very real differences in that. That is one of the other aspects that really needs to be addressed, not only as a funding issue but also as a policy issue. I think that is going to be a very important part of any federation reforms that are suggested or take place in the future.

Senator McKIM: Good morning, Professor Owler; thanks for appearing before the committee. Your submission relates to activity based funding and the national efficient price. Firstly, on the NEP, does the AMA believe that it reflects the actual costs to treat patients in hospitals? If not, are you able to advise the committee of the quantum of any shortfall?

Prof. Owler : It is difficult to advise on the quantum, but we do have concerns about the complexity of how the national efficient price is reached. Clearly this method of back casting, where the figures are sort of revised—usually downwards—does create a level of opaqueness to how the national efficient price is calculated. It is clearly a tool that will be used to drive down costs, and there is a danger that if the national efficient price is potentially set too low that we could actually see a budget cut in disguise, if you like, in terms of reducing funding to hospitals, particularly hospitals that might be struggling.

The shame of the 2014 budget in terms of this approach to CPI and population growth, which essentially took the focus off activity based funding, was that there was an enormous amount of time and energy that was put into activity based funding—not only at a department level but also at an individual clinician and individual hospital departments level. If we calculated the man-hours of particular senior clinicians in our hospitals that went into activity based funding, and continues to go into it, then I think we would be amazed at how much people have been participating in it, and also what the costs have been.

To take away a system that was actually designed to look at inefficiencies, particularly things like unwanted clinical variations, really flew in the face of those who would argue that the hospitals are inefficient. It was a very poor decision, without consultation, and there is a lot of cynicism that has been generated within hospitals and amongst clinicians in terms of the amount of time they have invested and yet that can be taken away essentially with the stroke of a pen. It is good that ABF has been re-established, that people have realised that actually it does have a role, and I am hoping that it is a system that will deliver efficiencies, that will do things like reduce unwanted clinical variations and will actually stimulate reform at an individual clinician, and at a hospital level as well—it is not just a change in funding sorted out; it is actually something that people can aim to work out, a benchmark which clinicians and hospitals can judge themselves against.

Senator McKIM: Is the AMA aware of, or has it been consulted on, potential reduction in funding for the Rural Health Outreach Fund?

Prof. Owler : No, we have not been consulted on that.

Senator McKIM: You said you have not?

Prof. Owler : No, I am not aware of being consulted on that.

Prof. Owler : Does the AMA regard the Rural Health Outreach Fund as a good mechanism to deliver services into rural and regional communities in Australia?

Prof. Owler : I am not particularly familiar with the outlook fund, so I would have to take some advice on that I am afraid.

CHAIR: Thank you very much. As there are no further questions for you, Professor Owler, I thank you very much for joining us and also for your patience. We were delayed in commencing this morning by the fog in Canberra, and I appreciate your staying on the line for a little longer.

Prof. Owler : No, it was a pleasure. Thank you.

Proceedings suspended from 10:10 to 10:25