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Public hospitals – funding needed, not competition

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ASSOCIATE PROFESSOR SUSAN NEUHAUS, CHAIR, AMA HEALTH FINANCING AND ECONOMICS COMMITTEE

Under its terms of reference, public hospital funding is a key focus for Health Financing and Economics’ work.  How funding arrangements affect the operation of public hospitals and their broader implications for the health system has always been an important consideration for HFE, and for Federal Council and the AMA overall.

The AMA Public Hospital Report Card is one of the most important and visible products for AMA advocacy in relation to public hospitals.

The 2017 Report Card was released by the AMA President on 17 February 2017. The launch and the Report Card received extensive media coverage.

The Report Card shows that, against key measures relating to bed numbers, and to emergency department and elective surgery waiting times and treatment times, the performance of our public hospitals is virtually stagnant, or even declining. 

Inadequate and uncertain Commonwealth funding is choking public hospitals and their capacity to provide essential services.

The Commonwealth announced additional funding for public hospitals at the Council of Australian Governments (COAG) meeting in in April 2016. The additional funding of $2.9 billion over three years is welcome, but inadequate.

As the Report Card and the AMA President made very clear, public hospitals require sufficient and certain funding to deliver essential services.

“Sufficient and certain” funding is also the key point in the AMA’s submission to the Productivity Commission’s inquiry into Reforms to Human Services, in relation to public hospitals. The Commission is expected to report in October 2017.

As part of this inquiry, the Productivity Commission published an Issues Paper seeking views on how outcomes could be improved through greater competition, contestability and informed user choice.

While the AMA believes there is clearly potential to improve outcomes of public hospital services, its submission highlighted that there are significant characteristics of Australia’s public hospitals that must be taken into account. 

Health care is not simply a “product” in the same sense as some other goods and services. Public hospitals are not the same as a business entity that has full or even substantial autonomy over their customers and other inputs, processes, outputs, quality attributes, and outcomes.

Public hospitals work on a waiting list basis, usually defined by acuity of need, to manage demand for public hospital services.  Private hospital services typically use price signals.  There is limited scope to apply mechanisms for patient choice (such as choice of treating doctor) to access arrangements in public hospitals that are governed by waiting lists. 

Public hospitals also operate within a highly developed framework of industrial entitlements for medical practitioners and other staff that are tightly integrated with State/Territory employment awards. These measures are intended to encourage recruitment and retention of medical practitioners to the public sector, offering stable employment conditions, continuity of service and portability of entitlements. They support teaching, training and research in the public sector as well as service delivery.

The freedom to choose between public and private hospital care, and the degree of choice available to patients in public hospitals as distinct from private patients, is an integral part of maintaining Australia’s balanced health care system. The broad distinction between public and private health care is generally understood by the community as a basic feature of the health system and part of Medicare arrangements, even though detailed understanding of how this operates, including what they are actually covered for in specific situations, is often lacking for many people.

Introducing private choice and competition elements into public hospital care will tend to blur the distinction between public and private health care, and reduce the perceived value of choice as a key part of the incentive framework for people choosing private health care.

The Commission’s Issues Paper proposes that increased competition will address equitable access for groups including in remote areas, benchmarking and matching of best practice, and greater accountability for performance.  These are all worthwhile and important objectives in their own right.  As such, they are already the focus of a range of initiatives.

Public hospitals are already subject to policies and requirements that address the same ends of improved efficiency, effectiveness and patient outcomes, including:

  • Hospital pricing, now supported by a comprehensive, rigorous framework of activity based funding and the National Efficient Price;
  • Safety and quality, supported by continuously developing standards, guidelines and reporting, including current initiatives to incorporate into pricing mechanisms;
  • Improved data collection and feedback on performance including support for peer-based comparison.

The single biggest factor that will increase the returns from such initiatives is the provision of sufficient and certain funding. Increased competition, contestability and user choice will not address this need.

The AMA Public Hospital Report Card 2017 is at ama-public-hospital-report-card-2017

 

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