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Dr Michael Wertheimer FRACS
November 2004
The author acknowledges the contribution and support of the Australian Doctors' Fund. Stephen Milgate Executive Director
NB: This is a summary document
This report was commissioned by the Member for Nelson in the Legislative Council, Mr Jim Wilkinson, in response to the Report of the Expert Advisory Group Review into Key Issues for Public Private Hospital Services in Tasmania. 14 May 2004 (the Richardson Report).
The report emphasises the situation confronting the Royal Hobart Hospital as indicative of the plight of Tasmanian and Australian Public Hospitals.
"At virtually every point of the inquiry the Panel encountered forceful, cogent and sometimes angry assertions of the need for a significant increase in health service funding. "
Firstly, we have created a government charitable hospital service that claims to offer unlimited health care on demand as a right to every citizen regardless of circumstances. Increases in funding do not relieve the pressure on the system. As it improves, it attracts greater demand.
As NSW Premier, Bob Carr publicly stated, "as fast as we hurled money at the hospitals, there was a further abandonment of private health cover and a further rise in demands on the public system" .
Secondly, funding our public hospital system does not come through the front door with each patient (voluntary funding). The majority of revenue comes from compulsory taxes through the back door in the form of annual budgets designed to meet political objectives.
Dr Max Gammon observed of the British National Health System "In that 8 year period [1965-1973] hospital staffs in total increased in number by 28%, administrative and clerical help by 51% but output as measured by the average number of hospital beds occupied daily actually went down by 11%)" Dr Gammon hastened to point out this was not because of any lack of patients to occupy beds. At all times, there was a waiting list for hospital beds of around 600,000 people.
US economist, Milton Friedman concluded that Gammon's Law was also at work in the US health care system. He found that "from 1946-1996 the number of beds per thousand population fell by more than 60%, the fraction of beds occupied by more than 20%. In sharp contrast input skyrocketed. Hospital personnel per occupied bed multiplied 9-fold and costs per patient day adjusted for inflation, an astounding 40-fold…. Gammon's Law, not medical miracles was clearly at work"
Our public hospital system is caught in a double whammy. Any improvements in productivity will be swamped by increasing demand while government funding generates Gammon's Law.
Hence, in order to dampen demand we have deliberately set out to manage the public hospital system near to crisis. We ration care and treatment because there is no price mechanism to regulate supply and demand. At worst, we set our public hospitals up to fail; at best we severely limit their ability to succeed (if by success we mean having a hospital bed and an operating theatre for those whose clinical condition requires it). Into this process we expect our doctors and nurses to deliver 1st class medical treatment, nursing care and world's best training of the next generation of doctors and nurses.
Unless and until we confront painful realities we will continue to suffer, as the Soviet Union once did, all of the blights of the command and control public hospital (economy) system.
Should we summon the political courage to fund our public hospital system by funding its patients so that public hospitals can provide care and not ration it, we will start to see our once great public hospitals rise again. Tasmanian public hospitals will then enjoy a more positive future.
Michael Wertheimer, FRACS,
24 November 2004
The Richardson Report highlights a variety of difficulties within the Tasmanian public and private hospital systems in great detail. It avoids serious questions over funding. Its recommendations are basically rearrangements of the current system. It notes that 32 factors are impinging on its recommendations and that most contributors to the report are cynical about its value and strident about the need for increased funding.
The Tasmanian public hospital system is performing poorly on a number of key indicators. Public patients requiring elective surgery in particular appear to be in a more difficult position than their counterparts in other states. Delays in elective surgery are deteriorating.
The Royal Hobart Hospital is a pertinent example of the decline of our public hospital system. Its Hospital Board has been removed, its CEO has no authority, it experiences constant disruption and restrictions in undertaking its primary tasks. It is providing less overnight stay beds to those who need it. Productivity improvements achieved by innovations in day surgery has not meant more capacity to treat elective cases requiring hospital admission. This would appear to be a national trend. The symptoms exhibited by RHH are also present at Bankstown Public Hospital in NSW.
$18 billion for a population of 20 million people is a significant investment in a public hospital system considering that around 42% of the Australian population also carries private health fund membership.
Cost shifting has become an artform in most Australian public hospitals. Public outpatients in some hospitals have been "privatised" to allow for transfer of costs to the Commonwealth. Other schemes including the Twister have created an intermediate class of public patient partly contributing to some costs on a user pays basis.
The public hospital blame game is a political strategy designed to relieve public anxiety over perceived shortcomings in the public hospital system. Both Commonwealth and state politicians are well practiced in the art of blame shifting. Fundamental truths about the inability of public hospitals to ever meet expectations of unlimited health care on demand for all Australians at no direct cost are rarely acknowledged. Spin (official lies) and political posturing is used as a substitute for confronting reality. A cynical public understands the game being played and looks on with increasing skepticism.
On a number of population health indicators Tasmania has still to make progress. There is no room for complacency albeit the indicators are approaching those in other states. Of particular concern are the rates of nicotine addiction and the high proportion of preventable illnesses that eventually find their way into the public hospital system. The Tasmanian population is ageing putting pressure on public health facilities. Adjusting population for age gives a weighted population figure.
In summary the taxpayer's contribution (State and Federal) to Tasmanian public hospitals has been growing steadily for the 5 years from 1997-98 to 2002 whilst non-tax-payer revenue (private billing and charges) has grown significantly (albeit that it represents 11% of all inflows into the Tasmanian public hospital system as at 2002). (See Appendix A)
All states including Tasmania have benefited from increased GST revenues which has provided a source of funds to ease pressure on the funding of our public hospital system.
The revival of private health insurance has provided relief for the public hospital system. Private hospital admission rates have grown at a faster rate than public hospital admission rates.
The concept of public hospitals has moved from charitable organisations to government owned and controlled hospitals. Centralisation of control and funding has followed these changes to what is now a command and control model.
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