Tasmania’s disastrous health budget.

During the internal discussions for the 2014 state budget, the Department of Health put a business case for upgrading the health system’s creaking and outdated computer systems.

It was firmly – rudely – rejected by Treasury officials and by the Health Minister, Michael Ferguson. The next year, the same thing happened. And the next year. And the next. Each time, the case for an upgrade was rejected as a waste of money.

Until this year. The centrepiece of the 2022-23 health budget is $150 million over four years for “digital health transformation”. Eventually, it will cost $476 million over a decade.

It’s an interesting backflip for Mr Ferguson – now the Treasurer – and previous Treasury officials who are understood to have been particularly scathing about proposals for a digital upgrade.

But new computer systems, however necessary, will not fix the appalling problems in Tasmania’s public hospitals. The solution to those lies elsewhere – and this budget, like its predecessors, does nothing to reverse the continuing slide into deeper chaos.

OVERCROWDING = SOARING COST

One marker is the efficiency crunch. When overcrowding gets beyond a certain point, staff can no longer work normally or efficiently, so it costs more and more to treat each patient.

In 2016-17, Tasmania’s per-patient costs were actually a bit lower than the national average. Within three years they were 25% above the average. And as demand continued to increase far beyond the available hospital space, staff concentrated on the most urgent cases. But those were also the most complex and the most expensive.

Over four years, the cost of treating the average patient rose by 36% and demand rose by 12%. In all, the costs facing hospitals rose by 48%. In just four years.

But funding did not match these increases. Nowhere near.

Funding for public hospitals comes from the state and federal governments, insurers and individuals. The system is not set up to cope with sudden shocks like this. By my reckoning, the costs facing hospitals outstripped the money coming in by around 38% in just five years.

The Commonwealth funds public hospital services at 45% of the National Efficient Price (NEP). That price is based on the national average of per-patient costs, weighted for complexity. But the calculations, by the Independent Hospitals Pricing Authority, are based on costing studies that were conducted three years before. The current NEP, therefore, is based on the costs of 2019-20.

Tasmania’s costs have risen by much more than the national average. Between 2015-16 and 2019-20, per-patient costs rose nationally by 9% and in Tasmania by 28%.

And federal funding is capped. Any annual cost increase above 6.5% must be borne by the hospitals.

The new state budget does not help. This financial year, health services will get just 4.95% more than they were budgeted to get last year.

 In some previous years, the state government has injected more money into hospitals to make up for unrealistically low budgetary provisions. But because the Tasmanian budget papers report only the budgeted amounts from previous years, not the actual amounts finally spent, it is almost impossible to work out from the budget precisely what hospital funding ends up being. The Australian Institute of Health and Welfare does work it out – and those are the numbers I’ve used in the charts above – but their data only go up to 2019-20.

BUT WHERE’S THE EXTRA SPACE?

The government has had master-plans for the redevelopment of the Royal Hobart Hospital for over three years and for the Launceston General Hospital for 19 months. These, the government has said, are part of its 30-year infrastructure plan.

At the RHH, space in the old buildings vacated in the move to the new K-block, is being refurbished. But this will not provide enough beds to meet current, let alone future, demand. That depends on the development of a proposed second campus on the site of the former Repatriation Hospital in Davey Street. There is no allocation in the budget for this.

Concept drawing of the RHH second campus ... needed, but not in the budget

At the LGH, the master-plan calls for extensive redevelopment, including a new seven-storey tower. This has been announced by the government several times, but there is no allocation in the budget for it. And projected funding for other aspects of the project show progress is likely to be slow.