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Want to save public hospitals? First, stop being stupid.

Under-funding is not the main reason for the crisis in Australia’s public hospitals. A far bigger problem is systemic stupidity.

Before the pandemic, Tasmania’s public hospital system was the nation’s standout basket case. But the malaise, rather like a virulent infectious disease, has spread.

Now every state has the same scandals: critically ill patients waiting for ambulances that are ramped outside a hospital, unconscionably long waiting times for elective surgery, bed block and chaos in emergency departments.

Hospitals that were only just coping before COVID hit did not have the excess capacity needed to deal both with the post-lockdown surge in cases and with ever-increasing levels of new demand. For many, that was the tipping-point.

Staff are experiencing burnout at levels seldom seen before. Too many valuable and experienced doctors, nurses and others have resigned. Recruitment of their replacements is predictably difficult and inadequate. And so the descending spiral continues.

The lack of space in acute surgical and acute wards is the principal cause of the chaos now afflicting so many of the nation’s public hospitals. When there is no space on a specialist ward, patients needing admission must be kept in the emergency department for extended periods. This has a well-documented cost in mortality and morbidity.

These patients take up many ED beds and need a considerable amount of care from already-stretched staff, who then have less time to deal with new arrivals. And this, in turn, is the main cause of ambulance ramping.

It didn’t have to be this way. If governments around the country had spent their available money more intelligently, Australia would have a public hospital system that is fit for purpose.

This post is about the Four Great Stupidities that stopped us achieving that – and which, as a result, have cost thousands of lives and extraordinary suffering.

Stupidity 1: Not building enough

For most of this century, the number of acute beds has fallen increasingly behind the number of patients being admitted. The lines in this chart show indices for both the numbers of available beds in Australia’s public hospitals (the blue line) and the number of patients being admitted (the red line). The gap between the two is the most cogent explanation of the pressures being put on the hospital system and those who work within it.

This gap has been managed mainly by reducing the length of time patients spend in hospital. This has happened in most countries, but Australia began from a low base and has since gone much lower. The figure fell from 3.9 days in 2003-04 to a low of 2.9 in 2020-21.

But this method of discharging patients “quicker and sicker” cannot continue forever and, as this chart shows, lengths of stay have now reached a plateau of around three days.

Figures from the Organisation of Economic Cooperation and Development are based on somewhat different criteria and include private hospitals. Nevertheless, Australia ranks low among other rich countries: another indication of why this method of managing demand cannot continue.

A clear indication can be found in the number of acute beds being provided, compared with other comparable countries. Australia, along with Britain and the US, have substantially fewer beds than the average. For Australia, it’s 2.47 per 1,000 population against an average of 3.39. It should perhaps not be a surprise that these three countries also have serious problems with their health systems.

Stupidity 2: Building the wrong stuff

Not all hospital patients are the same, but that diversity is not reflected in the types of accommodation being provided. Policy-makers are fixated on only two main alternatives: high-turnover beds and chairs for same-day cases, and high-level acute beds for almost everyone else.

But those expensive, high-level beds just aren’t needed for a substantial minority of the patients now occupying them. Someone, for instance, having been through a hip replacement operation may need that level of care only for a day or two. But they can’t go home because they’re not fully mobile and can’t take care of themselves.

If there was a cheaper, more clinically appropriate convalescent and rehabilitation facility, they could be put in to that – but those facilities, with few exceptions, have not been built. Instead, we have an extraordinary paradox: high hospital costs, relative to other rich countries, but fewer beds.

In Australia, it costs around $1,400 a day to keep someone in an acute hospital bed without doing anything for them apart from basic nursing. In contrast, the Productivity Commission calculates that the patient-day cost of residential aged care is $243 a day.

I recently completed a cost-benefit analysis of new capital investment in Tasmania’s two main public hospitals, the Royal Hobart and Launceston General. The central element was building new step-down facilities to nursing-home standard. Staffing would be somewhat more expensive than in aged care, because a greater element of rehabilitation would be needed for most patients diverted from acute wards. So a plausible assumption would be a recurrent cost of $300 per patient day, a likely saving of $1,000 per day.

The analysis can be downloaded here.

According to senior doctors, around 25% of patients in the medical wards of Tasmania’s two main hospitals on any given day would be more appropriately – and much more cheaply – cared for in nursing-home standard facilities, albeit with more allied health staff. For surgical wards, the figure was over 30%.

Nationally, the figure will vary widely between hospitals, but all states are experiencing major ambulance ramping and ED overcrowding – both are certain indication of bed block. It can conservatively be assumed that 20% of patients could be transferred to step-down care – if those facilities were built.

The potential savings are substantial. Assuming a saving of $1,000 per patient day, NSW would save $1.3 billion a year; across the nation, hospitals would save over $4.1 billion.

Calculating the value of avoiding death or disability is much more complex but there are well-established tools for doing so. In the end, every country has to work out what a particular intervention is worth, and whether money would be better spent on something else.

A key instrument for doing this is the disability-adjusted life year, or DALY. This is a proxy for the number of years lost due to ill-health, disability, or early death. The Australian Institute of Health and Welfare uses the DALY as a measure in its regular Burden of Disease studies.


The DALY estimates for Tasmania may underestimate the real impact of ill-health. The study method is necessarily limited by the data available to it and by its conceptual framework. The method seems likely to underestimate the clinical impact of comorbidity (someone with more than one disease) and the impact of inadequate health care that is below average capability and rapidly worsening, as in Tasmania.

Providing a fit-for-purpose public hospital system – and no state has one of those right now – could be expected to reduce the overall burden of disease, perhaps considerably. The base case in the analysis is that Tasmania’s disease burden could plausibly be reduced by 4% a year.

The impact of delayed treatment is more complex than the burden of disease estimates imply. Delays to treating one condition can lead to problems in other disease areas. For instance, someone needing a joint replacement, but who has to wait without surgery for several years, may become effectively immobile. The patient then puts on considerable weight, increasing the risk of cardiovascular disease and diabetes. There is a mental health cost of unrelenting pain and discomfort. So although the table above attributes only a low direct rate of premature death (years of life lost) to musculoskeletal conditions, delayed treatment can considerably increase that risk.

To be of use to policy-makers, a notional dollar value has to be put onto the measure. That’s based on the amount of money governments and health systems with finite budgets are prepared to pay to avoid a single DALY: if it’s too expensive, money would produce better health outcomes if it was spent on something else.

The federal government’s Office of Impact Analytics, part of the Prime Minister’s Department, calculates a related measure, the Value of a Statistical Life Year, at $235,000 in 2023 dollars. On the broader DALY measure, a World Health Organisation specialist unit suggested a rule-of-thumb that an intervention which cost between one and three times a country’s per capita GDP would be cost-effective and, below one would be highly cost-effective. The upper end of that has been widely criticised as too generous but the lower end is in line with other research findings. According to OECD estimates, 1% of  annual per capita GDP in Australia is $US71,862, or $A109,911.

A study of 176 nations concluded that a cost per DALY averted “between one and two GDP per capita in high and very high HDI [Human Development Index] countries” would be cost-effective. In the Australian context, that would be between $110,000 and $220,000.

The analysis uses a value per DALY averted of $100,000. So, for Tasmania, reducing the overall burden would result in a benefit to the community of $487 million a year. If the same result could be achieved nationally, the figure would be $20 billion.

Other likely benefits include creating a greatly improved working environment. Too many staff are experiencing burnout, too many have left, and their replacements are too often deterred by a hospital’s reputation as a poor place to work.

Stupidity 3: Building incompetently

Senior private hospital development staff say they can build a facility for around a third of the amount governments routinely spend. When you look at the way governments do the job, that claim becomes entirely credible.

If any private business wasted as much capital as state health departments do, they would go rapidly out of business. But the public servants and their political masters don’t have to worry about that, so they go on repeating the same mistakes, wasting billions that should be spent on treating sick people.

When you’re undertaking a major capital project, it ought to be common sense to get the plans right before digging a hole in the ground. And hospitals are complicated things, so the plans aren’t likely to be right unless you talk to the people who are going to work there – the doctors, nurses, allied health people, paramedics, orderlies, cooks and cleaners.

But the standard government plan is to build first and consult later. So, too often, critical faults aren’t identified until the building is well under way – or, in some cases, already finished.

Bureaucrats and ministers almost automatically gravitate to the lowest bid in any tender process, giving inadequate consideration to whether the bid is too good to be either true or deliverable. That’s what happened when the Tasmanian government built a new wing at the Royal Hobart Hospital, and when the Western Australian government built the new Perth Children’s Hospital.

In Hobart, problems included a blowout in costs, dangerous levels of lead leaching from taps and plumbing equipment sourced from China, inadequate consultation during the planning phase leading to expensive changes and delays. The lead contractor, John Holland, began in 1949 in Melbourne but is now a subsidiary of China Communications Construction, based in Beijing.

John Holland was also used on the $1.2 billion, 298-bed Perth Children’s Hospital project, which opened three years late in 2018. The project was dogged with problems, most of which could have been avoided: a convoluted governance process led by two competing groups, lead contamination of the water supply, asbestos in ceiling panels, legionella infection, a burst pipe causing serious damage, 900 fire doors that had to be replaced, and other problems at the on-site childcare facility, mental health unit, isolation rooms and with anaesthetic gas delivery.

These troubled projects cause massive political embarrassment for governments, as well as major hits to their budgets. Parliamentary inquiries, usually pursued by the government’s enemies, are usual and damaging.

“For the Perth Children’s Hospital project,” the inquiry reported, “the state accepted an extremely competitive bid, with little margin for error, from an entity it had not previously used to manage construction projects of such scale and complexity.”

The saga of the 800-bed Royal Adelaide Hospital is almost entirely the fault of stupidity and ineptitude by the South Australian government and its health department. They failed to ensure the plans being drawn up would produce a building that was suitable for the job it had to do. Governance, once again, was chaotic.

The place, bult by Hansen Yuncken and Leighton Contractors, finally opened in 2017 after many problems and long delays. Two  workers died during construction. Its cost of $2.4 billion makes it Australia’s most expensive building and the third most expensive in the world.

The final cost represents a blowout of $600 million, or 41%, from its original estimate of $1.7 billion. That was not the final cost, which is likely to be closer to $2.8 billion.

Many bungles had to be fixed, such as rebuilding the tiny emergency department. Patients waiting outside in ramped ambulances have died, one after being ramped for ten hours. Even now, those deaths are continuing: a recent coronial inquiry investigated three such deaths.

Fans have had to be installed to get rid of exhaust fumes from waiting ambulances. When a $400 million paperless patient records system hadn’t been fully implemented, the emergency department had to bring in furniture and trolleys to accommodate patient notes, further cluttering up the already small space.

Lights went out throughout the hospital because of a software glitch. A transplant patient had his new kidney ruined when the sprinklers went off unexpectedly during the operation.

And, after all that, the hospital is too small to accommodate the patients who need it.

There are basic, simple rules to avoid most of these problems: consult first, build later; be wary of low-ball tenders; and have one project manager in charge with clear lines of reporting, rather than a plethora of committees.

These three projects could, and should, have been built for perhaps half of their final cost.

Stupidity 4: The feds go missing

The federal government contributes towards the recurrent costs of treating patients in public hospitals. In  2021-22, the Commonwealth paid for 39% of public hospital services, the states paid 55% and patients paid 6%.

The Commonwealth, which controls most of the revenue-raising powers, is the only level of government capable of meeting the ever-increasing costs of care. Although its contribution needs to increase substantially and soon, at least that responsibility is recognised. But the feds put almost nothing at all into the capital costs – the buildings and equipment – without which no hospital can even exist.

The title of the government’s main funding body, Infrastructure Australia, gives the impression of a wide range of focus. And so, in theory, it has. It’s prepared to fund projects in all areas of transport, climate resilience, social services, northern Australia, education, energy, national connectivity … but not hospitals.

In fact, the focus is heavily weighted to one area – transport. If you want to build a bridge, a road, a railway, a port or an airport, Infrastructure Australia are your people. Want to build a hospital? Not interested.

They conduct rigorous cost-benefit analyses, but that is no guarantee against massive waste. Take the North-East Link road project in Melbourne, which the Victorian government said in 2018 would cost $10.8 billion. The state’s own economic analysis calculated a benefit-to-cost ratio of 1.3, meaning that for every dollar invested, the benefit to the community would be $1.30.

“Overall, Infrastructure Australia considers that the project is likely to deliver economic benefits that marginally exceeds its costs,” the evaluation concluded. That means that any substantial increase in costs would tip that project over the edge, from worthwhile to not-worthwhile.

Back then, the federal government agreed to put $1.75 billion into the project.

But, perhaps predictably, those costs have blown out, and badly. The latest estimate is not $10.8 billion but $26.1 billion. There has been no corresponding increase in benefit. The benefit-to cost ratio is now likely to be around 0.6, meaning that dollar invested will produce a return of 60 cents.

Nevertheless, the federal money has kept on coming. The Prime Minister, Anthony Albanese, has just announced that a further $3.25 billion in federal money would be tipped into the project, bringing the total Commonwealth contribution to $5 billion.

But there is still no sign of any willingness to put federal money into hospital-related infrastructure, even the most cost-effective and easiest to deliver – such as nursing home-standard accommodation to free up acute beds.

The system is broken

There are few areas of government administration in which politicians have the opportunity to save thousands of lives and alleviate massive suffering. Health is such an area.

Why, then, do we so often muck it up? The path to far better outcomes is not all that complicated. But the present system of planning and funding is so massively inept that those lives go on being lost and the suffering continues.

Australia could get the results the nation needs without spending more money than we already are. It just requires swapping entrenched stupidity for a bit of intelligence.

Why is that so hard?


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