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Hospital funding: $1 billion lost due to inefficiencies every year

11 Mar 2014, by Informa Insights

CaptureA new study by the Grattan Institute has found that public hospitals in Australia are spending over $1 billion every year with little or no benefit to the patient. According to the Victoria based think tank, the funds are not used to provide improved better care, but rather derive from inefficiencies within the system.

“What we found was huge variation in the costs of patients being treated with the states”, said the report’s author Stephen Duckett in a recent interview with the ABC.

“Now you’d expect to find between-state variation because different states have different industrial agreements and so on, but what we found was within a state there was huge variation.” In NSW the costs of having a gall bladder removed ranges from $3,500 to $8,000 depending on the facility. In another example a hip replacement can cost anything between $8,500 at one hospital and $25,000 at another.

The reasons for the huge cost variation can be the result of a number of different issues such as over-priced supplies and delays in patient discharge.

It will be a task for the state governments to address inefficiencies in the system. According to the report “Controlling costly care: a billion dollar hospital opportunity” there are two factors that will enable more cost-effective hospital operations. The first is the use of activity-based funding that will soon be utilised by hospitals in all P14A14hospital patient costingstates.

The second factor is the availability of quality data about costs. “One of the things we’re saying is [that] hospitals need to have much more information about their own costs and the costs of other people so they can improve their management”, says Duckett.

The report further recommends changing the way in which states finance public hospitals and reinvest the funds that become available through greater efficiencies. The saved moneys should be used to support new demands coming onto the hospital system.

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