TOWARDS A MORE

POSITIVE FUTURE FOR

TASMANIAN PUBLIC

HOSPITALS

A response to the RichardsonReport

Dr Michael Wertheimer FRACS

November 2004

The author acknowledges the contribution and support of

the Australian Doctors’ Fund

Stephen Milgate

Executive Director


CONTENTS

EXECUTIVE SUMMARY

OBSERVATIONS

ANALYSIS

RECOMMENDATIONS

EXPLANATORY NOTES

PUBLIC POLICY DILEMMAS

a) “OTHER PEOPLE’S MONEY”

b) “THE BETTER THINGS GET THE WORSE THEY BECOME”

WHY RISING COSTS AND FALLING PRODUCTION? - GAMMONS LAW IN ACTION.

MY RIGHT TO PUBLIC HEALTHCARE

THE HISTORY OF PUBLIC HOSPITALS

CATEGORIES OF ELECTIVE SURGERY ADMISSIONS USED IN TASMANIAN PUBLIC HOSPITALS

APPENDIXES A – Commonwealth, State & Non government public hospital expenditure.

APPENDIX B – GST Revenue

APPENDIX C – Comparison of Federal Health spending on Public Hospitals with Grants to States

EXECUTIVE SUMMARY

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 RoyalHobartHospital as indicative of the plight of Tasmanian and AustralianPublicHospitals.

  1. Australian tax-payers contribute $18 billion per annum to our PublicHospital system[1]. In 2001-02 when the latest AIHW statistics were calculated the Tasmanian government contributed $201 million and the Federal government $174 million to Tasmanian Public Hospitals. A further $43 million was contributed from non-government sources for a total of $418 million[2], or $341,782.00 for every public hospital bed in Tasmania[3]. Yet, as the Richardson Report shows the system is not coping and demands by those working in the system for greater funding have become more strident.
    “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.[4]”
  1. The RoyalHobartHospital is indicative of the decline of a once great public institution. The hospital board has been replaced by a state governmentbureaucracy whose prime purpose is to ration hospital care. Consequently, operating theatre time is regularly rationed and cancelled, elective surgery is regularly cancelled at the last minute aggravating patients and staff, the absolute number of hospital beds has declined over the last 10 years, (albeit official bed numbers and unofficial bed numbers rarely agree), staff overtime is limited or prohibited. In summary, productive capacity is continually disruptedlowering morale and increasing the frustration of those who attempt to work in such a system.
  1. Several key indicators of public hospital performance show that the Tasmanian public hospital system is deteriorating over time and in comparison to other states (albeit the latest data is 2-3 years old). In 2001-02 Tasmania had:
  2. The least number of public beds per capita compared to other states despite having the second oldest population
  3. The lowest number of public hospital admissions (per 1000 of weighted population)
  4. The worst performance for elective surgery admissions within the clinically accepted timeframe (dropping from 75% in 1998-99 to 59% in 2002-03)
  5. The worst median waiting time for a total hip replacement (264 days compared to a national average of 96 days[5])
  1. Why, when we are spending $18 billion per annum on our public hospital system does it continually fall short of community expectations? The answer is a combination of factors.
    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, therewas a further abandonment of private health cover and a further rise in demands on the publicsystem”[6].
    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.[7]
    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”[8]
    Our public hospital system is caught in a double whammy. Any improvements in productivity will be swamped by increasing demand whilegovernmentfunding 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 realitieswe 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 systemby funding its patients so that public hospitals can provide care and not ration it,we will start to see our once great public hospitalsrise again. Tasmanian public hospitals will then enjoy a more positive future.

Michael Wertheimer, FRACS,

24November 2004

OBSERVATIONS

The Richardson Report

  1. On 14th May 2004Professor Jeff Richardson submitted a report to the Honourable David Llewellyn MHA, Minister for Health and Human Services, Parliament of Tasmania
  2. The report was entitled, “The TasmanianHospital System: Reforms for the 21st Century”.
  3. The report states that it is a result of a comprehensive process of consultation with members of the Tasmanian community submitted by an Expert Advisory Group.
  4. The report is labelled “A Review of Key Issues for Public and PrivateHospitals in Tasmania”.
  5. The report states that questions of “the level of funding” is“outside the terms of reference of the present inquiry”[9] but acknowledges “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.[10]”
  6. The report acknowledges the cynicism of participants to the community consultation, “There was a belief that this report, like others before it, would be ‘put on the shelf and forgotten’ with little or no concrete results.[11]”
  7. The report acknowledges 32 confounding factors, “that have arisen to impact on the development of this report[12]”. These factors are as follows:

• Aged Care Funding Shortage

• Aged Care Patients in Acute Care Beds

• Ambulance Funding Shortage

• Changes to Medicare Funding

• Education and Training Improvements

• Elective Surgery Waiting Lists

• Gastroenteritis outbreak (in hospitals and residential aged care)

• GP Shortages

• HealthConnect Trial

• Hospital Ownership Changes

• Hospitals Review Process

• Increase in Chronic Diseases

• LGH Cardiology Specialist Shortage

• LGH CEO Quits

• LGH Renal Specialist Shortage

• LGH Vascular Surgery Specialist Shortage

• Medical Indemnity Crisis

• MedicareBulkBillingFalls

• Mental Health Service Shortage

• New Equipment (various)

• New Treatments/Technological Advances (various)

  • North WestHospital Service Changes

• Nurse shortages

• Nurse Wage Demands

• NWRH Nurses Threaten Industrial Action

• Private Health Insurance Cost Increases

• Residential Aged Care Funding

• Re-Using Old LGH and BurnieHospital Sites

• RHH Nurses Threaten Industrial Action

• RHH Radiation Oncology Service Shortages

• Tasmania’s Ageing Population

• West CoastHospital Service Changes

The Richardson Report emphasised the Vascular Surgery specialist shortage and the movement of MCH (MerseyCommunityHospital) to State Government control as providing a changing policy background to this review.

  1. The report lists a number of recommendations for changes to the Tasmanian hospital system including:
  2. implementing the “concept of the dedicated service centre”;
  3. creating centres with a critical mass;
  4. consolidating public hospital services into a single site in Northwest Tasmania;
  5. drawing upon partnerships across the public and private sector;
  6. supplying increased levels of Healthcare support;
  7. increasing the capacity of other sections of the service system to provide alternative forms of aged care;
  8. work to increase linkages across existing services;
  9. expand technology, partnership within dedicated service centre framework;
  10. develop policies that enable equipment sharing across the private and public sector;
  11. develop state-wide approach to the effective purchasing of equipment and technology;
  12. devolve human resource management to individual hospitals
  13. explore different models of professional education across all sectors
  14. The report states that Tasmania’s hospital system has 1,223 acute and other beds but acknowledges “The actual number of available beds also changes on a daily basis, depending on other factors such as staff availability[13]”.
  15. The report also acknowledges that “more patients are treated on a same day basis and the distinction between admitted and non-admitted patients has become less clear cut[14]”.
    The TasmanianPublicHospital System
  16. According to “The State of Our Public Hospitals, June 2004 Report[15]” compiled by The Federal Department of Health and Ageing, Tasmania has the least number of public beds per capita when compared to weighted population. Public beds per 1000 of weighted population 2001-02 were: NT 3.76; SA 2.74; WA 2.58; QLD 2.54; NSW 2.37; ACT 2.32; VIC 2.26; TAS 2.10
    National Average: 2.43
  17. According to the same report, (see 11) Tasmania had the lowest number of public hospital admissions per 1000 of weighted population 2002-03. The admissions were as follows:
    NT 354; ACT 230; VIC 225; SA 220; WA 193; NSW 192; QLD 190; TAS 164
    National Average: 204
  18. According to the same report, (see 11) Tasmania had the poorest performance of any state for elective surgery admissions within the clinically appropriate timeframe. The percentage of appropriate admissions in 1998-99 was as follows:
    SA 93%; QLD/NT 92%; VIC 91%; NSW 90%; WA 84%; TAS/ACT 75%
    National Average: 90%
    In 2002-03 the percentage was as follows:
    SA 90%; QLD 89%; VIC 88%; WA 85%; NSW 83%; NT 82%; ACT 73%; TAS 59%
    National Average: 85%
    Hence, not only has Tasmania come last in terms of timely elective surgery admissions in 2 separate surveys, 4 years apart, the position in 2002-03 has sharply deteriorated when compared to 1998-99
    The Royal Hobart Hospital (RHH)
  19. The RHH is Tasmania’s largest general public hospital. It is a tertiary referral centre with a stated capacity of 499 acute beds[16]. It has featured prominently as a hospital under constant strain and requiring extra funding to meet its budget.
  20. It is claimed that up to 200 beds have disappearedfrom RHH over the last decade[17] and that elective surgical patients are regularly cancelled due to lack of surgical beds. This is despite the fact that 65% of surgical admissions to RHH are day surgery cases and hence productivity improvements flowing from less demand on surgical beds have not resulted in more bed availability for those that need it. Beds have declined in absolute terms to a point where there is significant stress on bed availability. Furthermore, administration has increased to fill the vacant space left by declining bed numbers. The cancellation of elective surgery bedsat the last minute, is considered by the staff of RHH to be a major cause of complaint by patientsand a morale lowering wasteful practice[18].
  21. The Richardson Report has recommendation that the RHH become part of a “dedicated service centre” with 2 other public hospitals. Unfortunately the report doesn’t explain why similar concepts have failed elsewhere to achieve significant improvement[19]. This reorganisation envisages patients travelling to one centre whereas at present they are able to access three general hospitals nor does it explain the clinical implications of not having adequate cover for emergency surgery after hours or the fact that as a tertiary hospital the RHH is already a dedicated service centre.
  22. The CEO of the RHH position replaced the previous Medical Superintendent.
  23. It is reported that RHH experiences frequent operating theatre cancellations because of a ban on overtime. The result of this practice is that expensive infrastructure that should be fully utilised is disrupted (poor flow through operating theatres). Furthermore the depletion of experience theatre staff and general nurse shortages has also impacted on the functioning of operating theatres and resulted from frequent cancellations.
  24. It is reported that all theatres at the RHH are being utilised with no vacancy during normal working hours. It is therefore doubtful that increasing the surgical workforce will increase theatrethroughput since there is nowhere for the surgeons to work other than when existing lists are cancelled.
  25. RHH, like other public hospitals has a lower productivity in terms of throughput through operating theatresthan private hospitals. Training of theatre personnel is a function of any public hospital and may impact on speed of throughput. Reluctance to open theatres after hours has put RHH at a severe disadvantage compared to those hospitals which can fund their operating theatre time. Since emergency cases cannot be delayed, elective cases are regularly cancelled at the last minute.
  26. It is unlikely that RHH can expand the number of operating theatres due to current space limitations. Hence any increase in theatre throughput will have to be achieved by opening existing theatres after hours. Without senior clinicians supervising junior doctors after hours operating can lose efficiency (add to cost). Hence, there is a constant need for RHH to provide conditions and arrangements that keep senior experienced consultants engaged in procedural medicine.
  27. Historically the RHH was administered by a hospital board consisting of a chairman, vice chairman nominated by the Minister, the Dean of the MedicalSchool, representatives of the medical, nursing staff and ancillary staff as well as a community representative. A medical advisory committee and a single accountant administered the budget. The Chairman had direct access to the State Minister for Health and theTasmanian Health Department was rarely involved in the management of the hospital.
  1. The Richardson Report indicates that the current RHH CEO has very little, if any, discretion to administer the hospital. One of the recommendations (Section 5.1, page 51) is that the CEO be given authority to change the hospital’s administration and policies concerning the professional workforce.
  1. The Richardson Report recommends consideration of fee for service as a means of providing incentive for the purpose of improving productivityin clinical work.
  1. On November 23, 2004 the Daily Telegraph reported on the plight of Bankstown Public Hospital in Sydney. It stated that surgeons were only allowed to tread 1 overnight elective surgery patient per week, that patients with ingrown toenails were treated quicker than patients needing gall bladder surgery, that 7 minor procedures were done for every major procedure, that surgical trainees couldn’t get enough surgical time to develop their surgical skills on even routine cases, that vasectomy patients waited six weeks but gall bladder patients waited 18 months, and that 80yr old patients were being sent home on the same day they had surgery to free up beds[20].


PublicHospital Costs

  1. In 2001-02 the average cost foran admitted patient to an Australian public hospital was $3017[21]albeit the cost of a procedure may vary considerably (it is claimed[22] that a low birth weight baby can cost up to $112,000 per separation with same day chemotherapy estimated to cost $700 per separation).
  2. According to Australia Institute of Health & Welfare (AIHW) the costs of treating a patient in a public hospital was broken up as follows: Nursing 29%, Medical 20%, other staff 15%, other 15%, diagnostic 8%, supplies 8%; Drugs 5%[23].
  3. Approximately $18 billion in taxpayer’s money is being spent on public hospitals in 2004. This equates to approximately $900 for every man, woman and child in Australia[24] or $1,700 for every Australian without private health insurance[25] or $350,000 for every public hospital bed per annum.[26] or $4,535.94 per public hospital separation.[27]
  4. A senior surgeon at a major teaching hospital in Brisbane asserts that only 25% of the hospital’s budget is provided for surgical procedures.
  5. The authors of this report have had considerable difficulty obtaining specific information about public hospital costs and note Categories (in point 27) such as 15% other and 15% other staff – it is not known what percentage of medical costs is attributed to Visiting Medical Officers but given sessional rates in most states the percentage is not considered to be significant.

Cost Shifting

  1. This activity has now become a major pre-occupation and skill of public hospital CEOs across Australia. There are two main strategies. Privatised out-patient clinics where all patients are billed to the Commonwealth Medical Medicare (administered by the Health Insurance Commission, HIC) program and the “Twister” where patients are introduced into the hospital as self-insured (hence covering some of their costs and being subsidised for others), i.e. partly public or an “intermediate” patient. The Central Sydney Health Service (CSHS) is reported to operate a scheme which charges $270 per patient bed day being met by the patient. The doctors’ fee is paid by the patient and the patient claims back a rebate from medical Medicare. All other costs are met by the public hospital from HospitalMedicare (funded by State governments from consolidated revenue and the Federal Governmentunder The Australian Hospital Care Agreement, AHCA).