Andrew Laming (Bowman, Liberal Party, Shadow Parliamentary Secretary for Regional Health Services and Indigenous Health) Share this | Link to this | Hansard source

In the time allowed this evening I would like to make some observations about a bill that has the support of the coalition but, within that, we have a significant number of concerns about a government that has been fixated on creating new bureaucracies and authorities and at the same time has not been engaging in the difficult, grafting, adaptive work that is required to keep a health system running efficiently and effectively.

Around the world governments are focusing on quality and access in health care, and an authority is not a new conception—already, northern European economies have moved in that direction, partly driven by the need to depoliticise a lot of decisions around health care. I think here in Canberra we accept that state jurisdictions are often faced with those impossible asks of delivering perfect care every second of every day all year, and complaints can rapidly find themselves in the mainstream press with a demand for 'action' by ministers. The result has been a larger and larger bureaucracy in the main, asking more people who are not clinicians to constantly be taking a risk-averse approach to make sure 'that never happens again'. So the health authority is an effort to move away from that and to focus purely on quality of delivery. It has been a preoccupation for Western and leading health economies, and behind that has been a shift away from the global or envelope budget for health services towards activity based funding.

Here in Australia we have the Australian refined diagnostic groups—an effort to identify, both with day surgery admissions and even presentations to casualty, a way of paying for great outcomes. That means that if patients are seen and treated properly and if adverse outcomes like readmission to hospital, hospital infection rates or other detrimental outcomes occur, payments are balanced accordingly. We are trying to unshackle clinicians who are at the face of service provision so as to be able to use their ingenuity, skill and training to deliver world-class care. The alternatives, of course, are those risk-averse bean counters who are fearful of trading beyond the funding envelope and will do everything possible to make sure that no risks are taken and nothing new is tried. Somewhere in the middle is the challenge that all of us face.

I have said before that we have large public hospitals that are publicly owned, that are taxpayer funded, that are capacity constrained, and the faster they work the quicker they go broke. That is completely different to the private system where, in a world of item numbers, the faster you work the richer you get. In Australia, with these two impressive elements to the health system, we have to find a way where we do not have cost shifting or gaps left behind. The answer there is to look at those elements—and mental health is one of them—where there is inadequate compensation, to look at areas where the workforce is inadequate, and to address them. That has been a focus of exquisite attention for both sides of this House.

But at the moment the preoccupation is to establish new bureaucracies at exactly the same time that we are not doing what we need to do in basic clinical care. So clinicians are not having their creativity unshackled in hospitals; there has not been a move to genuine hospital boards that are staffed by clinical experts in their fields; and the move to health and hospital reform at state level is—dare I say it—a battered, pale, almost withered form of what was originally posed by this government just three years ago. The reality of getting it through the states means that what we have are three new authorities, each of them in the vicinity of $50 million a year to run, when many of these decisions are quite easily made and are already being made in jurisdictions. Congratulations to South Australia and to the Victorian government, who already predominantly use activity based funding to run their health systems. In fact, all jurisdictions have an element of it, and there is no problem with bringing it together into a federal approach, but the enormous cost that is being incurred by this government in the absence of any other reform is of incredible concern. My comments tonight will focus around cost shifting and cross-border concerns. That is where we see irrational, perverse behaviour by states in response to a very attractive Commonwealth-funded private system that operates in parallel. The great concern of cost shifting is no better seen than in large hospitals that operate with large, coexisting private service providers nearby. We know well that public patients are funnelled across into the private system to take the burden off a public hospital. But when you look at the legislation for this authority, it is almost silent on what can be done apart from noting it, apart from writing a report to the relevant health ministers. The great fear here is that many of these reports are not even made public. You would think there would be enormous public interest in releasing the findings of the independent pricing authority for public viewing. There is potentially some fear of telling the truth—I can understand that may exist in health—but our health system can only benefit by revealing true performance, by being honest about what can be done and what cannot be done well.

In my capacity of looking after rural health, there is no greater and no more acute debate than what can be done in a small hospital, sometimes with a shrinking population or sometimes unable to attract the medical and clinical workforce it needs for a young population that may be moving to the area for mining or agriculture or other enterprises. Queensland is a great example of that. The challenge that we have now—and I raise this because of its relevance to pricing—is that we have had a proud tradition of public and private health operating together. We have accepted that in the public system you may wait a little longer for that dicky knee to be repaired or a little longer for that cataract to be operated upon, but we know when it is done, it is done by the best hands in the land.

The problem or the dilemma we face now is that it is not in the quality of the treatment, but in the availability of the investigations that is holding us back. If you live in a regional city like Rockhampton, Bundaberg or Gladstone and you need a gastroscopy—let us use Bundaberg as an example—you are dutifully as a public patient placed on a waiting list for a two-monthly visit from Brisbane. You may have gastric bleeding and the risk of a cancer, but you will sit on that waiting list. Everything is booked out for two months, and you are lucky if you get on in four months, but more likely six months for that gastroscopy. For all the recordings that are performed by health systems, that is simply a person who has fulminant and metastatic cancer six months later when they finally get their gastroscope. They could have had the investigation six months ago and been treated, but instead they are picked up as a cancer patient and treated just the same as a private patient. It is true they get the same treatment, but the delay in the treatment cost them their life. We do not measure that; we simply measure that someone got a scope and had severe cancer and weeks later received the treatment. We forget the fact that in the private sector they get that scope the following day. They do not even get to that level of metastatic spread; they do not even get to that stage of disease because they are getting immediate access to investigations.

There is the same irrational approach with MRI scans. One single MRI certificate, one single licence, serves three major cities in Queensland. The MRI is in the back of a semitrailer. It spends four days every fortnight in one of those three cities. Here is a private hospital willing to invest in an MRI for this city. What are they told? 'You have to decommission that MRI and not use it for those four days. Transfer the licence across to this MRI that has been put in by the private sector and then let the mobile MRI sit in the dust for four days or let people pay full price to use it.'

These are the elements that we need a government addressing right now, not years away, not back-patting and congratulating themselves for yet another $50 million a year bureaucracy. That is fine, but you simply cannot forfeit the work that has to be done in the areas that could potentially save lives. In bowel cancer screening there should never have been an interruption to that wonderful program, but under this government there was at the start of this year. The program ceased early with no commitment to ongoing funding, and a world-class bowel screening process was held hostage for months in some weird budgetary process. We had to wait until there was a better understanding of where the budget would lie before we could continue bowel cancer screening for Australians.

Cross-border disputes is an area where states can sometimes act irrationally, particularly in mid- to small-size states that do not have the complete array of surgical options available in the capital cities. Tasmania is a good example, but even my state of Queensland, hard as it is to believe, does not have every subspecialist surgeon known to mankind able to do operations with the most recent training from major centres like the US and Europe. Those great surgeons may be in Sydney. Is there a way we can work together as a nation to see that someone is not disadvantaged because of their postcode? Someone who happens to have a four at the front of their postcode cannot see that surgeon who operates publicly at the Prince of Wales Hospital in Sydney. It should be easy: you should put that person on a Sydney list and Queensland Health should simply compensate New South Wales.

The complexity is byzantine. The delays are extraordinary. One constituent from my electorate had to wait more than three months with a progressive vascular disease of the brain, simply because Queensland Health could not bring itself to arrange the transfer. No-one here would support that delay; everyone would want to see a solution. There is nothing convincing in this legislation that tells me this will be fixed. My great concern is the government—with respect, you do not need advice from me—has too much faith and too much trust in bigger and bigger bureaucracies and it is not unlocking the creativity and possibilities within health systems. It needs to unshackle those who know how to run services better and that is going to require a whole lot of political creativity to get accessibility, availability, efficiency and, most importantly of all, quality right. You just need to walk into a public hospital to see how it works. There are plenty of visiting surgeons giving their time—often for fairly low pay, certainly less than it costs to run their private practice—to teach in public hospitals. To all of them we take off our hats. We take off our hats to all of those who work in outpatients and continue those services. The great problem is that part of that honorary role, part of the MO contract, is teaching, research, service development and training. It is very hard to price. Do you want to pay a specialist to see 20 patients and do no teaching or 15 and bring on the new cadre of surgeons and specialists?

Of course we need both. But there are very limited ways to price this in to a system that relies on the cost of doing business two years ago—because that is the most recent health data available. We have an uplift for inflation, we have a slight reduction for efficiency measures, and then we have a market-forces factor where we correct for geographic variations where markets mean that input prices may be slightly different. But, after that, it just requires clinical acumen to work out in an economic sense what the prices are for a range of inputs.

I hope I have outlined what the pricing authority would do. It has already been happening in most jurisdictions for nearly 10 years, but we are yet to move to an element of free pricing where markets can set their own prices for medical services. That is the next great step and the next great reform in this area.

Geoff Lyons (Bass, Australian Labor Party) Share this | Link to this | Hansard source

The member for Bowman obviously knows a fair bit about health, but he has a short memory. I was there when the former Prime Minister took over Mersey. It was great theatre and very bad for health. There have been lots of others that I can talk about as well. If the opposition were so good at it, why didn't they get it right in their time?

I would like to add my comments to the debate on the National Health Reform Amendment (Independent Hospital Pricing Authority) Bill 2011. Australia has a good health system but we do need to prepare for the challenges of the future. Having looked at hospitals in other countries, I can say that we do have a good hospital system. There are increased demands on our health and aged-care system due to new treatments becoming available, an ageing population, increased rates of chronic and preventable disease and rising healthcare costs. And, as I have said in this place many times before, the only certainty in health is change. The Gillard Labor government is reforming health in Australia. We are creating more beds, reducing waste and aiming for transparency. This bill is an important part of our health agenda.

The Independent Hospital Pricing Authority, IHPA, is an important element of the National Health Reform Agreement, which provides for Commonwealth payments to the states for public hospital services to be based on a national efficient price calculated by the pricing authority. And the authority will take into account the cost of training and the cost of different goods across state borders.

The bill specifies that the functions of the pricing authority are, among other things, to determine the national efficient price for healthcare services provided by public hospitals, develop and maintain costing and classification specifications, determine data standards and requirements for public hospital data to be provided by states and territories, and provide assessments or recommendations in relation to cost-shifting and cross-border disputes. The pricing authority will also be required to publish information for the purpose of informing decision makers in relation to the funding of public hospitals, subject to certain restrictions.

In reaching agreement with all Australian states and territories on 2 August this year, the Australian government showed its commitment to meet the healthcare needs of Australians and to work with the states and territories to deliver a better deal for patients. A key part of the agreement is the introduction of activity based funding. The new independent umpire, the IHPA, will set the efficient price and advise governments on the implementation of this measure across Australian hospitals. The introduction of activity based funding was a key recommendation of the National Health and Hospitals Reform Commission's report.

Activity based funding will be introduced from 1 July 2012. From 1 July 2014 the Commonwealth will pay 45 per cent of the efficient cost of growth in hospital costs, and from 1 July 2017 this will increase to 50 per cent. In total the Commonwealth is investing an additional $19.8 billion in hospital services over this decade. This is a big reform and is a fairer system that will end cost shifting and the blame game. As a previous hospital administrator, I can tell you this is a move in the right direction. The IHPA will take submissions and engage in detailed technical work with clinicians in the setting of the efficient price for services funding by both activity based funding and block funding. Factors will include reasonable access, clinical safety, fiscal issues and efficiency. I am confident this will be a thorough process.

The main purpose of the pricing authority is to promote improved efficiency in, and access to, public hospital services by providing independent advice to governments in relation to the efficient costs of such services, as well as developing and implementing robust systems to support activity based funding for such services. Activity based funding will help to increase the efficiency and transparency of public hospital funding. This is a big departure from the current arrangements where the Commonwealth provides public hospitals with block grants through states and territories, which are not tied to the provision of services. These changes are good news for Australians using the public hospital system.

As I mentioned earlier, change is the only constant in health. These reforms will help to ensure that hospital financing can dynamically adjust to shifting populations, local demographic characteristics, changing costs of delivering medical services from technological and clinical innovation, and the complexity and location of delivering hospital services. As I have said several times in this House, diseases and cures can overcome our planning, but at least paying for services on a case basis is a sensible way of funding.

I wish to note that small regional and rural hospitals are protected under the new financing arrangements through the use of block funding where activity based funding would not be appropriate and to ensure that small rural and regional hospitals are funded to deliver on community service obligations.

As stated in the memorandum, the authority will have nine members, including the chair and deputy chair, with the chair being appointed by the Commonwealth, and the deputy chair appointed with the agreement of the states and territories. The remaining seven authority members are to be appointed with the agreement of the Commonwealth, states and territories. The National Rural Health Alliance in their submission to the Senate committee welcomed the requirement that the board include at least one person with substantial experience or knowledge and significant standing in regional or rural health care, as we know full well that providing some services in rural and remote areas costs more. A clinical advisory committee and jurisdictional advisory committee will also be established to the support the pricing authority in undertaking its operations. Dr Tony Sherbon has been appointed as the Acting Chief Executive Officer of the Interim Independent Hospital Pricing Authority. Dr Sherbon has skills as a senior administrator and doctor and has experience in implementing structural change, the establishment of clinical structures and the design of new public health plans and strategies as a past chairman of the Australian Health Ministers Advisory Council. I am sure he will be an asset in this role.

The new national health and hospitals network agreement combines reforms to the financing of the Australian health and hospital system with major changes to the governance arrangements between the Commonwealth and the states and territories to deliver better health and hospital services. The changes to the funding arrangements will provide a secure funding base for health and hospital services in the future. The new governance arrangements will improve the responsiveness of the system to meet local needs, enhance the quality of services and allow greater transparency. This is a major microeconomic reform that will help to increase the efficiency of services because the introduction of price signals will mean there is an incentive for hospitals to maximise the services they deliver at or below the efficient price. This is good reform and will ensure that more services can be delivered locally. It will also be important for growing areas of Australia where often under the old system public hospital funding did not catch up with the demands that they have.

These reforms are also vital as it is important for taxpayers that their funding is transparently reported, with funding according to services provided paid directly to local hospital networks through the national funding pool. This means Australians will know what is being bought through our massive investment in hospitals—what services are delivered, by which local hospital network they are delivered and at what cost. Australians should have this information so they are confident that the money is being spent where it is needed most. Importantly, this reform will also help to identify underperforming hospitals so that those cases can be remedied and the lessons of highly performing hospitals can be shared.

The Gillard Labor government has a strong agenda for health. Everyone, no matter where they live, deserves access to first-class health care close to home. That is why we have ended the blame game through the national agreement to boost hospital funding, increase local control and expand primary and aged-care services Australia wide. I was in Tasmania when the Liberals sacked the local hospital boards. I was also there when the Liberals sacked the regional boards. I note now that in Tasmania they have a policy to bring back the regional boards after having sacked them.

This means more money, more beds and less waste in public hospitals with less bureaucracy. Hospitals will become more accountable and the doctors and the community will get more say. Plus there will be extra support for GPs and aged-care providers nationwide. Because this is a national deal, every Australian will benefit no matter where they live. Labor do have a proud record on health. In the last four years public hospital funding has gone up 50 per cent. We have tripled mental health funding, delivered 5,500 more GPs and 680 more specialists, and enacted the world's toughest anti-smoking laws.

The Liberal's 10-year record is dim. Out-of-pocket health expenses went up 50 per cent, $1 billion was ripped out of hospitals, and doctor shortages affected six in 10 Australians. I remember when the money was slashed from nurse and doctor training by the minister. Of course, I remember the great feature of the former Prime Minister taking over the Mersey hospital, which did not allow for sensible administration of health in Tasmania.

We had a mess to clean up, but I am proud to say that our national health reform is already delivering for patients. The after-hours GP advice line handled 10,000 calls in its first month of service. New telehealth services are available through Medicare for the first time. We have seen the establishment of the first 19 Medicare Locals to better coordinate frontline healthcare services and education in local communities. Projects to provide more beds have commenced in a range of public hospitals, including the great Launceston General Hospital.

A national efficient price for hospital services so hospitals are funded at a fair level for each service they deliver is vital for the future. This is very important legislation. I hope for the sake of the millions of Australians who rely on public hospital services that this legislation is passed without amendment. Patients, doctors and nurses have been waiting too long for the efficiency, transparency and proper funding that this bill will help to deliver. Our agenda is not over yet.

The finalised plans for Australia's secure, efficient e-health system were released by the government on 12 September. The concept of operations for the personally controlled electronic health record, PCEHR, system is a fundamental part of the move from paper based records to secure e-records. Patients will no longer have to remember every medical test, immunisation or prescription they have had. Doctors and other healthcare professionals will no longer have to rely on patients to accurately recall past treatment. This will enable doctors and patients to work together more easily to provide better care and treatment.

We are a government that is delivering on health. The Consumers Health Forum noted in their submission to the Senate Finance and Public Administration Legislation Committee inquiry into this bill:

CHF welcomes the establishment of the Independent Hospital Pricing Authority, as we anticipate that it should result in the introduction of improved transparency and efficiency in the pricing of hospital services.

The Australian Medical Association also noted that they are generally supportive of the bill.

This is a much needed reform that will result in better hospital administration and in effect better outcomes for patients. Paying buckets of money to hospitals does not encourage an efficient service. Hospitals should be paid for what they do, not just given a bucket of money and told to make it work. There should be an incentive for increased activity. I know that the only way to save money in health is to do it right and do it early. I commend this independent hospital pricing authority bill to the House. I implore those on the other side of this House to get on board with these sensible and important reforms of the Gillard Labor government.

Nola Marino (Forrest, Liberal Party) Share this | Link to this | Hansard source

I rise to speak on the National Health Reform Amendment (Independent Hospital Pricing Authority) Bill 2011. The government's agenda for healthcare reform hinges on the proposition that the government believes that health services can be delivered in a standardised way for a standardised price. At its best, this is supposed to provide a uniform standard of service and outcome for a uniform or at least comparative price. At its worst, it could be a discriminatory funding tool which is unable to recognise practical differences in health service delivery in various geographical, economic and social environments and could lead to a deterioration of the services provided by regional and remote health services and the communities they serve.

These hospitals will be entirely dependent on a decision made by what the government says will be an independent hospital pricing authority as to whether they will qualify for continuing block funding or be subject to activity based funding at a specified level. I have no doubt that there are many hospital administrators who are very concerned about what funding model will be used in their specific case and whether they will receive sufficient funding for the quality and safety of the services they provide. They will also look at the government's national health reform process delivery document and wonder how they will manage the layers and layers of bureaucracy they will have to deal with. They are well aware that the devil will be in the detail that they are yet to see.

The activity based funding concept lies at the heart of the government's proposed partial takeover of health from the states and territories, which may or may not ultimately lead to a more general takeover in the future, something the government originally intended. We do know that the Labor government has not delivered on its fanfare of 2007 election promises. The government promised a magic fix of hospitals by mid-2009 but failed. The government also promised to take over hospitals but has not done so. The government promised that the Commonwealth would be the dominant funder—the promise of 60 per cent Commonwealth funding was later dumped by the minister.

The government's national health reform was, thanks to the actions of state Liberal governments, at least converted from yet another debacle of a federal Labor takeover to some semblance of federal-state partnership. That state Labor leaders were prepared to sell out their constituencies and communities to prop up their federal party was sadly not unexpected, but, at the time, we could even see some Labor premiers choking on the bitter pill fed to them by the Prime Minister—they knew the deal being offered at that time was not in their states' best interests. Led by Western Australia, and joined by Victoria and New South Wales as Labor tumbled in those states and Liberal governments were elected, the states have managed to develop a partnership of sorts. Health consumers in Western Australia were, and remain, sceptical that a Canberra based, top-down bureaucratic maze of administration will be capable of running hospitals from a distance of 3,000 or 4,000 kilometres. I am sceptical that the government's proposal for a centralised Canberra health administration to be responsible for the day-to-day operations of hospitals would ultimately have been anything short of a disaster for regional Western Australian health services. As we know, a government responsible for pink-batt fires in people's roofs and cash for clunkers actually running hospitals is the stuff of medical nightmares.

A real partnership with states is a better alternative by far. This current proposal by the government will be heavily reliant on the Independent Hospital Pricing Authority, the body that will compare the cost of service provision across states and territories and set standardised funding models. The functions of the Independent Hospital Pricing Authority include the following: determining the national efficient price for healthcare services provided by public hospitals where the services are funded on an activity basis; determining the efficient cost for healthcare services provided by public hospitals where the services are block funded; developing and specifying classification systems for health care and other services provided by public hospitals; determining adjustments to the national efficient price; determining data requirements and data standards in relation to data that is to be provided by states and territories; determining public hospital functions that are to be funded in the state or territory by the Commonwealth—except where otherwise agreed between the Commonwealth and a state or territory; advising the Commonwealth, the states and the territories in relation to funding models for hospitals and costs of providing healthcare services in the future; considering cost-shifting and cross-border disputes; and doing anything incidental to or conducive to the performance of any of its functions.

Given this government's poor policy performance, some of these deserve much closer examination. The setting of a national efficient price for any health service will have to ensure that it does not disadvantage one section of the community over another, whether that is through block or activity funding. The cost of a particular service varies considerably, and it might surprise some members to know that generally neither the largest nor the smallest health service providers are the most efficient. Large tertiary hospitals are geared up for highly complex cases and can struggle to efficiently deal with less complex ones, whereas small regional hospitals can struggle to gain economies of scale.

The cost of providing a similar service in such a range of settings can, and will, continue to vary significantly. This will make the setting of standard pricing a difficult process. Although activity funding has some obvious financial advantages and is favourably mentioned, especially in Victoria, it does have a number of drawbacks. There is always a minimum base, or 'block', of funding which is not case load dependent as it is needed to underpin the running of a health service. This base funding covers administration, building and maintenance, and support services, and much of it is not reflective of hospital patient or clinical activity.

It is for this reason that hospitals are funded on a historical basis rather than an activity basis, and block funding is often the alternative name for historical funding rather than a calculated expected cost of base funding needed. For example, the cost of running a small country hospital in Western Australia may be a little over $1 million per annum whether that hospital has a bed average of two or 10. This can be because to be considered a hospital as opposed to a nursing post a certain minimum capacity needs to be maintained, such as a 2:2:2 nurse roster and cleaning and catering services. These costs exist before a single patient arrives. It is not just small hospitals or health services that face this issue. The provision of a specialist service in a tertiary teaching hospital also has to maintain a minimum capacity, even without high patient loads. There have been examples around the world of specialist units struggling to find adequate case loads to justify their existence. It is a major issue in regional communities to rationalise services, especially clinical services, whether that is the cutting of a specialist service in a tertiary hospital or the downgrading of a regional hospital to a nursing post. Therefore, the solution to this is usually to incorporate a mixture of block and activity funding in broader funding models, and generally this can provide a reasonable outcome. The block funding component is usually not that difficult to determine but will most frequently relate directly to historical funding for practical reasons.

The key for the Independent Hospital Pricing Authority will be to determine the cost variance of actual activity in different settings and make a determination on how much of that variance is actually reasonable. Hospitals will be funded according to the level of activity, the level of complexity and the cost of the service that they are providing. I will watch these decisions and the process quite closely. I hope in striving to deliver designated activity based funding services defined by the IHPA that hospitals are not forced to take shortcuts that lead to a reduction in frontline services and safety for patients—something that is particularly critical in regional, rural and remote areas, as you would understand, Mr Deputy Speaker Scott.

Hospitals will need to be able measure quality outcomes in a wide complexity of individual circumstances. I urge the minister to consider carefully the make-up of the authority in consideration of this point. We have heard about some of the appointments. There will need to be a balance of those with a thorough understanding of the needs of regional, rural and remote health services in particular with those with the capacity to set and enforce efficiency. Health experts have warned about their concerns with activity based funding and the need for an achievable time frame in relation to the delivery of this.

In relation to another function of the authority, that of determining public hospital functions that are to be funded in the state or territory by the Commonwealth, as a general rule of thumb the Commonwealth is responsible for primary care at the doctor and the chemist and for aged accommodation. The states are primarily responsible for hospitals. The state government in Western Australia, for example, is investing significantly in the Harvey Hospital in my electorate and has plans to completely rebuild the Busselton Hospital at a cost of well over $100,000 million. Millions have been invested in the Bunbury Health Campus. These investments are necessary to meet the key health needs of a dynamic and rapidly growing region.

We need the Commonwealth to perform its existing defined role in the provision of aged accommodation. Country hospitals around Australia are housing aged-care patients who cannot get into Commonwealth funded aged-care homes. Some are expected to move far away from family and friends to find a federally funded bed, and for some in particular regional areas there are no beds at all. The government needs to take this obligation seriously and fund aged-care providers sufficiently to make those beds available. Around the country, thousands of apparently 'funded' beds have not been taken up by service providers because federal funding is not sufficient. Providers are often losing money on the beds they do take up. This inequity is impacting on ageing Australians and their families all over the nation. We need the government to get this program, which it is in charge of, right. So much of what is in this bill comes down to trust. Can we trust the government to get the process right? Unfortunately, on past performance, the evidence does not support that.

Mr Deputy Speaker, I thank you for this opportunity.

Deborah O'Neill (Robertson, Australian Labor Party) Share this | Link to this | Hansard source

I rise to also speak on the National Health Reform Amendment (Independent Hospital Pricing Authority) Bill 2011. Every member of this parliament should feel proud of the Australian healthcare system. Our health workers strive every day to improve their standards in the service of our community. Not only are our hospitals world class but they are staffed by dedicated doctors and nurses who play a vital role in our community, yet it is sadly a fact that they are often underappreciated.

I am profoundly disappointed by the Public Service wage freeze policy promoted by the O'Farrell government in New South Wales. For our health system to remain a world-class system, within the context of a population that is ageing, we should be encouraging people to enter the nursing profession rather than setting up structures that would encourage them to depart and take all that skill, expertise and care with them to other industries. We should be sending the message that our country values its nurses and health professionals, but that is not the sentiment reflected when the state of New South Wales capped the pay increases of nurses at 2.5 per cent.

In contrast, Labor understands the need to care for the caring professions and ensure a fair day's pay for a fair day's work. That is why I am proud, and will always be proud, to be a member of parliament from the Australian Labor Party. As a party, we will always work to ensure that the providers of our essential services are treated in a respectful and dignified manner. I am certainly very proud of our health system and of the services that our hospitals provide, but at this time in our great history as a nation we need to expand our capacity if we are going to effectively meet the challenges of a growing and ageing population. Importantly, these pressures manifest on local and regional levels. In the suburb of Kincumber, located in my electorate of Robertson, according to the 2006 census—which will hopefully be updated very soon with the census data collected this year—25 per cent of the suburb was aged 65 and over. This percentage rate is expected to increase once the baby boomer generation nears retirement. Of course, the ageing population is an issue that has been mentioned countless times in this chamber, and it has been mentioned numerous times by me in my speeches in this place. The ageing of the nation is a sign of success though; I do not want to make it a negative thing. It is a sign of the success of 100 years of very effective and positive health and social policy. We are living longer, and that is a good thing. Despite this, the challenges of providing quality health to an ageing population cannot be ignored; and it certainly requires government action—and now.

Thankfully, this Labor government has decided to act in the long-term interests of the country—once again, the national interest—by undertaking much-needed national health reforms. I am proud to be part of a government that has health reform at the heart of its agenda. The Labor Party is doing what was not done for 11 years under the Liberals. We are bringing transparency and accountability to the health system to ensure it is sustainable as our population ages and comes to retirement.

This bill will introduce the Independent Hospital Pricing Authority, and this body will determine a national efficient price for hospital services. There will be no more blank cheques from governments to hospitals with no follow-up and no accountability. The pricing authority will, amongst other things, determine a national efficient price for healthcare services provided by public hospitals and develop and maintain costing and classification specifications. Importantly, as a measure of transparency accountability, the pricing authority will be required to publish these decisions. There will be no more hiding; everything will be on show for the Australian public to see. The effective allocation of health care services, rather than simply a historical allocation of services, in a national economy requires that appropriate and effective mechanisms are put in place to make sure the most fair, the most appropriate and the most transparent pricing policies are what is actually implemented.

The establishment of the Independent Hospital Pricing Authority has been necessitated by the Commonwealth-state agreement to implement Commonwealth activity based funding. A move to activity based funding is a reform that only a Labor government could make; it is a reform that is needed to make sure we meet our future healthcare demands. This legislation is evidence of Labor getting on with the task of governing well, and it marks a real change from the Howard era, when blame shifting between federal and state governments was developed to the level of an art form.

The Gillard government has taken responsibility and sought to revolutionise the healthcare system. We have committed money and care, increasing Commonwealth responsibility and enabling us to work towards maintaining and advancing our world-class national healthcare system. Activity-based funding will help achieve this target by increasing the efficiency of public hospital funding. It is distinct from the current system, where the Commonwealth provides public hospitals with block grants from the states and territories, which are not tied to the provision of services. We have heard members on the other side wax lyrical about what a great system the current system is, yet for hospitals in regions such as mine, where we have had incredible population growth, the maintenance of historical sources of funding is an inefficient and ineffective way of responding to the reality of shifting demographics and shifting needs. As well, there is a cost in shifting a clinical practice and in changes for practitioners in the field.

Every dollar that is wasted in our health system is a dollar that could have been directed to improving health and improving lives. For the people of Robertson, my eyes are firmly focused on achieving that task locally. Efficiency in funding is vitally important and it is a vital reason as to why I strongly support this bill. I have to say that many of the practitioners in my area have spoken with great optimism about the positive change that this funding model change will make to their practice in our community.

A truly national healthcare system requires appropriate Commonwealth governance, and this is what the Gillard government will provide. The pricing authority is an essential component in ensuring that the development of an activity based funding model leads to real reform in the healthcare system. The pricing authority is independent; it is an independent statutory authority. In essence, it acts almost like a Reserve Bank for the public hospital system. It will provide advice to state and territory governments, it will be free of political pressure, and it will be advising about the efficient price for a particular procedure or range of procedures or for a particular operation or a number of operations provided in a public hospital.

This independent advice will also enable the development of robust systems to support activity based funding for these much-needed services. Really, this is what people expect, and it is certainly what the healthcare system needs—clear, transparent and accountable funding decision-making. No funding should be made in order to score cheap political points, yet that is what we saw time and again under the leadership of John Howard and those who are now sitting opposite in prominent positions, where the scoring of cheap political points seems to be a game that is being played out at the cost of the nation.

In relation to its management of public hospital funding, the pricing authority will take submissions and engage in detailed technical work with clinicians in the setting of efficient prices for services funded by both activity based funding and block funding. The factors that the pricing authority is going to take into account include reasonable access, clinical safety, fiscal issues and, of course, efficiency. As stated, a purpose of this bill, in addition to the entirety of the Gillard government's National Health Reform Program, was to best ensure that our health system can cope with the pressures of an ageing population and our changing demographic overall.

An independent pricing authority is, however, just one of the planks in a broader reform agenda. We will also see a national health funding pool to replace the current inefficient funding system. The funding pool will bring state and federal health funding together into one source. This will ensure that both levels of government are always aware of where health funding is spent, and every health dollar will be spent and accounted for. The funding pool will be run by an administrator and it will be paid directly to the local health networks. This will ensure that records are able to be kept for every expense and that a fair national price is paid for each activity.

I am happy that the Central Coast finally has its own dedicated health region. With a population of almost 300,000, we are as large as Canberra but far less well-resourced; we certainly are not a beneficiary of historical block funding. I expect that services on the coast will significantly improve for my community under this Labor reform. Equity of service and equity of funding will be provided like never before through greater local responsiveness. Being lumped in with North Sydney, as we were, did no favours to either of the regions for the provision of health services. I am glad that Central Coast locals will be saying where the money will be going on the Central Coast.

We in Robertson were gifted with some wonderful news from Minister Roxon recently. The Woy Woy Hospital rehabilitation facility has been revived by the Labor government's investment of $12.7 million and $9 million over the next two years of forward estimates to make sure that this much loved health service will mean that locals on the peninsula will be able to stay close to friends and family while they are receiving ongoing care in recovery. This government is clearly dedicated to providing more assistance to primary health care and, through the provision of additional subacute beds to Woy Woy Hospital to assist individuals, we are making this idea a reality. It is not a blank cheque, however, for state governments. The beds that have been allocated will be assessed and monitored to ensure that funding is being directed to the most effective care. By increasing the number of subacute beds, emergency departments across the country will be able to deal most effectively with the people that are in need of immediate care.

We are taking the necessary steps that state governments failed to take in order to bring efficiency and accountability to our health system and improve the health outcomes for all Australians. This policy enacted in legislation acknowledges that, while a national system of public hospital funding is needed, local factors always need to be taken into account. I regard this as a vital consideration because the local health needs of my electorate of Robertson differ substantially from those of electorates in other parts of the nation.

This reform and the establishment of the pricing authority will help ensure that hospital funding can dynamically adjust to shifting populations, to local demographic characteristics, to the changing costs of delivering medical services from technological and clinical innovation, as well as adjust to the complexity and location of delivering hospital services. Importantly, this policy takes account of the fact that activity-based funding is not appropriate for small regional and rural hospitals. It will be adjusted to fit the context. Such hospitals will be funded by block funding to help them ensure they deliver on community service obligations

As a member of parliament for the Australian Labor Party, I am proud to be part of a government that has made the hard decision to embark on significant health reform. It is not reform for the sake of reform, but reform that is clearly directed to better ensure that we meet the challenges of providing for all Australians with access to a world-class healthcare system wherever they are. It is a reform that will work to ensure that money allocated by the Commonwealth on the basis of activity will be efficiently spent in the nation's public hospitals. Importantly, the Commonwealth's commitment to activity-based funding provides a greater incentive for investment in primary care services. That has to be good for all of us and for our communities. Because the Central Coast is a retirement destination, primary care really has a vital role in addressing healthcare needs early without visits to hospitals being necessary. For these and so many other wonderful reasons that will improve our health outcomes in this country, I commend the bill to the House and I urge its prompt passage through the parliament.

Louise Markus (Macquarie, Liberal Party) Share this | Link to this | Hansard source

Government has an obligation to ensure that the health services it provides are relevant and effective for patients. Government has an obligation to provide quality health services while also achieving value for taxpayers' dollars. Today we address an amendment to the National Health Reform Act 2011. The National Health Reform Amendment (Independent Hospital Pricing Authority) Bill 2011 seeks to establish a new authority, the Independent Hospital Pricing Authority, the third and final statutory authority committed to under the then Rudd Labor government health reforms.

The main objective of the Independent Hospital Pricing Authority is to promote improved efficiency in, and access to, public hospital services by providing independent advice to the Commonwealth, state and territory governments in relation to the efficient costs of services and developing and implementing systems to support activity-based funding for those services—in other words, to deliver value for money in the provision of health services. At first glance this is a commendable objective. However, as we have come to expect from this incompetent Labor government—a government more skilled in spin than substance—the legislation is long on rhetoric but short on detail.

The people of Macquarie—a vast electorate that spans both the Hawkesbury and the Blue Mountains in Greater Western Sydney—are fortunate to have the services of many hospitals: the Blue Mountains District Anzac Memorial Hospital at Katoomba and Springwood Hospital, in addition to St John of God Hospital at North Richmond and the Hawkesbury District Health Service at Windsor.

There are some serious flaws in this legislation that may prove more of a hindrance than a help, particularly for the delivery of health services to the people of Macquarie. The first is that the pricing authority is supposed to be established and operating by July 2012 with the main functions being, firstly, to determine the national efficient pricing for healthcare services provided by public hospitals where the services are funded on an activity basis, secondly, to determine the efficient cost of healthcare services provided by public hospitals where the services are block funded and, thirdly, to publish this and other information for the purpose of informing decision makers on the funding of public hospitals. The mechanism for the authority to determine pricing is through the activity based funding, known as ABF. This model relies on a classification system to define and count hospital activity, each patient classified according to their diagnosis, surgical procedure and other data. There are around 670 patient classifications with a different price paid for each one. This funding model is already being used in the private hospital sector and by Medibank. The outcome of the ABF model is to determine the Commonwealth's contribution to hospital funding and there is support for this model which could provide estimated annual savings of between $0.5 and $1.3 billion.

A significant flaw in the legislation is that it does not acknowledge the economic modelling that underpins the differences between private hospitals providing public services, and public hospitals. A submission by Catholic Health Care Australia, a major private/public hospital provider, states that for the bill to be effective it needs to have regard to the unique nature and the slightly different legal status under which public hospital bed services provided by the private sector actually operate. The Hawkesbury Hospital at Windsor operates in this way. It is a private hospital with a private/public arrangement where public patients in the Hawkesbury arrive at the hospital and are treated as public patients.

It appears that only the largest hospitals—a minority of the nation's hospitals—will actually operate under an activity based funding model. I call on the government to clarify what funding models will apply to smaller and regional hospitals and how they will survive if their needs and their circumstances are not considered. Hospitals in my region are entitled to know exactly what it means for them.

There is a great deal of scepticism about the start date, given the enormity of the task ahead in setting an efficient price for every hospital activity across every jurisdiction and then deciding which hospitals will be funded solely by ABF and which will continue to be provided with block funding, and there is cause for the concerns expressed by a number of submissions to the Senate inquiry. All the work of the authority in setting pricing is for 'advice only' to the states and territories, who will still have the power to decide what to pay. This sounds similar to the Petrol Commissioner, Grocery Watch, or Fuel Watch. Are we revisiting these approaches? On the one hand, the authority will provide certainty on pricing, but as the advice is not binding and the states and territories retain their discretionary powers to determine the price paid, uncertainty will prevail and fights about the adequacy of public hospital funding by each level of government will continue.

Another function of the authority will be to investigate cost shifting and cross-border disputes. The authority can report on its website instances of cost-shifting disputes and make recommendations to the minister, but those recommendations are not going to be publicly available. This raises questions of transparency and accountability, especially when the two subcommittees to be established by the Independent Hospital Pricing Authority—the Clinical Advisory Committee and the Jurisdictional Advisory Committee—have limited public reporting requirements. The coalition has been critical of the establishment of subcommittees as there is no formal mechanism in the bill to facilitate cooperation. This could give rise to issues of duplication, or even triplication, with the inevitable consequence of a blowout of costs. Given the government's poor record of managing programs, how likely is it that without formal guidelines this major hospital reform will also end up in a costly, unworkable mess?

I note that in a number of submissions to the inquiry there were questions raised about why the private sector was not consulted. It is essential that the private sector with expertise in activity based funding, governance and nongovernment hospital service provision, be represented on the Independent Hospital Pricing Authority board of management and on its subcommittees.

While the coalition does not oppose this bill, we are sceptical about what it can deliver. When you look at this bill closely, it is more about creating the illusion of reform, because of its lack of detail, guidelines, transparency and accountability. The one thing it does is create another bureaucracy funded to the tune of almost $100 million over the forward estimates and, when fully functional, will have, I understand, a full-time staff of 42 and could cost about $31 million this year. It remains to be seen whether the authority can justify this price tag and deliver real reform, or whether it will be another case of waste and lost opportunity to fund other major issues such as mental health, transport, infrastructure, education and environment.

Stephen Jones (Throsby, Australian Labor Party) Share this | Link to this | Hansard source

Never have so many angry words been said in support of a piece of legislation by those on the other side of the chamber. I am delighted to be speaking on this bill because it is a part of an important package of reforms that the Gillard Labor government has underway.

Since coming to office, this Australian government has been working hard to deliver better health services for the Australian community and to work with the state governments to deliver better hospital services to our community. Most importantly, these changes are benefiting patients right now in hospitals and medical centres around the country including in my electorate, in Throsby in southern New South Wales.

The reforms are significant. In total, the Commonwealth is investing an additional $19.8 billion in hospital services over the decade. This stands in stark contrast to the situation we found ourselves in when we took office in 2007, because it came after a decade of those who sit opposite bleeding the health system of funds—over a billion dollars—that should have been spent on fixing up the mess in our public hospital system and training more doctors and nurses, and we have had to fix this mess up. We now have a truly national health reform agreement with every state and territory government signed on, on board and committed to improving hospital services and health services in our community. We have local hospital networks across four states. We have established new subacute beds opening in every state. We have 19 Medicare locals operating across the country, with more to come in the coming months. I was very pleased that, when the Minister for Health and Ageing visited my electorate and the electorate of my colleague the member for Cunningham this week, she was able to announce that the Illawarra Division Of General Practice had been awarded the contract to operate the Medicare local in our electorates and in our regions. That is great news for the Division Of General Practice and great news for the residents and citizens of the Illawarra.

We have a GP after-hours phone line that has already taken over 41,000 calls, and we are connecting patients in regional and outer-metro areas with medical specialists through telehealth and videoconferencing. I am delighted—probably more delighted than the member for Gilmore, in whose electorate the town of Kiama exists—that it has been selected as one of the trial sites for rolling out the government's new telehealth and videoconferencing facilities. This joins up, of course, with that other great government initiative, the National Broadband Network, to ensure that Australians, wherever they are around the country. Whether they are in Dapto in my electorate, in Kiama in the member for Gilmore's electorate, in a town in the electorate of my colleague here the member for Braddon or in the inner leafy suburbs of Sydney or Melbourne they have access to some of Australia's finest medical minds through NBN enabled telehealth and videoconferencing facilities.

It does not stop there. We have finalised the plans for e-health records, with the national infrastructure now being built. We cannot underestimate this, because a number of Australians do not consult a consistent medical practitioner week in, week out, year in, year out, for a range of reasons—they may move around and live in different places or consult different medical practitioners depending on where they are when they have an ailment. Having an infrastructure in place which enables records to transfer the record of that patient around literally saves lives, and it certainly saves thousands and thousands of dollars.

We also have a $2.2 billion mental health package, the biggest in our nation's history, and there is also much, much more happening. We have doubled the number of doctors and nurses in training, which is going to make a significant difference. We are going to be able to fill that gap that many members in this place are very aware of: the gap in the demand for GP services and the number of GPs available to service that demand.

The bill before the House is another piece in this puzzle. It will bring into effect yet another key part of the government's national health reform agenda. It establishes the Independent Hospital Pricing Authority. Through this bill it will help to deliver a more sustainable, efficient and transparent health system for all Australians. The main purpose of the pricing authority is to promote improved efficiency in, and access to, public hospital services by providing independent advice to governments in relation to the efficient costs of such services, as well as developing and implementing robust systems to support activity based funding for such services.

The main functions of the pricing authority are, amongst other activities, to determine the national efficient price for healthcare services provided by public hospitals, to develop and maintain costing and classification specifications, to determine standards and requirements from public hospitals, and to provide recommendations in relation to cost-shifting and cross-border disputes. In addition, the pricing authority will be required to publish this and other information for the purpose of informing decision makers in relation to the funding of public hospitals.

A key part of the National Health Reform Agreement that was reached with all states and territories on 2 August this year is the introduction of activity based funding, which will occur from 1 July next year. The introduction of activity based funding was a key recommendation of the National Health and Hospitals Reform Commission's report.

From 1 July 2014 the Commonwealth will pay 45 per cent of the efficient cost of growth in hospital costs, and from 1 July 2017 this will increase to 50 per cent. The very real impact of this is that we will be relieving state governments of the great burden of the increasing cost of health care, particularly hospital care, funding, which is projected to well exceed their projected revenues by 2035 unless some other system is put in place. The bill creates a new independent umpire, the Independent Hospital Pricing Authority, who will set the efficient price and advise governments on the implementation of this measure across Australian hospitals.

This bill is a direct result of the Council of Australian Governments agreement with all states and territories. The Commonwealth will be a true partner in the hospital system, with a commitment to funding 50 per cent of the growth funding for hospital services. This extra growth funding will apply to the increase in the cost of services as well as the increasing demand for new services with the ageing of the Australian population. This commitment to growth is vitally important as the states will not have, as I said, the capacity to fund the increasing cost of services on their own. It also creates a better incentive for the Commonwealth to invest in primary and preventative health services to keep people healthy and out of hospital.

These reforms will help to ensure that hospital financing can be dynamically adjusted to accommodate shifting populations, local demographic characteristics, changing costs of delivering medical services from technological and clinical innovation, and the complexity and location of delivering hospital services. It is important to note that small regional and rural hospitals are protected under the new financing arrangements, because although we are introducing case based funding to the hospital networks the use of block funding where activity based funding would not be appropriate will be introduced and will ensure that small rural and regional hospitals—and I have a few of them in my electorate—are funded to deliver on community service obligations.

As I said, last week I had the pleasure of welcoming the Minister for Health and Ageing to the Illawarra, to my electorate of Throsby. When we were there we had the pleasure of opening the new GP superclinic at Shell Cove. This is an investment of over $2.5 million, to provide GP services to this high-growth area in the Illawarra. It is an announcement that was very well received by the entire community and, I have to say, even by the member for Gilmore, who was there at the opening.