Australian governments waste $1.2 billion a year on avoidable spending in public hospitals which does nothing to improve patient care, a new Grattan Institute report finds.
That money could pay for an extra 160,000 hospital visits each year.
The report, Smarter spending: Getting better care for every hospital dollar, shows that spending on public hospitals increased by $3 billion every year on average over the past decade.
Yet hospitals are still under strain. Ambulances are ramping outside emergency departments, waits for surgery are getting longer, and staff say they're burning out.
And demands on hospitals will only grow as Australians get older and sicker. Public hospital spending per person will increase by a third in the next decade - from $2,500 to $3,300 each.
'But budgets are under pressure. Smarter spending can make every dollar go further, reducing the need for tax hikes or cuts to public services,' says report lead author and Grattan Institute Health Program Director, Peter Breadon.
Some hospitals are much more expensive than others. The average cost of a knee replacement in Victoria varies by $13,600 between high- and low-cost hospitals. In Queensland, it's $11,000. In NSW, $9,000.
It's the same for other procedures, and in every state and territory.
If costly hospitals reached the middle of the pack for efficiency in their state, that would save taxpayers $1.2 billion every year.
'Cutting costs doesn't mean cutting quality,' Mr Breadon says.
'There are plenty of ways hospitals can safely deliver care for less.'
Some Australian hospitals excel at preventing complications, such as falls and pressure sores, that keep patients in hospital longer. In England, doctors use AI notetakers to spend less time on paperwork and more time with patients. In Canada, one in three people who get a hip or knee replacement safely go home the same day, freeing up hospital beds.
But hospitals are held back by bogus budgets.
State governments set unrealistically low budgets at the start of the year, then bail out hospitals when they run a deficit at the end of the year. Those top-ups are big and destabilising, averaging 6 per cent of spending.
We need to end the annual budget rollercoaster of hospital blowouts and bailouts.
The federal government's contribution to public hospital funding should rise in line with growing demand for care. It should fully fund the cost of care - provided states reform their systems to improve efficiency.
State governments should change how they fund care to promote shorter stays, buy in bulk, consolidate some procedures in specialised centres, and help hospitals adopt best practices.
Scot-free bailouts must end. There should be serious consequences for hospital deficits - including CEOs and boards losing their jobs.
'Australia's hospitals are approaching breaking point,' Mr Breadon says.
'As public hospital costs keep rising, the danger is we make the same mistakes as the UK, which resorted to brutal austerity to rein in costs, with devastating impacts for patients.
'Instead, we need to fix the broken funding system, so our public hospitals spend smarter and provide more care.'
