2.1 Budgetary Context
The budget for Acute Health Services in 1997-98 comprises a mix of new funding provided by the Government to improve the quality outcomes from the hospital system; a productivity requirement sought from all Departments; and a reallocation of resources to high priority areas within the Department of Human Services and the Acute Health Division.
The Government's 1997-98 budget, released by the Treasurer in April 1997, outlined the broad financial parameters affecting hospitals in the coming year. An additional $18.5 million has been provided by the Government to manage demand in a more strategic manner.
The increased funding will enable hospitals to:
- Better manage the expected growth in demand for acute care services by increasing their capacity to deal with higher volumes of more complex acute care.
- Reduce the rate of unplanned readmissions.
- Reduce extended hospital stays associated with medical complications.
In addition to these funding increases, the budget has also provided funding for exit packages to assist hospitals or Networks requiring further restructuring. Funds will be allocated on a priority basis to those in most need of restructuring and unable to fund the restructure within existing resources.
The Government's budget required a annual productivity saving of 1.5 per cent from all Government sectors including the hospital sectors. This involves a cash return to Government from the Acute Health Program of $27.5 million.
Commonwealth penalties with regard to cost shifting in outpatient services totalled $24 million. For this reason, a greater proportion of the funding adjustments ($15 million) has been made in this area. The introduction of the Victorian Ambulatory Classification System (VACS) funding system in 1997-98, enables the Department to fund hospitals for outpatient work on the basis of work actually done for the first time. Funding adjustments are therefore targetted on the basis of actual performance.
In summary, increases in funding have been made to improve key elements of hospital sector performance, but aggregate funding levels reflect a continuing commitment to efficiency and productivity across the public hospital sector.
High levels of industry performance have been achieved since the introduction of casemix funding. The Report on Government Services Provision published in 1997 gives an interstate comparison of Victoria's hospitals against those in other States, while information on individual Victorian hospital performance is published quarterly by the Department in the Hospital Services Report. This report includes information on inpatient activity, access to emergency services and elective surgery; and enables comparisons to be made between individual hospitals.
2.1.1 Key Elements: Additional Funding
Key elements of additional funding in the Budget were:
- Elective Surgery Enhancement Program: An additional $10 million will be provided in 1997-98 to expand the Elective Surgery Enhancement Program. This will give further incentives for hospitals to better manage demand for urgent and semi-urgent procedures for example by providing additional operating theatre sessions in required specialities.
- Post Acute Care Program: Introduced in June 1995 as a joint Aged Care/Acute Health initiative, this program promotes early identification of patients at high risk of hospital readmission. In 1997-98 the post acute care program will be extended. $4.2 million will enable the establishment of further post acute care projects in rural regions and metropolitan hospital Networks.
- Infection Control: $4 million will be provided to implement best practice programs to improve infection control and trial approaches to improve clinical risk management in hospitals. Improved infection control and the management of clinical risk are integral to ensuring that the State's hospitals maintain their reputation as leaders in quality services.
- Reduced Private Health Insurance: $3 million has been provided to cover the additional medical costs incurred in public hospitals as a result of the decline in the number of patients treated holding private health insurance.
- Wage Increases: The Department's budget for hospitals includes provision to pay prospective wage increases during 1997-98. These amounts are also included in the Modelled Budget section of this document. Networks and hospitals are responsible for negotiating work place agreements with their staff. The Treasurer noted that there would be no further funding allocated to the Department or hospitals for funding of wage increases in 1997-98.
2.1.2 Key Elements: Reallocation
The Department and Acute Health Division have also reallocated substantial funds to support the purchasing strategy identified above. From this reallocation additional funds have been directed to:
- Emergency Services Enhancement Program: An additional $10 million will be provided in 1997-98 to expand the hospital Emergency Services Enhancement Program so that emergency departments continue to be fully equipped and staffed to meet required standards and to manage peak periods. Payments to hospitals will be based on key indicators of priority patients being treated within clinically recommended times; on continuing decreases in blocked admissions from emergency; and on occasions of ambulance bypass at or below agreed levels.
- New Technologies/Clinical Practices: A fund of $10 million has been established in 1997-98 to facilitate the introduction of new treatments or clinical techniques that have been proven effective in public hospitals. These treatments, such as cardiac or vascular stents, often have a higher initial treatment cost, but result in shorter stays in hospital or a better clinical outcome. This initiative is essential if our public hospitals and clinicians are to continue to be leaders in medical practice. Each year an extensive cost weight study is undertaken to determine relative costs between differing clinical procedures. The data used relates to the annual period prior to that during which it is collected. Rapidly changing clinical procedures can sometimes mean that innovative treatments are not included in the cost weight study. There has been a notional distribution of the majority of this fund within the funding model.
- Substitution Initiative: Funding of $1 million will be provided in 1997-98 to projects that will substitute a range of health care services for acute hospital care, while improving health outcomes for patients.
- Information, Information Technology and Telecommunications Strategy: A commitment of $100 million over a period of four years has been made by the Premier towards improving the information technology capability in public hospitals. $25 million will be provided in 1997-98 for the further implementation of the hospital Information, Information Technology and Telecommunications Strategy. Released in late 1996 by the Minister for Health, the Strategy has been well-received by the public hospital industry. The first phase of implementation is well-advanced and $5 million was directed in 1996-97 to improving the level of information technology expertise in hospitals. The Strategy is phased over several years, and defines performance measures in the form of information capability at the end of each phase. Funding allocations are expected to be on the basis of business plans from Health Care Networks and rural technology alliances. These plans will be key components of local information technology strategic plans. The hospital Information, Information Technology and Telecommunication Strategy is consistent with the Government's overall multimedia strategy.
2.1.3 Capital Expenditure
The Budget also announced a significant increase in capital expenditure. The total estimate of funds for new capital works commencing in 1997-98 is $236 million. This represents implementation of the first stage of the Metropolitan Health Care Services Plan, released in October 1996. In rural areas, a package of capital works totalling $58 million will commence in 1997-98.
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Policy and Funding Guidelines
1997-1998 - Table of Contents
