14 December 1999

QNU Submission to the Senate Community Affairs Reference Inquiry into Public Hospital Funding

(a) the adequacy of current funding levels to meet future demand for public hospital services in both metropolitan and rural Australia

There is no doubt that the funding of public hospital services throughout Australia has been under extreme pressure in recent years. Despite increases in funding by both the federal and Queensland governments, the recent demand for public hospital services is exceeding supply. While Queensland has increased funding to public hospitals in recent years a number of states have made significant cuts to the funding of public hospitals. This cost shifting to the Commonwealth has affected the level of Commonwealth funding available to those states that have not cut their level of funding.

In 1997-98 the Australian health service expenditure to GDP ratio was 8.4% (or $43.2 billion). From 1991-92 to 1995-96 this ratio remained constant at 8.2%, and increased by 0.1% points in the years 1996-97 and 1997-98. Of this around 46% of funding was provided by the Commonwealth, 23% by state and local governments and 31% from the non-government sector (ie from individuals, health insurance funds and workers compensation and compulsory third party motor vehicle insurance.) 1

The funding for hospital care accounts for less than 40% of government expenditure. While this is a significant figure, hospital funding must not become synonymous with health care funding. It is the view of the QNU and many other organisations that increasing funding in other areas (community health services) could greatly assist to decrease pressure on the public hospital system. As stated in our covering letter, we are concerned that a broader more "holistic" approach be taken to the issue of public health funding.

By international comparison Australia's expenditure on health care as a proportion of GDP is not excessive. Indeed our expenditure is around the average for OECD countries. Australia's expenditure certainly compares very favourably to the expenditure of the USA at 14.5% of GDP. This comparison is even more startling when we consider that an estimated 40 million Americans are not covered by either public or private health insurance. Costs in the largely privatised US health system continue to spiral whereas Australia's universal health care system Medicare helps to keep health costs under control. In the course of this inquiry we are sure that it will be difficult to find a consensus view on many issues, but we predict that there will be consensus that Australia should not proceed down the grossly inefficient and inequitable US health path.

Across the various state and territory jurisdictions there is a great variance in government spending per capita. In 1996-97 this ranged from $595 in Queensland to $826 in the ACT (average $660 per capita).2 Although the Queensland government has increased their contribution to health expenditure during most years over the last decade, there is still a need for continued improvements to funding if Queensland is to reach the national average per capita expenditure.

The inadequacy of current public health funding arrangements has obvious adverse effects for Queensland Nurses' Union (QNU) members as both providers and "consumers" of health services in this state. This dual role of "provider" and "consumer", coupled with the fact that the vast majority of nurses do not operate on a "fee for service basis", means that nurses are particularly well placed to perform a critically important health advocacy role.

Nurses, as providers of public hospital services, have well and truly met the call for increased efficiency that "drives the health dollar" further. In public acute care hospitals nurses make up around 44% of the total number of full time equivalent staff employed. Our members in this sector report that workloads continue to increase as the demand to do "more with less" increases. Public hospital "throughput" increased significantly over the last 10 years - while the length of stay in hospital has decreased and the level of patient acuity has increased. Put simply, those who require hospitalisation are there for shorter periods of time and are sicker during this time. There are also fewer nurses caring for these patients. This is consistently confirmed by research. For example, according to a recent report by the Australian Institute of Health and Welfare (AH) titled Nursing Labour Force 1998, between 1995-96 and 1997-98 patient numbers in public hospitals have increased by 5.0% and at the same time the number of full-time equivalent (FTE) nurses decreased by 2.9%. During this time separations per FTE nurse increased by 2.8% and patient days per FTE nurse increased by 9.3%. 3

The QNU strongly believes that nurses have gone as far as they can to increase efficiency in the public sector. In our view the funding is insufficient to keep up with the demand and there is an urgent need to increase the level of funding provided to the public health sector.

Queensland has particular funding pressures that result from the decentralised nature of the state. The resident population of Queensland is dispersed over large rural areas. The significant number of indigenous communities in remote areas also poses particular problems for Queensland from the health service delivery perspective. In 1996-97 Queensland had a total of 191 public acute and psychiatric hospitals, 26% of the total number in Australia (727). During this year, of the 160 hospitals of the size 0-10 beds, 49% (or 79) of these were in Queensland, which also had 23% of the 11-50 bed size facility (77 of 337). 4

Particular problems therefore exist for Queensland by mere virtue of the decentralised nature of the state. In remote areas of the state and many rural areas, the public health services provide the only health service in the area. The difficulties in attracting General Practitioners (GPs) to rural and remote settings in Queensland further highlight the critical importance that public sector health care services play in these areas. Nurses are frequently the only qualified health care provider in many remote communities, and a cogent argument exists to extend the role of nurses to that of Nurse Practitioner in these areas.

The unavailability of a private health sector in many parts of Queensland underscores the inherent unfairness of the current federal government's private health insurance incentives. By virtue of geography and "market forces" many Queenslanders are denied the benefit of these incentives. For these people the federal government's money would have been far better spent improving public health services in their local community.

It is acknowledged that the current extreme budgetary pressure being experienced in the public health system could be further exacerbated by the aging of the Australian population. We caution that aging need not necessarily equate to increased health spending, especially if adequate funding is provided to ensure health promotion and maintenance. In a paper prepared for a Health Financing Summit held in Brisbane earlier this year, Meredith Carter from the Health Issues Centre in Victoria highlighted the fact that even though the number of elderly Australians is expected to double by the year 2041 this does not necessarily mean that our health costs will "blow out" to the same extent.5 To contain the cost blow out that many predict will result from our aging population, we must aim to get the correct type of care in place (community and other support services) rather that go down the track of the "desperate, hi-tech search for everlasting life" as Stephen Leeder calls it.6 It should also be noted that a 1997 OECD analysis of aging populations was also cited by Ms Carter as concluding that in terms of expenditure on both income transfers (eg social security payments) and health care, Australia is expected to remain in the bottom third of OECD countries well into the next century.

(b) current practices in cost shifting between levels of government for medical services, including MBS, pharmaceutical costs, outpatient clinics, aged and community care, therapeutic goods and the use of hospital emergency services for primary care

It appears to the QNU that the current funding arrangements promote cost shifting and apportioning of blame between the various jurisdictions. Cost shifting behaviour has become more pronounced in recent times given the increasing pressure on District Health Services to contain budget blowouts.

The most obvious example of recent times is the closure or scaling back of outpatient services in Queensland public hospitals - in a number of country towns Queensland Health public hospitals have closed outpatient clinic services, referring patients to local GPs. This not only shifts costs from the state run public hospitals to the MBS and hence the Commonwealth, but also to the individual "consumer" as it is common for there to be no bulk billing GPs in country towns. A number of metropolitan public hospitals have scaled down outpatient services in recent times, referring patients back to their local GPs or the local hospital. In these scenarios the costs are shifted to the Commonwealth (or indeed another District Health Service) but the shifting of cost to the "consumer" can be avoided given that the number of bulk billing GPs is greater in metropolitan areas.

The QNU is also concerned that the potential exists for cost shifting between the state and Commonwealth in two particular areas - state government nursing homes and Multi-purpose Health Services. With respect to state government nursing homes, the QNU remains concerned that the Queensland government is keen to divest itself of all responsibility for the delivery of residential aged care facilities. A recently leaked consultant's report to the state government certainly made this recommendation. Although the state government has denied that they will implement the recommendations of this report, we remain concerned given that recent activities within a number of state government nursing homes could be seen as preparatory steps towards transfer of responsibility to the private or not-for-profit aged care sectors and hence subject to total Commonwealth government funding.

The QNU also highlights an area of potential cost shifting between private nursing homes and public hospitals. During the Commonwealth's two-year review of aged care reform, anecdotal advice from QNU members highlighted an increase in admissions to public hospitals of residents from private nursing homes. This was attributed to an increase in falls, fractures and the non availability of qualified registered nurses in nursing homes and hostels to care for those residents suffering from acute episodes of illness.

The submission from Queensland Health to the two-year review confirmed this trend. Queensland Health tabled statistics titled Nursing Home Type Admitted Patient Episode of Care and Bed days Queensland Public Acute Hospitals, Qld 1996/97- 1997/98. This showed that some Queensland hospitals have reported an increase in the number of nursing home type patients admitted to public hospitals since the implementation of aged care reform.

The QNU is aware that a number of Queensland providers believe it not the role of residential aged care facilities to care for residents during acute illness phases and they deliberately transfer residents to the acute public sector in these circumstances. This is inconsistent with the governments Ageing in Place philosophy and the purported funding of homes for specialised nursing services designed to provide funding for residents with significant health problems. This is clearly a cost shift from the private nursing home sector to the public hospital system.

Multi-purpose Health Services are a relatively new initiative but will increasingly become a feature of the health landscape in Queensland given that Queensland Health plans to provide this type of service in all facilities with a budget of less than $2million per year. Although the philosophy underpinning such services is supported by the QNU, we are at this stage not fully aware of the funding arrangements for such services and therefore remained concerned about the potential for cost shifting. We are undertaking further investigations into this issue at the present time.

Another recent area of concern has arisen with the formation this year of three Zones within Queensland Health. These three zones are an intermediate layer of administration between Corporate Office of Queensland Health and the various District Health Services. The state has been split into three zones (central, northern and southern) and three zonal managers have been appointed to co-ordinate health service delivery within each zone. Since the establishment of these three zones plans have been announced to "reverse the flow" of patients from tertiary metropolitan hospital facilities or major regional hospitals to the patient's local hospital whenever possible. The QNU conceded that there certainly is the potential to make savings (though not yet quantified) by referring those patients requiring non-tertiary health services away from tertiary facilities to their local hospital. However we remain concerned that the potential exists for aberrant cost shifting to occur between District Health Services. It appears to us that because of the increasing pressure to constrain of health budgets bureaucrats have tended to shift costs from their particular area of responsibility to another's. This has been reinforced in the "purchaser-provider split" model that has been adopted by health bureaucracies across the country. The more layers of health administration that are put in place the greater the potential for cost shifting and abdication of responsibility for the delivery of health services.

An example of cost shifting from the Commonwealth to the Queensland government is in the funding for the provision of health services to remote Aboriginal and Torres Strait Islander (ATSI) communities. The Queensland government largely funds the provision of these services by virtue of the lack of access to Medicare funded services in these areas. (It should also be noted that the issue of the adequacy of Queensland Casemix funding for provision of health services to ATSI clients (where this occurs) is contentious. In our view this allocation is insufficient given the complexity of the care required. We have routinely raised the issue of this inadequacy with Queensland Health and it is yet to be addressed to our satisfaction.)

For QNU members as health workers, one example of a negative outcome of cost shifting between the state and commonwealth government is in the area of job security for nurses employed in Commonwealth funded programmes. Nurses who work in such programmes (generally in the community sector) have been denied permanent appointment to a health service because the Commonwealth funding for the programme they are working in is provided for a fixed term (usually varying from one to three years). These nurses are employed under sequential temporary contracts of employment that are renewed if and when the next round of Commonwealth funding is secured. The QNU and other health unions have secured a review of these and other temporary employment practices under the auspices of our current Enterprise Bargaining Agreement with Queensland Health. Many nurses whose employment is expected to be continued after Commonwealth funding expires will be converted to permanent employment. However a number of nurses will continue to be employed in this unsatisfactory manner merely because of the inability to resolve this funding issue.

(c) the impact on consumers of cost shifting practices, including charges, timeliness and quality of services

The shift towards "user pays" principles in health service provision has been pronounced in recent years. Health, like other government services, has not been immune to the ideologically driven push for smaller government and individual rather than collective responsibility for funding of essential services. Our concerns about the erosion of the role of government and the effect on service provision are detailed in the attached QNU policy titled QNU Policy on the Role of Government and Privatisation of Government Services.

In health as in other areas of government service provision "out of pocket" expenses are increasing for individual citizens. (We use the term citizen rather than "consumer" because it denotes an active two-way relationship between individual and the state, rather than the passive and relatively powerless role of "consumer".)

This shift to "user pays" in health care must not only be viewed in terms of "out of pocket" expenses for health care. The adoption of Casemix funding methodology, the push to increase hospital throughput and the continuing declining trend in Average Length of Stay (ALOS) in hospitals have resulted in a shift in responsibility for the care of convalescing patients from the health care system to their families or significant others. The inherent assumption appears to be that all patients have family and/or friends who will be available to help to care for them post discharge.

Although efficiency indicators such as Casemix Adjusted Separations and ALOS have been developed and refined over time, effectiveness indicators relating to quality (eg hospital service outcomes, patient satisfaction, hospital misadventure), appropriateness of care and accessibility and equity are either not developed or only partially developed. Undue emphasis has been placed on the development of efficiency or unit cost indicators at the expense of effectiveness indicators - this stresses the importance of the cost to be paid at the expense of the nature (or quality) of the service being paid for. "User pays" models fail to recognise the costs of lack of effectiveness in areas such as re-admissions that front-end savings tend to produce. This can also induce cost shifting at the other end as patients may present at another health service to fix problems created by the initial cost cutting.

We have highlighted in section (b) above examples where individuals have been forced to make a contribution towards their health care when hospital outpatient services are closed or scaled down. Out of pocket expenses are incurred when this service is picked up by a GP who does not bulk bill. Out of pocket expenses are often incurred for services when the fee charged is greater than the Medicare Schedule Fee. This particularly occurs for some specialist services, radiological and anaesthetic services, when the fee set by a specialist college often far exceeds the Medicare Schedule Fee. A 25% differential already exists between the Medicare Schedule Fee and the Medicare Rebate for services in cases where they are not bulk billed. However the out of pocket expense can be far greater than this given the ability of doctors to set their own fee for service. The QNU believes it is essential this issue be addressed as a matter of urgency given that this uncapped "fee for service" regime is one of the fastest growing areas of health expenditure and is the greatest liability for government and patients alike. (For example, in the period 1989-90 to 1995-96 medical services and pharmaceutical services were the fastest growing areas of government health expenditure with an average annual growth of 6.5% and 9.9% respectively.7 ) The ability of medical colleges not only to set the level of remuneration for doctors in that field but also the supply of specialist practitioners is an issue that successive governments have failed to adequately address.

(d) options for re-organising State and Commonwealth funding and service delivery responsibilities to remove duplication and the incentives for cost shifting to promote greater efficiency and better health care

Currently the three levels of government (commonwealth, state and local government) hold varying responsibilities for health service delivery. As a result there is unnecessary duplication (and hence obvious efficiency gains) in some areas. The QNU believes that the issues of duplication of services and incentives to shift costs between jurisdictions require urgent consideration. We have not yet formed a view regarding which level/s of government should assume the primary responsibility for the delivery of health services.

The QNU acknowledges that this is a complex and contentious issue but one which must be more closely examined if we are to maximise the efficiency and effectiveness of our health system. Given that fundamental constitutional reforms are unlikely to occur in the near future, it is perhaps best for this issue to be viewed as an evolutionary matter. Firstly we have to know what each level of government is doing in terms of health service funding and provision and the strengths, weaknesses and gaps in health service provision. Once a detailed analysis has been performed then negotiations can commence about potential future models for health service delivery. Such negotiations must include mechanisms to involve all key stakeholders in the deliberations about health service needs and expectations. To date the Australian community has not been engaged in a meaningful dialogue about the provision of health services. Duplication and inefficiency in the health sector also results from the existence of multiple insurers. Multiple players mean multiple administration costs. One national health insurance scheme covering all areas of health provision would decrease administration costs, assist the co-ordination of episodes of care and allow for more effective scrutiny of the effectiveness of care (eg monitoring of re-admission rates).

(e) how to better coordinate funding and services provided by different levels of government to ensure the appropriate care is provided through the whole episode of care, both in hospitals and in the community

Improved coordination of health service delivery would be facilitated by the detailed analysis of current health service delivery processes referred to in point (d) above. Certainly significant advances have been made in recent times with respect to "clinical pathways" which view episodes of care as a continuum for the patient from the community to health service setting and their return to the community again. However better coordination of care will continue to be difficult to achieve as long as there is pre-eminence of inpatient or hospital care over primary health care considerations.

Co-ordination of care requires a relationship between those service providers involved in the continuum of care that is based on meaningful communication. Nurses provide this continuum of care in the range of health care settings - the acute care or hospital setting, in the community (via community and domiciliary nursing services), in aged care residential facilities (eg nursing homes) and in other settings such as schools and prisons. In our view the nursing role is the lynchpin to continuous and appropriate health care. We are concerned that a recent federal budget initiative to provide additional funding to GPs to facilitate the case management of those with chronic conditions or complex care needs and those aged over 75 years fails to recognise that nurses have for years played the role of case manager. Rather than expand the role of the nurse and concentrate on strategies to enhance communication between the various service providers (including GPs), the federal government has chosen to fund the more expensive option. We in no way wish to diminish the very important role that GPs play in health service delivery and coordination. However, we fear that the government has allowed (medical) political considerations to take precedence over the efficient allocation of health resources. In our view the correct and more cost effective response to case management of older Australians and the chronically ill would involve an inter-disciplinary team approach to health service delivery.

The funder-purchaser-provider distinction (or split as it is known) in health has in our view enhanced discontinuity of care. These distinctions attempt to reduce health care to transactions and contractual arrangements. Health is seen as a market like any other market. The split also enables governments to divest themselves of responsibility for the provision of health services and hence facilitate the private sector provision of such services. In our view the split between funder, purchaser and provider is an artificial one that has in large part been created in an attempt to deflect attention from the poor coordination resulting from three levels of government (and non-government providers) being involved in the funding and/or provision of health care.

If the current discontinuity of care promoted by such a model cannot be addressed in a comprehensive manner then immediate improvements to communication and planning mechanisms between funders, purchasers and providers are required. Unfortunately there is a lack of an integrated approach to the planning of health services that involves all key stakeholders including the community as a whole. As stated above, there needs to be meaningful involvement of the community in decisions about the adequacy of funding for health care as well as health service needs and expectations. Achieving such involvement will necessitate further careful consideration and planning. The QNU is pleased to see that the federal government has at least commenced consultations about community expectations in health financing by funding a series of workshops on this issue this year. As participants in the Brisbane workshop held in May this year we eagerly await the outcomes arising from this consultation process. Another federally funded initiative of workshops involving nurses and "consumer" representatives aimed at devising strategies to facilitate "consumer" involvement in health care planning and service delivery is also welcomed by the QNU.

(f) the impact of the private health insurance rebate on demand for public hospital services

The QNU is extremely concerned that the 30% private health insurance rebate has not achieved its stated objective, represents poor value for money and rather than decrease demand in public hospitals could result in an increased demand in these services.

Since its introduction the rebate for private health insurance has only increased the percentage of people with private health insurance by less than 0.5%. For the quarter ended 30 June 1999 28.6% of the Queensland population (or 1,006,000 people) were privately insured. The federal government set aside $1.5 billion a year (around 20% of what the federal government spends on public hospitals) for this failed incentives scheme.

The haemorrhage from private health insurance has been stemmed, but this form of insurance is seen by most of the general public as poor value for money. It remains the case that those 70% of Australians who have not taken out private health insurance have not benefited from this rebate. For the majority of Australians this money would have been better spent improving the public health system. It certainly has been demonstrated that private health insurance is far more expensive to administer than a universal health insurance fund administered via the taxation system. The dispersal of funds for profit making insurers also reduces expenditure on direct health care as profit margins are deducted from the amount provided.

The fact that private health insurance is seen as poor value for money is best illustrated by the increasing trend towards self-funding of private hospital care, especially for treatment in day hospitals. An estimated 10-15 % of private patient admissions are self-funded, an option recommended by some financial planners because private health insurance is poor value for money. According to Australian Hospital Statistics 1996-97 from AH, of the total number of separations from private hospitals in 1996-97 (1,684,948) almost 20% (332,636) were not insured and a further 11% (186,944) did not report their insurance status. This trend towards self-funding of private hospital care has increased in recent years. It is important to note that even when private health insurance rates were declining the utilisation rates for private hospitals have continued to steadily rise.

The increased number of private day surgery facilities and technological advances have increased the affordability of many diagnostic and minor surgical procedures, even for the uninsured. (This is because there are no inpatient costs to pay.) This has contributed to the increase in "throughput" of patients in private hospitals. (AH states that separations have increased by 7% in private hospitals from 1995-96 to 1996-97.) Similarly AH notes that during this time annual growth in recurrent health expenditure as a constant (1989-90 prices) has increased by 8.2% for private hospitals (compared to 3% for recognised public hospitals).

The most impressive growth area for private hospitals over the five-year period 1992-93 to 1996-97 was in free standing day hospital facilities. These have increased from 94 in 1992-93 to 153 in 1996-97, an increase of 63%. (This is in addition to Day Surgery Theatres in private acute and psychiatric facilities that numbered 165 in 1996-97.) The trend in recent years in both public and private hospitals is to decrease length of stay for patients and maximise the use of day theatres and clinics to perform procedures on a day only basis. (Around 51% of admissions to private hospitals are for same-day hospital care.)

The disparity between the decline in popularity of private health insurance and the increased utilisation of private hospitals is very important. The decline in private health insurance coverage of recent years has coincided with a rapid increase in premiums - premiums in states with the highest membership have increased in real terms between 58% and 173% from 1984 to 1996. This has greatly affected affordability of the product. A 1996 Industry Commission Inquiry into private health insurance identified that the cost of private health insurance had increased by 9.8% per year between 1989-90 and 1995-96. (This is well above the CPI per year during this period of 2.9%.) It will be critical to monitor the "drop out" rate if premiums continue to rise and steps are not taken to make the product more attractive.

It will also be critically important to monitor the impact of recent attempts by a number of funds to introduce "no gaps" or "known gaps" policies. The QNU fears that these endeavours will result in a significant shake up of the private health sector, with many smaller facilities potentially closing as a result of the financial pressure resulting from these tough negotiations. The first signs of pressure in the private health sector in Queensland are already beginning to show with the Private Hospitals Association making a formal complaint to the ACCC about the MBF negotiations in Queensland. Another indication of the uncertainty facing the sector was HCoA's withdrawal from collocation negotiations at the Royal Brisbane Hospital campus because of "instability" in the market.

The QNU is particularly concerned about the impact that this shake up will have on our membership employed in the private sector. QNU members employed at St Andrew's Hospitals in Rockhampton and Yeppoon and the Carrington Nursing Home in Brisbane have already suffered significant loss of entitlements resulting from corporate insolvencies during the last two years. In our view it is vitally important for our members that the federal government introduce measures immediately that will protect employees lawful entitlements in cases of corporate insolvency. We have made the Prime Minister aware of our concerns regarding this matter and would welcome the opportunity to provide further information to a Senate Inquiry on this issue once the operation of such an inquiry is finalised.

The QNU firmly believes that the current federal government incentives for private health insurance will not take pressure off the public health system. Indeed it is our fear that these incentives could put more pressure on the public system. In a paper presented to this years QNU Annual Conference titled Public funding - good social policy - good economic policy, Ian McAuley (Lecturer in Public Sector Finance at the University of Canberra) outlined reasons for this. The recent trend to take out cheaper "front end deductable" policies could result in high income earners avoiding payment of the additional Medicare Levy, claiming the 30% subsidy and then using the public system if they require health care. (Mr McAuley estimates that around 38% of contributors are now covered by front-end deductible policies.) It makes good economic sense for people to take out this cheaper form of insurance and never use it.

Mr McAuley also highlighted that additional pressure could be placed on the public sector given that where funding goes then resources will follow. That is, professional specialist medical staff (and in some cases nursing staff) could be attracted to the private sector and the public sector in order to "compete" could be forced to pay premium rates of pay to maintain services in specialist areas.

The third potential area of adverse effect for the public sector is that by improving the "risk profile" of those with private health insurance the "risk profile" for the public sector will worsen. It is our belief that the private health insurance industry would really like to do what the private health sector already does - take the uncomplicated cases and leave the complex and expensive cases for the public sector. A particular section of the Australian Healthcare Agreement contained a formula that outlined how funding for public hospitals would decrease as private health insurance levels rose above a set level would have reinforced this "no win" situation for public hospitals. (We understand that this has subsequently been amended.)

Our concerns about the efficiency and effectiveness of private health insurance and our opposition to federal government subsidisation of this industry should not be confused as a lack of support for the private health sector. The QNU has a considerable membership in the private sector and as we have stated previously, we are extremely concerned about the pay, working conditions and long term job security for these members. In our view some of the initiatives being pursued by the private health funds have the potential to adversely affect our members in the private sector. Private sector health services perform an important complementary role to our public health system. The private sector should never be seen as a replacement to the public system just as it is essential that the public system does not become a mere safety net in a two tiered health system. Access to health services should be based on clinical need not ability to pay.

(g) the interface between public and private hospitals, including the impact of privatisation of public hospitals and the scope for private hospitals to provide services for public patients

Currently the whole area of public sector/private sector interface in health is shifting rapidly without proper consideration of community needs or outcomes. The boundaries between public and private sector are becoming increasing blurred via privatisation, collocation of public and private health services and the contracting out of health services.

The current trend towards private operation of, or involvement in, public health services is a significant and concerted threat to the Australian public health system. It endangers the concept of universal free access to care based on need rather than ability to pay. The privatisation push must be seen as part of a wider ideological agenda, one that the Labour movement is not only well placed but also duty bound to challenge. Health union members, in both the public and private sectors are affected by this agenda as both employees and "consumers" of health services.

In privatisation scenarios public financing is provided via Medicare payments as well as other sources of state public funding. At a time when private health insurance levels continue to fall both "for profit" and "not for profit" private providers have found a source of funding that will ensure their continuance and even assist their expansion - our universal health scheme Medicare. An article in the Australian Financial Review on 8 January 1998 (page 36) titled Year of the health carve-up outlined the considerable opportunities that exist for private health operators in the current health policy environment. Basically this article gave an overview of the jostle amongst private providers to "carve up" Australia's public health system, with at least 15 hospital "sell offs" and collocation proposals on the drawing boards in 1998. The article noted that financial markets had not yet fully appreciated the importance of this mad scramble for assets. The combination of the private health insurance incentives offered by the federal government and the "sell off" of public health assets by state governments provided golden opportunities for private providers. As the article concluded: "The private health companies believe they are in a no-lose situation. If the take up rate of private health cover is slower than anticipated, they will still benefit from the sell-off of government institutions and/or the outsourcing of public services."

Queensland, like every other state and territory is going down the privatisation track, with private operators providing public services at Noosa and Robina Hospitals (via Build Own Operate and Transfer or BOOT arrangements), the collocation of public and private facilities at various metropolitan and non-metropolitan sites and the contracting out of various health services. Although health unions were able to secure a no further contracting out commitment from the government as part of the current Enterprise Bargaining Agreement with Queensland Health, we remain concerned that such proposals remain firmly on the agenda in some areas.

Increasingly distinctions are being made in health about "core" and "non-core" health services. So called "non core" services are easily hived off to the private sector, and the state is left to provide "core" services. The distinction between "core" and "non core" services is a false and dangerous dichotomy in health. It is also a moving feast, with many previously defined "core" clinical services (such as diagnostic and hospital out patient services) now being deemed "non core". The QNU is concerned that this core/non core distinction merely results in public sector job losses, the loss of public sector health services and the fragmentation of health services provided. Health departments across Australia are failing to take a "holistic" approach to this issue. These determinations should not be made on economic considerations only (that is, it is claimed but never clearly demonstrated that it is cheaper and hence more efficient and effective for the private sector to provide the service). Critically important clinical and social implications must also be considered.

The QNU holds many concerns about the privatisation push that is occurring in health across the country. The lessons from interstate experience have not been learnt in Queensland. The experiences in four states (South Australia, New South Wales, Western Australia and Victoria) are worth examining.

Soon after the transfer of the Modbury Hospital in South Australia to private management (by the company Healthscope Ltd), the private operators had to be "bailed out" financially by the state government. This was allegedly because they had treated more patients than their contract had stipulated. These financial difficulties continue until this time. Modbury Hospital is currently running at a significant deficit, which lead to the retrenchment of the Director of Nursing, Assistant Director of Nursing and other health workers employed in HRM and Staff Development.

It is also important to note that a state Parliamentary Committee of Inquiry into Healthscope's contractual arrangement with the SA government was not able to access sufficient information to determine whether the transfer of the facility to private management was in the public interest. Indeed this Committee was unable to determine why the government decided to go beyond its original brief (to collocate a 65 bed private hospital on the Modbury public hospital campus) and decide that Healthscope would manage both the private and public facilities on campus. It is quite astounding to consider that democratically elected parliamentary representatives experienced significant difficulty in accessing the necessary information. The interim report of the committee (July 1996) noted that Healthscope, the Health Commission and Modbury Hospital Board all failed to comply with repeated requests for information that would enable the committee to make a proper assessment of the privatisation process. If a parliamentary committee cannot obtain information essential for determining whether the public's interests are being served by privatisation, what chance does a member of the public have?

A media report in The Australian on 2 March 1999 (page 23) highlights that the financial worries of Modbury Hospital continue to plague Healthscope, who have made a $13.5 million abnormal provision for future losses. Losses continue despite that fact that the company successfully renegotiated a contract with the SA government 12 months ago for management of the hospital. The company hopes that this renegotiated contract will at least help them to "neutralise losses".

In 1991, the coalition government in New South Wales (NSW) announced the closure of then 100 bed Hastings District (Public) Hospital and its replacement by a privately owned and run hospital. (Mayne Nickless' health care arm, Health Care of Australia (HCoA) acquired the Port Macquarie Hospital.) The privatised Port Macquarie Hospital costs the public purse much more than if a hospital had been built and operated by the state. According to Meredith Carter in an article in the September 1998 edition of Health Issues:

"The actual cost to the public purse of building the hospital was estimated by the Auditor-General at around $143.6 million, paid via servicing charges. Despite paying this amount, the state would not end up owning the facility. The cost of actually building a hospital which the state would own would have been about $50 million. Instead of saving some $15 million, as estimated by the NSW Health Department prior to privatisation, the deal would cost the state around $93 million." (page 16)

Other concerns about the operation of the privatised hospital include:

• Public disclosure of financial information is not a requirement of the contract with HCoA
• Complaints have been made regarding the level of service (eg promised renal unit not delivered, poor quality of service from A&E Department, operating theatres cut back from 7 day to 5 day operation)  
• Unresponsiveness to complaints about hospital service (resulting in calls for an independent ombudsman to monitor the hospital's activity)  
• Increasing reliance on part time and casual hospital staff

It should be noted that, according to a report in the Port Macquarie News (24 February 1999, page 1), HCoA threatened legal action with the NSW government over alleged funding shortfalls for the hospital. Funding for elective surgery at the hospital "dried up" four months before the end of the financial year. There are extensive waiting lists for various kinds of surgery at the hospital, including 18month waiting lists for joint and ophthalmic surgery. This newspaper report quotes a spokesperson for the then NSW Health Minister Dr Andrew Refshauge as follows:

"The situation at the Port Macquarie Base Hospital is not something over which the Department of Health has any control. It is a funding management issue. The situation basically underscores the disastrous experiment of privatisation by the Coalition government and is good proof of the Coalition's failed health policies…The Minister has said again and again that the Coalition's privatisation of Port Macquarie Hospital has been a complete failure which continues to have a damaging impact on patients and their families in the area."

A recent Auditor General's report from Western Australia titled Private Care for Public Patients: The Joondalup Health Campus (Report No 9, November 1997) highlights concerns about the risks associated with this privately run public facility. The report detailed concerns about the failure of the Health Department in that state to follow a logical sequence of planning stages and to make meaningful comparisons of the costs associated with private sector versus public sector operation. The Auditor General made recommendations about the management of future projects, and recommended that performance indicators for the project be developed so as to measure costs and benefits. The lack of data available to the Health Department and the Auditor General on which to make meaningful comparisons was noted. To quote the report:

"There is not, however, reliable information to establish that the contract provides net tangible benefits to the state relative to the public sector alternative from either services or facilities." (page 5)

The report also highlighted the risks to the State:

"Additional risks to the State compared to public provision of services and facilities include: reduced flexibility and lack of competition for new services and facilities; limited contractual control over the quality of the services; fixed availability charge with limited control over service quantity; guaranteed offer to purchase a minimum quantity of services (although the minimum quantity can be gradually reduced); financial incentives for the Operator to influence admission, treatment and discharge patterns; and potential overpayments because of incorrect coding of treatments." (page 4)

We strongly recommend that members of this committee read this report as it highlights many procedural concerns about contract and risk management associated with privatisation processes. A considerable concern that the QNU holds is that reports of this nature are made after the event, given the retrospective nature of Auditor General reports. There is no open and consistent mechanism (apart from parliamentary processes) to ensure that significant policy decisions (such as the private operation of public health facilities) are actually in the public interest and that departments adopt appropriate processes to ensure that this is the case. Efforts by various governments to restrict access to information available under Freedom of Information (FOI) legislation are of particular concern in light of the changing health environment. Unfortunately, because of "commercial confidentiality" considerations it has been difficult to secure full public disclosure of arrangements for privatised health facilities and the impact for the public of such privatisations.

The QNU has for some time now taken an active interest in the changing health landscape, particularly given the privatisation of public health services at the Noosa and Robina Hospitals and the increasing number of collocated public and private health facilities in this state. Our concerns about the privatisation of public services relate primarily to:

• The loss of or threat to the provision of essential services by government - a considerable diminution of the role of government. 
• The lack of detailed public debate about these issues. 
• The lack of public scrutiny and accountability.  
• The lack of comprehensive and open public benefit tests or needs analyses.  
• The potential for additional costs to be incurred by government (given the need for a "profit margin" for a private provider) or the health "consumer" paying more for services from their own pocket (shift to "user pays").  
• The time and resources expended in undertaking cost shifting between state and commonwealth governments.  
• The effect on access to health services by the public.  
• The need for mechanisms to be established to ensure quality and level of services provided.  
• Threats to job security and working conditions for both public and private sector health workers. (In effect the subsidisation of a privately run public health service by virtue of the payment of lower wages and working conditions that do not meet the public sector standard.) 
• The need to ensure that the current government's policies with respect to privatisation (and collocation) of health services are implemented. 
• The appropriateness of contractual arrangements and selection processes, especially "commercial in confidence" considerations.

It is important to note that it is difficult to access information that will allow a meaningful comparison between the relative efficiency and effectiveness of the public and private health sectors. Such information is readily available about the public sector but information of this nature is usually designated as "commercially sensitive information" and therefore is not in the public domain. This inherent problems of this knowledge deficit was recently acknowledged By a Queensland Parliamentary Public Works Committee report on the Noosa and Robina Hospitals Project. This report recommends that "Queensland Health establish a methodology to measure the value, to both public and private sector operators, of co-located public and private hospitals." 8

It is not the intention of the QNU to attack private sector providers. Rather our purpose is to maintain and extend our efficient, effective high quality Queensland public health system. This is particularly important given the decentralised nature of this state - there are relatively few private facilities outside of metropolitan and major regional centres. It is also of critical importance given the ever-present budgetary constraints on our public health system.

At the heart of the privatisation agenda in health is the shift towards "user pays" - increasingly placing the onus on individuals, rather than society collectively, to meet the cost of providing health services. It is also the case that many a state government is not averse to shifting costs to the Commonwealth. Private operators are making commercial decisions that make good use of the current policy framework. They have been able to convince governments in various states that they can provide hospital services more cheaply that the public sector. (This is despite the fact that there is no publicly available and hence contestable evidence that the private sector is more efficient or can offer enhanced services.) The outcomes interstate have been disastrous, whether you look at it from the health financing perspective or in terms of the nature and quality of services provided to the public.

The QNU understands that health services are to be discussed at the November 1999 World Trade Organisation (WTO) Seattle meeting of Trade Ministers. We understand that multinational health care organisations have been lobbying for an agreement to be reached on the health care sector at this meeting. If such an agreement is reached at the Seattle meeting and if Australia signs such an agreement then there is the potential for the Australian health care sector to be locked into the global corporate healthcare "marketplace". This will bring Australia that much closer to a US managed care type system and the corporatisation of health care. There has been no general community debate on this critically important matter and no public statements by relevant politicians. The QNU is particularly concerned about this disturbing development and the potential negative effects for our healthcare system. We strongly urge this committee to further investigate this issue as part of this inquiry.

In our opinion current mechanisms for the collection and analysis of data in health generally remain inadequate. A framework for performance indicators for public acute care hospitals has been adopted via COAG process so that consistent information is publicly available which enables comparison between state jurisdictions and individual facilities. The measurement of performance is divided between indicators of effectiveness (quality, appropriateness and accessibility and equity) and efficiency (unit cost). An update on performance against criteria is provided annually via the various Reports on Government Service Provision provided via the Productivity Commission's Steering Committee for the Review of Commonwealth/State Service Provision (A copy of this framework is attached to this submission.)

As stated elsewhere in this submission, it is of concern that there has been undue emphasis placed on the development of indicators that measure efficiency rather than effectiveness. Progress is however being made in some sectors with these effectiveness indicators. (It is of particular concern to the QNU that Queensland Health recently admitted to health unions that they do not have the systems in place to gather much of the effectiveness data required by this framework.) It is the case that at least some of these indicators are developed or in the process of being developed. However, this at least provides some broad picture of performance of the public sector. The same can not be said about the data available to measure the relative performance of the private health sector. This is a significant issue that must be addressed if we are to progress the debate about many of the issues of critical importance to this inquiry. How can the performance of the public health sector be found wanting if the same sort of analysis can not be undertaken for the private health sector? We have to be able to make meaningful comparisons of the relative performance of the public and private health sectors.

Recent Australia wide attempts by governments to wind back access to information is also making it difficult to access meaningful data about the health system. It appears that many governments are currently reviewing (either formally or informally) the Freedom of Information (FOI) regimes in each jurisdiction. (In Queensland this is in the form of a formal review by a parliamentary committee.) The QNU has noted an increased reluctance on behalf of Queensland Health to release information that would normally be seen as information that facilitates open and accountable government. A recent example of this is our request, via Enterprise Bargaining consultative processes for detailed budget information. We were advised that only global or broad budget details would be made available to us, information about the budgets and performance of individual District Health Services or facilities would not be provided. Further to this we were advised that this is the policy of the current Labor and past Coalition governments.

It is the strong view of the QNU that this union and our members can not participate in a meaningful way to the delivery of an effective and efficient health service if such information is denied to us. We have therefore made a detailed application under FOI legislation for access to budget information for one district health service. We are awaiting advice on this application. It is of considerable concern that we have been forced to go to such lengths to obtain access to information that should be in the public domain. The QNU will vigorously oppose ant attempts to "wind back" the FOI regime in this state. Indeed we have argued for some time that FOI legislation should be extended to the private health sector!

Shrouds of secrecy seriously impede the ability to have any form of meaningful community debate about an issue of fundamental importance to the community - the funding and operation of our health system. Access to information about both the public and private health sectors is of critical importance to the debate at hand and we strongly urge this committee to pay particular attention to this matter in this inquiry.

(i) the effectiveness of quality improvement programs to reduce frequency of adverse events.

In recent years there has been increased emphasis in both the public and private sectors on quality improvement programs to reduce the frequency of adverse events. Hospital and health service accreditation processes, the focus on evidence-based practice and various significant health benchmarking processes are all contributing to the reduction of adverse events. Much more work is required however. As we highlighted in terms of reference (h) above, there are particular problems relating to undue secrecy and the withholding of information in both the public and private sectors.

The main quality improvement standard in the Australian health care sector is the Australian Council on Healthcare Standards (ACHS) accreditation and quality improvement and measurement processes. Their program and set of standards is known as the Evaluation and Quality Improvement Program (EQuIP). EQuIP can be utilised in public and private hospitals, community health care centres, aged care facilities, home and community nursing services, day procedure facilities and other health care services. The ACHS, in collaboration with various Australian medical colleges and other associations, has developed a range of objective tools or clinical indicators to measure the management and outcome of patient care. There are currently 17 sets of indicators available for health care organisations to use. These are: Adverse Drug Reactions, Anaesthetics, Day Procedures, Dermatology, Emergency Medicine, Hospital Wide Medical Indicators, Intensive Care, Internal Medicine, Obstetrics and Gynaecology, Ophthalmology (including Excimer Laser), Paediatric, Pathology, Psychiatry, Radiation Oncology, Radiology, Rehabilitation Medicine and Surgery. (From January 2000 a Hospital in the Home Indicator set will be available.)

As at June 1997 there were 28 ACHS accredited public hospitals in Queensland and 163 non-accredited. (The percentage of public hospital beds accredited was 53%.) This compared to the total for Australian public hospitals of 316 accredited and 411 non-accredited. For Queensland private hospitals the number of accredited hospitals was 31 and non-accredited hospitals 19. (The percentage of private hospital beds accredited was 82%.) This compares to the total for Australian private hospitals of 208 accredited and 115 non-accredited. (It should be noted that Queensland public hospital figures are skewed because of the greater number of very small and isolated facilities and because of the long-standing capital stock deficiencies that are being addressed via a massive capital works program.)9

The QNU supports ACHS accreditation as one method to facilitate continuous improvement in health but we believe that more could be done in this area by government. We support recent initiatives by the federal government that aim to decrease the frequency of adverse incidents but are concerned about the relationship between these and other quality improvement processes and ACHS processes. We are unsure how all of these separate processes and initiatives inter-relate and whether there is a overarching framework that will facilitate the involvement of all key stakeholders in activities aimed at continuous improvement in health. We believe that better integration is required to facilitate consistency of approach with respect to these matters.

The QNU is committed to the promotion of evidence based practice in health and we support all measures that reduce the frequency of adverse events for patients in our health system.

1. Steering Committee for the Review of Commonwealth/State Service Provision Report on Government Services 1999, page 231. Productivity Commission, Melbourne 1999
2. Steering Committee for the Review of Commonwealth/State Service Provision Report on Government Services 1999, page 247. Productivity Commission, Melbourne 1999
3. Australian Institute of Health and Welfare (AH) 1999. Nursing Labour Force 1998, page 12. AH cat.no. HWL 14. Canberra
4. Steering Committee for the Review of Commonwealth/State Service Provision Report on Government Services 1999, page 288. Productivity Commission, Melbourne 1999
5. Meredith Carter An Overview of the Current Health System, page 3. Paper provided to the Brisbane Health Financing Summit held on 21 May, 1999
6. Stephen Leeder, Unhealthy Myths Muddy Medicare, page 2. Quoted on the Public Health Association Web site page titled "Friends of Medicare"
7. Steering Committee for the Review of Commonwealth/State Service Provision Report on Government Services 1999, page 234. Productivity Commission, Melbourne 1999
8. Queensland Parliamentary  Public Works Committee Report No. 39 Robina and Noosa Hospital Projects, page 1. Brisbane 1999
9. AH Australian Hospital Statistics 1996-97, page 11 AH Canberra. AH cat. no. HSE 5.