Ideas@TheCentre
Reform NSW health
Expenditure on NSW public hospitals has skyrocketed in the last decade from approximately $7 billion to more than $12 billion a year.
This is unsustainable. The state auditor-general predicts that NSW government spending on health will consume the entire state budget by 2033 if current expenditure growth continues.
Instead of implementing long overdue productivity-boosting reforms, the O’Farrell government has re-birthed the failed policy of its predecessor. It has created 15 Local Health Districts (LHDs) that are virtually identical to the 15 Local Health Networks the Keneally Labor Government created in 2010.
The Coalition’s health policy won’t increase efficiency or restore local control over health services as promised before the 2011 state election. The NSW Health department will continue to micro-manage hospitals to prevent budget overruns that Macquarie Street will have to pay for.
What the Coalition should do to improve the financial and operational performance of public hospitals is make LHDs fully financially accountable so they can have real managerial independence and real incentives to increase efficiency.
LHDs should be modelled on the British National Health Service Hospital Trusts, which have far greater freedoms and responsibilities, including the power to borrow and retain surpluses.
The rigid, state-wide terms on which doctors and nurses are employed should also be scrapped, so LHDs can figure out the most flexible and cost-effective way of delivering services.
And Privately Financed Projects (PFPs) should be reintroduced to give more efficient private operators full control over the hiring and firing of hospital staff, including the ability to eliminate restrictive work practices.
Competition with private operators would encourage hospitals that remain in state hands to lift their game and adopt more efficient, ‘business-like’ methods that are usually foreign to public hospitals.
The Coalition’s administrative reorganisation of NSW Health is the fifth in 30 years. It is another round of ‘system redesign,’ which insiders call ‘rearranging the deck chairs on the Titanic.’
The rapid ageing of the population will increase pressure on public health services. If longer waiting times are to be avoided, we have to develop innovative ways to get more services for each increasingly scarce health dollar spent.
We can no longer afford to keep on quarantining the public health sector from the microeconomic reforms that have improved the productivity of other government instrumentalities since the 1980s.
Dr Jeremy Sammut is a Research Fellow at The Centre for Independent Studies. His report, with David Gadiel, How the NSW Coalition Should Govern Health: Strategies for Microeconomic Reform, was published by the CIS this week.
