Curing sick hospitals

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  • Published 20040601
  • ISBN: 9780733314339
  • Extent: 268 pp
  • Paperback (234 x 153mm)

ONE THING I have learned is that the so-called “health debate” is between insiders – doctors and ministers. Usually it is about hospital budget overruns and hospital waiting lists. More recently, it has been about medical indemnity. Under-resourced and timid journalists facilitate the views and interests of insiders on each of these issues. The debate largely excludes the community. The major health issues are often ignored.

Let me illustrate what I have learned about these major issues.

After heading two health inquiries in NSW and South Australia, I have concluded that no one runs hospitals. Yet public hospitals cost $24 billion a year and want more money for more beds. They take over half of state health budgets. They dominate the health debate. Mental health and Aboriginal health are blotted out by the shrill demands of the hospital sector.


LET ME EXPLAIN how hospitals work. Doctors admit, treat and discharge patients – and largely see their roles as professionally autonomous. Their clinical decisions drive both the hospital inputs and outputs. Doctors supply the clinical services and manage the clinical demand. Senior executives are “responsible” for staffing and budgets but don’t make the clinical decisions that affect outcomes. They do not involve themselves, quite properly, in clinical decisions. So hospital budgets blow out and senior executives get the blame when others are really pulling the levers. Nurses hold the system together but don’t have any real authority.

Hospital boards are usually political decorations. Few seriously concern themselves with major quality and safety issues. Ministers and CEOs of health departments micro-manage in response to political pressures but mainly succeed in confusing the organisations and making senior executives gun-shy in taking decisions.

The board and CEO of a well-run Australian public company would run a mile if they had to run a large public hospital. The situation is little different in private hospitals. Peter Smedley, the former CEO of the Mayne Group of hospitals, thought that he and his colleagues ran the Mayne Group of hospitals and tried to reduce costs. What a foolish thought! Doctors sent their patients to other hospitals and Smedley lost his job in short time. Hospitals in Australia have a life of their own with no clear lines of responsibility and accountability. Only the good sense of people in the system prevents it from descending into chaos. No one runs hospitals. Governance is fundamentally flawed.

For this anarchic situation, the states cannot blame the “Feds”. Hospitals are clearly a state responsibility.

The lack of clear responsibility and accountability in hospitals demonstrates quite compellingly how we need to broaden consideration of health from the present attitude of simply seeking more money to fund the system to how the system and the delivery of services need major reform.

Medicare has been very successful. Most, but not all, Australians get a quality health system at reasonable cost by world standards. Our life expectancy is the second highest in the world. But Medicare is a health-insurance or funding scheme. It finances the existing system and structure of health services. It is about funding, not delivery of health services. Governments are under pressure to provide more money for this or that service. The system is taken as given. That is no longer feasible. As the late Dr John Paterson, former secretary of the Victorian health department, described it, the system is nearing the end of its architectural and design life. Health is Australia’s biggest industry, taking about 9 per cent of our GDP. Governments pay 70 per cent of our national health bill of about $66 billion. They have a responsibility to ensure that the money is effectively and efficiently spent. It does not happen. If I were a treasurer, Commonwealth or state, I would be cautious about providing more money for health unless I could see that new funds were linked to a reform of the system.

Apart from the absence of real responsibility and accountability in running hospitals, there is other clear evidence that the system is unsustainable and reaching the end of its architectural and design life.


WE ARE TOLD repeatedly by the insiders and it is conveyed to us by the media that our hospitals are in crisis and we need more beds. But I can’t recall one media story in recent years pointing out that 30 per cent of patients in hospitals shouldn’t be there. But it is true. They are there because of system failures and a highly hospital-centric health system. Many patients would be much better treated in the community if services were available. A survey by the Prince of Wales Hospital in Sydney recently found that 79 per cent of elderly patients could have been kept out of hospital if they had visited their GPs earlier. People with panic attacks, for example, flood emergency departments when they could be more effectively and efficiently treated in the community if the facilities were available. They are known as “frequent flyers”.

Because hospitals are apparently always in crisis, it is politically easy to abstract more money from governments when the health of the system and the community clearly suggest that more money should be spent in non-hospital areas. But these other areas don’t have the political clout and media savvy of the hospital lobby.

We would be much better served if we managed the pressure on the hospitals with better care in the community, better management of emergency-department pressures and better discharge planning from hospital to the home. We should encourage the regional health authorities to expand initiatives such as “hospital in the home”, rehabilitation in the home, GP home-link, aged/acute interface programs and chronic disease management programs. All these programs would ease the pressure on the hospitals and serve the community better.


ANOTHER MAJOR SYSTEM problem is that demand keeps rolling on and on, promoted by unrealistic public expectations, clinicians, drug companies and medical-technology companies. We all want more services and facilities. The media pander to these unreal expectations and undermine public confidence in good health decision-making. An obvious example is the availability of new drugs. We see campaigns for all sorts of new “wonder drugs”. There is pressure from the drug companies through patient groups that this or that drug will save lives and reduce suffering. That is probably true, but there must be a rigorous and transparent process. Information-poor journalists are no match for drug companies with their enormous marketing and public relations budgets.

There would be a far greater health dividend if an extra $10 million was spent on an effective anti-smoking campaign and clean water for Aboriginal communities, rather than an extra $10 million for hospital beds and drugs. And the issue is not just within the health budgets. I recall a senior intensivist at a major Sydney teaching hospital advising me that the Government should spend more money on speed humps on the road, rather than more money on ventilators in intensive-care departments for road-accident victims. But so often ministers get sucked into the micro detail and lose all sense of a health strategy.

For good policy reasons, we have decided that the supply of limited health dollars and resources should not be restricted by price, which would exclude those who do not have the ability to pay. But we are left with a major problem of mediating and managing the demand. Hospital beds will always be filled. They are like the family refrigerator. There’s never enough room. Priorities in health have to be set and choices made.

Some say the community doesn’t know what it wants but in every survey that I have seen, the community has a well-developed view of where priorities in spending should be – mental health, children, particularly those subject to violence, and Aboriginal health. I don’t think the public can be expected to finetune the demand but it has a very clear view about where the broad priorities should lie. We do not attempt to set priorities so the money and resources go to those who have influence and media savvy – the “worried well”. The meek do not inherit resources in the health system.


DESPITE A LOT of research, meetings and statements, there is no rigorous monitoring and reviewing of the quality and safety of health care. Very few hospitals in Australia have a transparent, rigorous and systematic program to identify and remedy quality and safety problems. Clinical services in many hospitals are, frankly, unsafe, often with insufficient activity to maintain the skills of staff, and should be closed. But local clinical and political interests insist on keeping them open.

In his excellent paper to the Australian Health Care Summit in Canberra in August 2003, Professor Geoff Richardson of Monash University highlighted this issue. The Quality in Australian Health Care Study (QAHCS) reviewed hospital medical records in NSW and South Australia. This 1995 review, extrapolated to the whole of Australia, estimated that “about 470,000 hospital admissions were associated with an adverse event and these would have resulted in 18,000 deaths and 50,000 cases of permanent disability”. There were 280,000 cases of temporary disability. In 1999, the updated QAHCS noted that half the adverse events were avoidable and that 60 per cent of deaths in hospitals could be avoided. The Medical Journal of Australia, in an editorial in 1999, reported: “Welcome though various initiatives are, the pace of change nevertheless seems slow, given the stark message of the original study four years ago.” As Richardson suggests, being conservative and assuming that only 25 per cent of deaths are due to avoidable adverse events, that is 4500 deaths a year. That is 50 times the number of Australians who died in Bali. The national cost of these avoidable adverse events was estimated at more than $4 billion in 1995-96. There are a lot of journalists and others asleep at the keyboard on this one.

These are system failures. Every occupation and profession has incompetent people. Malpractice in medicine is addressed but there is no comprehensive checking and effective credentialing of doctors as to their competence.

So what is the response? The Commonwealth Government has recently provided $580 million to further subsidise medical premiums of doctors. It addresses the symptom and not the problem. The real problem involves accreditation (particularly of small hospitals), reliable and efficient records, better hospital systems, consolidation of specialist services, clinical accreditation, peer review, but above all, an openness so that the issues are addressed and not hidden for fear of professional, legal, financial or political repercussions. A veil of silence descends. The real issues are avoided.

There is continual pressure for more skilled health staff. But much of this is putting the cart before the horse.

The structure of the workforce is more appropriate to the needs of the 19th century than the 21st century. It is archaic and incoherent. As put to me by a senior clinician in NSW, “We have boxes everywhere, junior doctors, clinicians, nurses, allieds, managers, colleges and universities, but there is not a thesis or a plan that draws it all together.” Training and work are in separate compartments. Teamwork is not promoted. Work demarcations abound. Health is rife with restrictive work practices and denial of career prospects, particularly for nurses, whether it is in the community or hospitals. Many senior nurses are more skilled and experienced than most junior doctors and many registrars. Because of the opposition by obstetricians, less than 10 per cent of normal births in Australia are managed by midwives. In the Netherlands it is over 70 per cent and in the UK over half. Many more leave nursing for management or academia because of a lack of career prospects and financial reward. The medical colleges protect their own interests in the name of ‘quality’.

There are large central health department offices. There is little linkage between workforce plans, if they exist at all, and budgets, infrastructure planning and delivery of services. The labour market is supply-driven with little effective linkage between the supply through training and educational institutions and the demands of a changing health system. There are serious shortages of doctors in outer suburban and rural areas, yet seeming adequacy or perhaps oversupply in more prosperous metropolitan suburbs. Provider numbers that enable doctors to access public subsidies are available regardless of whether more doctors are needed in Bellevue Hill or back of Bourke.

The changes in the Australian workforce have helped transform the Australian economy in the past 20 years. But that workforce renewal has not touched the professions, and particularly the health sector, where jobs need substantial redesigning and work processes must be significantly re-engineered. Over a period, this will deliver major productivity gains and enhanced job satisfaction, particularly for nurses. If there is not a productivity dividend of at least 40 per cent in workforce reform over a decade,
I would be very surprised. We really must get outside the “workforce square” to look laterally at this very serious problem. Health is Australia’s largest industry and cannot be excluded from workforce reform.

In the late 1980s, I attended a round-table discussion with the then British Prime Minister Margaret Thatcher in Sydney. She was asked: “Now that you have reformed the work practices of printers and coalminers, what do you propose to do about the restrictive practices of doctors and lawyers?” She replied: “It is a serious issue, but if you don’t mind, I will leave it to my last term.”


ANOTHER MAJOR SYSTEM problem is the divided responsibility between the Commonwealth and state governments in health. In the recent Generational Health Review in South Australia, this problem was continually raised. “It is all very well for the state government to review its health system but a major problem is the inefficiency, fragmentation, gaps, cost and blame-shifting that result from the different roles of the Commonwealth and state governments in health.” This view was expressed not only by those working in the health system but also by the community generally. The problem of divided responsibility is clearly and well understood.

Many examples were mentioned. One was the pressure on state hospital emergency departments because of inadequate funding or management of general practice services in the community. The other was the shortage of Commonwealth-funded aged-person facilities, which resulted in aged and frail persons remaining for long periods and unnecessarily and expensively in state acute hospitals. There are many other consequences of divided responsibility – delays in elective surgery in the public system because of emergency department priority, inadequate attention to prevention and disease management and poor workforce planning.

Because of the widespread understanding and waste of the present divided system, I am confident that the community would welcome a resolution of the problem. In this case, I think good health policy would be good politics as well.

The insiders won’t fix it. They are caught in the detail and find it very convenient to blame someone else.

In my view, the best solution would be for state governments, either singly or together, to cede their health powers to the Commonwealth Government and, hopefully, to achieve a unified and national health service. There is precedent and support for this. The Kennett Government ceded most of Victoria’s industrial relations powers to the Commonwealth. As Federal Industrial Relations Minister, Tony Abbott, last year canvassed the possibility of the Commonwealth using its Corporations power to supplant the state’s industrial relations powers. Consistent with that view as Federal Health Minister, he said in March this year, “Why do not the state’s in the spirit of co-operative Federalism, say to the Federal Government ‘Look, why don’t you take over the health systems. Then there would be no more buck passing’.”

Tony Abbott’s comment was dismissed as “hot air”, but taken at face value, it was the most sensible suggestion that I have heard in health for a long time. But true to form, the media got it screwed up again and reflected the common view that hospitals equals health. The media changed the issue from the Commonwealth taking over state health services, to taking over state hospitals.

It would be sensible for the Commonwealth to take over state hospitals, but that is an inadequate response. It would leave unresolved the lack of integration of health services between hospitals and other providers of health services. Any integration should include not only state hospitals, but other state health services such as disability, Aboriginal, mental health, dental, child and youth, domiciliary care, nursing and drug and alcohol services. They must all be included in the package or the present fragmentation will continue.

A state handover of health services to the Commonwealth may be politically too difficult for some states. A practical and feasible alternative which is being canvassed, would be to establish a joint Commonwealth/State Health Commission in any state where the two governments could agree. I envisage that the joint commission, with shared governance, would be responsible for the funding and planning of all health services in a state. Consistent with an agreed plan, the commission would then buy health services from existing providers – Commonwealth, state, local, NGO and private.

A political agreement between the Commonwealth and any state is essential. If this political agreement is achieved, I am confident that we would see a more cohesive and integrated health service, delivered much more efficiently. Once the benefit was clear in one state, probably a small state to begin with, I am sure other states would follow.

I think this proposal is feasible and would have strong public support.


PERHAPS MORE MONEY should be spent on health in Australia, but it must be clearly linked to system reform on such big-ticket issues as:

  • How hospitals are run.
  • With unlimited demand for health services, how should priorities be determined?
  • How do we ensure rigorous and transparent quality and safety programs to minimise accidents and unnecessary medical treatment?
  • How can the health workforce reflect the needs of the 21st century?
  • How can the cost shifting and blame avoidance of the divided Commonwealth and state system be resolved?

These issues are fundamental. It is time to shift our focus to the way health services are delivered and not just how they are financed. But the media give us very little sense of the real issues at stake. They have become the mouthpieces for the insiders in health – doctors and ministers. The fourth estate has become the lazy estate.

The two reviews that I chaired really only gave a few years’ breathing space to a hard-pressed system. In the March 2000 NSW Review Report, I said: “Behind all that we have described and recommended in this report, there is a major problem in an ever-growing demand for health services. The more facilities that are provided, the more will be utilised. We are inclined to believe there is a cure for almost everything, even inconveniences … Because health resources are limited, they have to be rationed. That is what waiting lists and waiting times in emergency departments are about. But instead of publicly debating the resources available for health and how priorities should be allocated within these resources, the current debate is about symptoms, eg the closure of hospital beds … How can we decide, for example, the merits of spending public money on the last few days of a patient’s life, rather than on babies, children and mothers? We need an informed and serious public discussion about health directions and priorities.”


WE STILL DON’T have that “informed and serious public discussion”. The media take us down side alleys.

In the April 2003 South Australian review, I said much the same: “We have continual pressure and demands on the system for better equipment, more drugs, more beds and more surgery. These pressures and services are all defensible and probably beneficial on their own merits. But they can be and often are at the expense of Aboriginal health, mental health and early intervention to help children who are the subject of abuse … Priorities have to be set and choices made. So often at present, the powerful in the health service pre-empt the dollars.”

In presenting both of these reviews, I told ministers that our reports provided only short-term relief or bandaids. They needed to address the longer-term system failures that I have described. Those system failures are getting more obvious every day.

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About the author

John Menadue

John Menadue AO is a Centre for Policy Development Board Director.He headed the Department of Prime Minister and Cabinet from 1974 to 1976, working...

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