NSW public expenditure on health represents one-third of the entire NSW budget. Despite public hospitals consuming nearly 60% of the high and rapidly growing health spending, elective waiting times have lengthened in NSW compared to other states in the last decade.
The focus of NSW health policy must be to reform the rigid public service monopoly model of public hospital care.
The adoption of private sector methods, including greater involvement of private operators in the delivery of public health service, should be encouraged to enhance productivity and improve access to quality hospital services at the least cost.
The implementation of comprehensive structural reform stalled under the NSW Labor governments from 1995 to 2011. Fledgling privatisations of public hospital services, by experimenting with privately financed projects (PFPs), were discontinued, principally at the bidding of public sector health unions.
PFPs are one of the avenues that have the potential to fundamentally change the traditional role of the NSW government from health service funder and provider of centrally coordinated hospital services to that of health service purchaser.
This has the potential to deliver efficiency gains by creating a market for public hospital care-at least to the extent possible under Medicare. It would oblige competing providers to adopt business axioms (such as a culture of competition, innovation and more customer-focused service delivery) that are usually foreign to public hospitals.
The provider would carry responsibility for a hospital's entire budget, including 'core' clinical services like nurses, doctors and allied health, rather than the purchaser - the state government.
Most importantly, effective managerial autonomy would include the freedom to hire clinical personnel on terms that are relevant and suitable to local conditions.
Centralised control of human resources by NSW Health-the centrepiece of the restrictive public model-means that hospital managers currently lack administrative authority over their clinical workforce.
Statewide nursing awards and prescribed ratios of nurses to patients, combined with the freedom that visiting medical officers and staff specialists exercise over their work practices, deny managers the flexibility to secure efficient and effective care.
By default, the NSW Coalition appears destined to retain a diluted PFP model adopted by Labor in 2001. This limits future PFP outsourcing in health to projects that involve only building services and other so-called 'non-core' support services such as cleaning, catering and maintenance.
Instead, the centrepiece of the Coalition's design for health policy is its necessary but insufficient reform of the governance and management structure of NSW Health.
Jeremy Sammut and David Gadiel have produced a report, 'How the NSW Coalition Should Govern Health: Strategies for Microeconomic Reform' which was published by the CIS this week and is available at www.cis.org.au.
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