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The most important step to fixing the health system is curing sick hospitals

By John Menadue - posted Thursday, 17 June 2004

After heading two health inquiries in NSW and South Australia, 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.

I have also concluded that no one runs hospitals. Yet public hospitals cost $24 billion a year and want more money for more beds. They take mare than 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 the outputs. Doctors supply the clinical services and manage the clinical demand. Senior executives are "responsible" for staffing and budgets; quite properly they do not involve themselves 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. 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.


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 Australians get a quality health system at reasonable cost by world standards. But Medicare 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; the system is taken as given. That is no longer feasible. Health is Australia's biggest industry, taking about nine 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, which does not happen.
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.

Because hospitals are apparently always in crisis, it is politically easy to extract 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 growing, promoted by unrealistic public expectations, clinicians, drug companies and medical-technology companies. We all want more services and facilities. The media panders to these unreal expectations and undermines public confidence in good health decision-making. In reality there would be a far greater health dividend if an extra $10 million were spent on an effective anti-smoking campaign and clean water for Aboriginal communities, rather than an extra $10 million for hospital beds and drugs - or even money spent outside specific health areas. But so often ministers get sucked into the micro-detail and lose all sense of an integrated 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.
Community surveys demonstrate that the general public has a well-developed view of where priorities in spending should be - mental health, treatment of children, particularly abused children, and Aboriginal health - yet we do not attempt to set priorities so the money and resources go to those who have influence and media savvy - the "worried well".

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. 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 of doctors as to their competence. The Commonwealth government's response to this problem has been to provide $580 million to further subsidise insurance premiums of doctors. This addresses the symptom but 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.

There is continual pressure for more skilled health staff. But much of this is putting the cart before the horse. The structure of the medical workforce is more appropriate to the needs of the 19th century than the 21st century. It is archaic and incoherent. 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.

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.

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Article edited by Betsy Fysh.
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This is an edited extract from Griffith REVIEW: Making Perfect Bodies.

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About the Author

John Menadue AO is a former Australian Public Servant. He was head of three Federal Government Departments, including Immigration and Prime Minster and Cabinet. John was also a Telstra Director and Chief Executive Officer of Qantas. He is Chair of New, an independent online political newsletter.

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