The peak body for Victoria’s publicly funded healthcare services has warned that the Victorian Government’s cost cutting measures will have significant impacts on the delivery of care and services for Victorian patients.
Metropolitan, regional and small rural health services have been asked to develop budget action plans by the end of June with the expectation they achieve a financial breakeven by 30 June 2025. They have also received significant cuts to healthcare funding in their model budgets. Health services have been left with no choice but to develop plans that include redundancies of frontline staff, cutting hospital beds and winding back planned surgeries. These plans then need to be submitted to the Department of Health for approval – a process that could carry on over weeks.
VHA CEO Leigh Clarke said that the Victorian Government’s unrealistic savings targets would have serious consequences for the delivery of care and services in the community. Just as households are feeling the pinch from rising cost of living expenses, so too are our health services through the rising cost of service delivery.
‘Over the past six months, we have seen a series of cost-cutting measures which started with cuts to non-clinical staff and back-of-house services, and was then followed by a directive for all health services to rein in spending. The trouble is – this is now shaping up to mean cuts to frontline staff and services and will impact Victorian patients accessing the public healthcare system,’ Ms Clarke said.
‘Doing more with less is not an option, particularly as many services have already made cuts to non-clinical staff and services. This budget squeeze leaves no more room to move.’
Ms Clarke said that the budget action plans ordered by the government would leave services with sizable deficits and, given the directive to achieve financial breakeven by July 2025, it leaves services with some difficult choices ahead.
‘Any suggestion that these measures are only to address wastage in the system is false. These measures will go way beyond any perceived duplication or wastage. The consequences of these cost-cutting measures will mean redundancies of frontline staff, the closure of hospital beds, and longer waiting lists for urgent care and planned surgery,’ she said.
Ms Clarke said the VHA had already observed these issues playing out with some services placing a freeze on hiring, which was directly linked to cost-cutting measures.
‘It is still possible for the Victorian Government to turn the corner on this if it is truly committed to ensuring there are no impacts to patient care, frontline staff, planned surgery and no loss of services. We urge the government to change course and reverse the cost-cutting measures that have been applied to the sector, she said.’
Ms Clarke noted that the Department of Health would be reviewing the draft budget action plans of services and entering negotiations over the coming weeks and months, and called for meaningful discussions that seek to limit the impact of service cuts.
‘We’re calling on the Department of Health to take a hard look at the budgets of services when it receives these submitted budget action plans and really consider the needs of local communities, including the fact that we have an ageing and growing population and changing patient needs. If we truly want a healthcare system that meets the evolving needs of all Victorians, then the government simply can’t afford to cut services.’
Health services across metropolitan, regional and small rural health have been asked to develop budget actions plans and submit these by the end of June with the expectation they achieve a financial breakeven by 30 June 2025. This expectation was communicated in the absence of detailed funding guidelines / targets and has meant health services have had to tighten their budgets.
Health services have received model budgets for financial year 24-25 but will still need to submit their budget action plans to the Department of Health for approval – a process that could carry on over weeks. Some services, including major metropolitan services, have determined that the request for financial breakeven in one year will leave them with a sizeable funding gap between what the Victorian Government is willing to fund and the services they need to deliver to their communities. Health services have been developing plans which include redundancies of frontline staff, cutting back hospital wards and winding back planned surgeries. There will be flow-on effects for the delivery of care if the government doesn’t re-consider its cost cutting directives, leading to longer waiting lists, loss of services and frontline staff, and worse system access.
Metropolitan, regional and small rural health services received their modelled budgets earlier this month which included cuts to the following:
Metropolitan and regional health services that are funded by ‘activity’ (i.e., the number of patients that are expected to present to hospital) received cuts in the number of activities the Victorian Government is willing to fund. This is despite projected increases in patient demand consistent with the past year. The readjusted activity alone leaves some services with a reduction in funding of more than $10 million in the next financial year 24-25.
Funding clawback for up to 70% of the cash reserves of small rural health services – in which they have been requested to address part of the cuts through a one-off contribution from their cash reserves.
These measures are part of a series of cost cutting measures and follows a directive from the Minister for Health in early May to contain costs. Health services will not receive any further ‘top-ups’ from government to cover any future deficits and will work closely with the Department of Health to ensure plans are in place to reduce the ongoing rate of cost growth (e.g., limiting use of consultancies and agency staff, as well as locums). Many services have very likely imposed hiring freezes as a result of these cost containment measures. This comes on top of cuts to non-clinical staff and services (back-of-house savings) which metropolitan and regional services have already made.
For further information contact
Toli Papadopoulos
0408 851 302