Health budget on life support: will Victoria spend billions more?

ACM revealed in February Victoria's hospital system was outspending its budgets by historic amounts and heading for a $3 billion deficit by June 30.

The massive structural deficit represents a double whammy for the government.

First, it will have to find the missing billions to ensure hospitals across the state can pay their staff and keep their doors open.

Then it will have to decide whether to spend billions of dollars more in the coming budget to ensure the record deficits don't repeat in 2024-25.

Health system experts told ACM the record hospital deficits showed the government's budgets were too tough.

One senior hospital executive said health services had "given up" trying to break even.

Health economist Dr Stephen Duckett - who designed Victoria's hospital funding system - said the government had clearly been "setting unachievable budgets".

"Treasury and the government have been in denial about the state of the Victorian hospital system for at least five years, predating COVID," Dr Duckett said.

The health department has responded to the billion-dollar shortfalls by ordering hospitals across the state to meet strict belt-tightening measures. Some small rural health services have said the cut-backs will affect patient care.

The government has plunged money into certain parts of the health system, but got mixed results.

Its $1.5 billion COVID Catch Up Plan for elective surgery opened Patient Support Units at 23 health services across the sate to help patients prepare for surgery, two new public surgical centres and 10 new Rapid Access Hubs.

Health Minister Mary-Anne Thomas said on May 1 that the program had brought the elective surgery wait list back to its pre-COVID height. But the Minister didn't say the government was already 27,000 surgeries short of its target for the year.

The investment was also supposed ensure more patients were treated on time, with 100 per cent of urgent, 83 per cent of semi-urgent, and 95 per cent of non-urgent patients seen within the recommended time frame.

The system met the first target, but fell 20 per cent short for semi-urgent patients and 15 per cent short for non-urgent patients. Just 63 per cent of semi-urgent patients were being treated within the recommended 90-day period.

The two-year program essentially ends on June 30. Will the government renew it, or scrap it with more than 62,000 patients still on the waiting list?

The other big question mark hanging over Victoria's health budget is the prospect of system-wide hospital amalgamations.

Sources who have seen the draft Health Services Plan - created by an expert advisory committee set up by the state government - said it contained "sweeping" changes to the way Victoria's hospitals were administered.

Smaller regional health services fear the looming changes are a cost-cutting measure, with the Victorian Healthcare Association saying amalgamations could only benefit the system alongside substantial funding increases.

VHA policy and advocacy manager Belinda Bravo said the massive financial shortfalls in the hospital system revealed a structural deficit that needed to be addressed, regardless of whether services merged.

"We're concerned that the Victorian Government is pursuing a significant reform to the structure and governance of Victoria's health system with next to no investment in the system," she said.

"It's essential that the Victorian Government takes responsibility for what this substantial reform involves and provide ongoing support to health services throughout the change management process."