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Hospital Reform: Kevin Rudd Address The National Press Club

Prime Minister Kevin Rudd has addressed the National Press Club on his hospital reforms.

Rudd said the federal government “will take on the dominant funding role for the entire public hospital system”. The government will build a National Health and Hospital Network in which the eight state-run systems will become part of one national network.

Rudd said: “Today we are delivering on the most significant reform of Australia’s health and hospital system since the introduction of Medicare almost three decades ago. The Government will deliver better hospitals by establishing a national network, that is funded nationally, and run locally.”

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Transcript of Prime Minister Kevin Rudd’s Address to the National Press Club.

Better health, better hospitals: The national health and hospitals network

I acknowledge the First Australians on whose land we meet and whose cultures we celebrate as among the oldest continuing cultures in human history.

The Australian Government is delivering on the basics.

This morning’s National Accounts confirmed once again that we have kept the Australian economy growing strongly – while other economies around the world remain devastated by the global recession.

Earlier this week, we delivered on our commitment to launch the first national curriculum for schools in our nation’s history – a curriculum grounded in teaching the basics and one delivered after two years of effort after thirty years of failure.

Today, we turn our attention to health.

Today we are delivering on the most significant reform of Australia’s health and hospital system since the introduction of Medicare almost three decades ago.

Starting today, the Australian Government will build a new National Health and Hospital Network to deliver better health and better hospitals for all Australians.

The Government will deliver better hospitals by establishing a national network, that is funded nationally, and run locally.

For the first time in history the Australian Government will take on the dominant funding role for the entire public hospital system.

For the first time, eight state-run systems will become part of one national network.

And there will be one set of tough national standards to drive and deliver better hospital services.

The Australian Government’s decision to take on the dominant funding role for the entire public hospital system is designed to:

End the blame game.

Eliminate waste.

And to shoulder the funding burden of the rapidly rising health costs of the future.

The hospital system will be run through Local Hospital Networks.

These Networks will bring together small groups of hospitals in a local area, where local professionals, with local knowledge, are given the necessary powers to deliver better hospital services to their local community.

To fund this Network, the Australian Government will take around one-third of the GST revenues and place it in a new National Hospital Fund to be spent only on health and hospitals.

The Australian Government will take on the dominant share of funding future demands on the system.

At the moment we pay around 35 cents in every dollar of public hospital growth funding. Under our reform plan, we will be funding around 60 cents in every dollar.

This is a comprehensive package that I will put to the States and Territories at COAG on April 11.

My message to them is simple: work with the Australian Government, work with the doctors, nurses and other health professionals of Australia who want reform, work with the clinical leadership of our local hospitals who also want reform – and together deliver better hospitals and better health care for all Australians.

If the states and territories do not sign up to fundamental reform, then my message is equally simple: we will take this reform plan to the people at the next election – along with a referendum by or at that same election to give the Australian Government all the power it needs to reform the health system.

The Australian Government’s position is clear.

It also gives effect to my commitment to the Australian people at the last election.

Health and hospital reform cannot, must not, and will not be put off to some distant point in the future.

It must begin now.

The purpose of our plan is simply this: better hospitals, and better healthcare, for all Australians.

This is the single purpose of the new National Health and Hospitals Network (NHHN) we are announcing today.

We will deliver on this commitment by establishing a national network, that is funded nationally, and run locally.

Our plan deals with the reasons why so many Australians seem to fall through the cracks in our current health system.

I share the frustration of patients.

I share the frustration I have heard from our doctors and nurses.

I’ve heard the stories in hospital after hospital.

– There is too much blame and fragmentation, making it hard for patients to work out which level of Government is responsible for the care they need.

– Too many patients are receiving uncoordinated care because of the lack of integration between hospitals and out-of-hospital services.

– Too many mums and dads can’t find proper health care for their kids if they happen to get sick out of normal business hours (which they normally do).

– Too many of our public hospitals are struggling as demand on the system is rapidly outweighing the supply – with one in three emergency department patients, and almost one in six elective surgery patients, waiting for longer than the recommended time for treatment.

– Too many of our local clinical leaders are not adequately involved in decisions about the delivery of health and hospital services in their local communities, when they invariably know best.

And underneath it all, because the current system is a total mess in the organisational relationship between the Commonwealth and the states, there is just too much duplication, overlap and waste.

Failure to fundamentally fix the system would mean that a large part of future investments in the system would be wasted.

Let’s give the current problems a human face.

Let’s imagine a 67 year old man who is retired and lives in the outer suburbs of one of our major cities.

He’s just been placed on a waiting list to get a hip replacement at his local hospital but he’s been told there’s a wait of around 12 months.

That’s 12 months of living with pain, poor mobility and having to rely on his wife to get around.

On the same day a 45 year old woman with a similar hip problem living in another major city, was told that her local hospital could give her a hip replacement in 5 weeks.

Two different people, both in capital cities – but very different standards of care.

The new National Health and Hospital Network aims to deliver a set of national standards, including access to elective surgery.

This means both would get their operations done within a similar timeframe.

If one of them can’t get it at their local hospital then the Local Hospital Network will find that person a bed at another hospital within the Network – or with a private hospital if one can’t easily be found.

The National Health and Hospitals Network will also recognise that patient needs are best served by empowering our dedicated health professionals.

Imagine the situation of two clinicians at a hospital in regional Australia.

They have pioneered the development of new services for elderly patients with multiple illnesses, based on their knowledge of local health needs.

Their work has reduced hospital admissions and improved the health outcomes of elderly patients who frequently visit their local hospital.

Both clinicians would like to take this pilot into a much larger program for their hospital.

They have been waiting for the bureaucrats in a capital city health department to give them the go-ahead on this program for more than two years.

Under the new National Health and Hospitals Network, the clinicians can approach their clinical representative directly.

Providing their new program meets national clinical standards, the Local Hospital Network – which is more likely to recognise the relevance of the program for the local community – can decide to expand the pilot and make it part of that hospital’s day to day operations.

In other words, a new level of local control over the delivery of health services.

In both scenarios, the new National Health and Hospitals Network is designed to deliver better hospitals and better health care.

Doctors want this.

Nurses want this.

And so do the patients totally frustrated by waiting lists or not being able to get on to waiting lists in the first place.

Before the 2007 election, I made a commitment that if elected to government, we would tackle the challenge of reform of the health and hospital system.

That we would end the buck-passing and the blame game.

And that instead, on the reform and the future of the health and hospital system, the buck would stop with me.

Today, the Australian Government honours that commitment.

Today, I honour that commitment.

Each and every word.

Health reform, we know, is one of the greatest long-term challenges facing Australia.

Every day, hundreds of thousands of Australians rely on our health and hospital system to provide quality care for themselves and their families.

Every year, Australians make more than 115 million visits to the local doctor.

Every year, they make use of 54 million hospital services spread across the nation’s 762 public hospitals.

Australia’s health system employs around 740,000 workers, or one out of every 14 Australian employees – including 60,000 doctors and 230,000 nurses.

In building the new National Health and Hospitals Network for the future, the Australian Government is undertaking a massive reform.

But we do not shrink from that challenge one bit.

The time for fundamental reform is now.

But in rising to the challenge of reform, we are building on that which we have already delivered in our first two years in office:

– A 50 per cent increase in hospital funding over the next five years in the Australian Health Care Agreement – a $64 billion investment.

– An unprecedented $1.1 billion investment in training more doctors, nurses and health professionals, including a 35 per cent increase in GP training places.

– A rural doctors incentive scheme that now extends to 500 additional communities and 2,400 additional doctors to encourage them to stay in the bush.

– For the first time, the Australia Government is investing more than $1.8 billion directly in expanding emergency departments, post-acute care and elective surgery.

– Establishing 36 GP super clinics across the nation to provide flexible, integrated care in local communities.

– And, for the first time, the Australian Government is investing directly in the capital needs of local hospitals.

We have also taken action to put the health system on a more sustainable footing, including by rebalancing support for private health insurance for high income Australians – a fiscally responsible measure that the Opposition last week again blocked in the Senate, despite its potential to free up $100 billion for our health budget over the next 40 years.

The reforms we have delivered so far are helping tackle the immediate pressures in our health and hospitals system – our emergency departments, elective surgery waiting lists and workforce shortages.

But they are just the beginning.

There is much, much more to be done.

That’s why two years ago, not long after coming to office, I commissioned the most comprehensive structural review of the operation of the health system in 20 years.

Today we are joined by Dr Christine Bennett who led that review and I take this opportunity to thank Christine and the members of the National Health and Hospitals Reform Commission for their work.

The Commission concluded in July last year that the health and hospital system is fragmented, is at a tipping point and is unable to cope with the challenges it faces in the years ahead.

In the words of the Commission, “now is the time to act”.

Having received and absorbed the Commission’s work, the Government over the last six months engaged in a comprehensive consultation process involving more than 100 forums around the nation – 21 of which I attended.

Today I want to thank the doctors, nurses, allied health professionals, health administrators and other passionate advocates who attended these consultations and shared freely their time and wisdom.

Our consultations underscored the need for reform – with the overriding theme of a stronger Australian Government role, coupled with higher national standards and increased funding for public hospitals.

In addition to the Commission’s Report, the 2010 Intergenerational Report highlighted that our health and hospitals system is not adequately prepared for future challenges – with the combination of an ageing and growing population, the increased burden of chronic disease, ongoing workforce shortages and rising costs.

Based on the same data, Treasury has concluded that by 2045-46, spending on health and hospitals would consume the entire revenue raised by state governments.

This means that states would not be able to fund their health and hospital system, let alone meet their other responsibilities.

Once again, the time for action is now.

The clear message of both the National Health and Hospitals Reform Commission and the Intergenerational Report is that the system needs reform that is fundamental – not just incremental.

Reform that for the first time enables eight state-run systems to become part of a single national network, using consistent national standards to drive and deliver better hospital services.

Funded nationally.

Run locally.

The National Health and Hospitals Network contains seven major reforms.

For the first time, the Australian Government will take on the dominant funding responsibility for all Australia’s public hospitals from the states because the states simply cannot afford to fund the future growth of the system.

The Australian Government’s funding share will almost double, from 35 per cent today to 60 per cent into the future – equating to an additional $11 billion per year from next year.

The Australian Government will take clear financial leadership in the hospital system, permanently funding 60 per cent of the efficient price of every public hospital service provided to public patients.

We will fund 60 per cent of recurrent expenditure on research and training functions undertaken in public hospitals.

We will fund 60 per cent of capital expenditure – both operating and planned new capital investment – to maintain and improve public hospital infrastructure.

No previous Australian Government has accepted any responsibility for the funding of hospital infrastructure – let alone 60 per cent.

Over time, we will also pay up to 100 per cent of the efficient price of ‘primary care equivalent’ outpatient services provided to public hospital patients.

These reforms will permanently reverse the decline in the Australian Government funding contribution for public hospital services over the last decade.

They will put an end to the tiresome cycle of the blame game between the Australian Government and the states over hospital funding.

In exchange for relieving pressures on State budgets, the Australian Government will require system-wide reforms to create a better integrated, unified national health and hospitals network, with national standards, national transparency and national accountability.

Right now, too many patients find themselves shunted from one part of the health system to another.

Under the National Health and Hospitals Network, for the first time, the Australian Government will take full funding responsibility for all GP and GP-related services delivered outside hospitals.

Because one level of government will be responsible for both the majority of hospitals costs and all of primary care, more people will be treated outside of hospitals – as they often should be.

With the Australian Government paying more of the hospital bills, it will have the incentive to make sure people are treated through less expensive and more appropriate primary care services.

This is instead of shunting patients into expensive hospital services predominantly paid for by another level of government – albeit paid by the same, long-suffering taxpayer.

That’s what I mean by ending cost shift and the blame game.

With the Australian Government responsible for all primary health care services, we can finally deliver better integrated, better coordinated healthcare that is more responsive to the needs of patients.

This is what we have already begun to do through the creation of GP Super Clinics.

Once again, this is but the first step.

By taking full funding and policy responsibility for primary care we can also reduce the number of unnecessary hospital admissions that could be avoided through providing better care in the community – estimated at around 441,000 admissions, or 9.3 per cent of total hospital admissions every year.

Bad for patients.

Bad too for the taxpayer.

To help fund these reforms, we will rebalance financial responsibility in the Federation by dedicating around one-third of GST revenue directly to a new National Hospitals Fund.

The Australian Government will also take the dominant responsibility for funding the future growth of the system.

These funds – in the order of $90 billion over the first five years of the new arrangements – will be dedicated entirely to hospital investments.

We estimate this is likely to cost the Australian national budget a further $15 billion over the decade which would otherwise be borne by the states.

This reform will also significantly address the vertical fiscal imbalance in the federation.

If we fail to address this imbalance, the level of government with the least efficient tax base will continue to bear the burden of the fastest growing area of public expenditure (that is, hospitals) – with detrimental effects for the national economy.

The Australian Government is determined to end the blame game in hospitals and health.

And that’s why the Australian Government is putting its own skin in the game.

But under this plan it is important that the States have some skin in the game too – to provide a strong incentive for States to better manage hospital systems and ensure they do not have any reason to start to withdraw money from their health budgets.

To strengthen accountability within the health system, the Australian Government will develop strong national standards for patient care and publish performance statistics for the nation’s hospitals – leveraging its increased funding responsibility to deliver a better standard of care.

For the first time there will be nationally consistent performance standards for hospitals in critical areas such as emergency departments and elective surgery, to help reduce waiting times for the public.

For the first time, Australians will also have access to information about how hospitals and health providers are performing – including safety and quality measures, such as the level of adverse events and hospital acquired infections.

These standards will create a more transparent and accountable health system for the Australian taxpayer.

While health and hospital services will be funded nationally – they will be run locally.

For the first time, Local Hospitals Networks, run by local health, financial and managerial professionals, rather than state or, for that matter, federal bureaucrats, will be put in charge of running the hospital system.

The Australian Government will require the establishment of Local Hospital Networks across the country.

The Australian Government will, in time, also fund Local Hospital Networks directly.

Payments will therefore bypass state bureaucracies and empower local clinical leaders to flexibly tailor health services to local needs and local populations.

If local clinical leadership of a hospital can better deliver services locally and save money, they should be allowed to re-invest what they save in the further delivery of services.

This has been a strong and consistent call from clinical leaders across Australia.

Local Hospital Networks will bring together small groups of local hospitals within a geographic or functional connection, who will manage their own budget, deliver coordinated patient care and be held directly accountable for their performance.

Local Hospital Networks will have a professional Governing Council with clinical representatives, and a CEO who is empowered to make day to day operational decisions, and who is accountable for health outcomes.

A system based on Local Hospital Networks will encourage cooperation in delivering better health care coordination across a population area – particularly with local primary care and aged care providers.

In many states, existing regional health bodies are too remote from local decision making.

The creation of Local Hospital Networks will substitute these arrangements and will not be allowed to result in any net addition to bureaucracy – because as a condition of funding, any increase in the number of local staff working at Local Hospital Networks must be matched by a reduction in head office staff numbers in health departments and regional bureaucracies

And staff will be located in local hospitals themselves.

The Government will pay Local Hospital Networks directly for each service they provide, rather than simply providing block funding to the States.

Payments will be made directly, on the basis of an efficient price per hospital service, determined by an independent national umpire.

Currently, the Australian Government provides block hospital funding to states, who then determine how and where this money is spent.

This is like providing a blank cheque.

In the past, neither the Australian taxpayer nor the Australian Government had any idea where the money went.

Or even if it all went to hospitals.

This must stop.

Under the new arrangements, each Local Hospital Network will be funded for every service they provide to a patient.

Alongside our measures to improve transparency and accountability in service delivery, this reform will foster a culture of innovation and self-improvement

It will become easier to identify the best-run hospitals, who will be able to share their expertise and innovations with other hospitals.

This reform will drive hospitals to eliminate waste and will mean that patients will not be pushed out of the hospitals system – as hospitals are paid a fair price for every service delivered.

In addition to the fundamental structural reforms I have announced today, the Australian Government will also take on the dominant role for the future growth of the system beyond a simple linear projection of GST payments.

The gap between GST growth and projected hospital spending growth on a no-policy change basis must still be met. And that is where the Australian Government must step in.

Within this framework of fundamental reform, further initiatives must also be embraced in the future including:

– the inadequacy of hospital bed numbers now including specific problems in emergency departments, elective surgery and sub-acute care;

– further reforms in the expansion of primary care;

– the undersupply of doctors, nurses and other health professionals;

– the inadequacy of electronic health records across the system; and

– preventative health care, aged care, mental health and dental services.

These also formed part of the National Health and Hospital Reform Commission’s deliberations.

The Government is also signalling today that we will be acting in these areas in the future.

But further significant investment in these critical areas must be built on the basis of the fundamental reforms to the system that are part of the National Health and Hospitals Network.

Reform is essential.

You can paint a wall with the most expensive paint in the hardware store.

But before you pick up a paintbrush, you have to do the preparation. You have to strip off the old wallpaper and see what’s underneath. You have to sand the walls and repair the cracks first.

Because if you don’t, the wall might look alright for a couple of months, but the cracks and the flaws will reappear.

And you’ll end up having to repaint that wall time after time.

Our health system has cracks and flaws. Some of them we can see, some of them are under the paint.

And those flaws have been repainted and papered over for too long.

We’re doing the preparations now. With the structural reforms I am announcing today, we can go on to build and extend a health system for the 21st century.

We can do this together – with the doctors, nurses and other health professionals who want reform – and with the sign up of the states and territories.

And if the states and territories do not sign up, then we will take this reform plan to the people at the next election – along with a referendum by or at that same election to give the Australian Government all the power it needs to reform the health system.

What I have outlined today is also a landmark reform to one of the most important sectors of the Australian economy:

I think the Australian people have been waiting too long for health reform.

So today, Australia has a choice.

We can continue blaming others when things go wrong.

Or we can take the hard road of reform.

Building a new Health and Hospitals Network is fundamental to building a stronger and fairer Australia.

A stronger Australia because better health and better hospitals are critical for workforce participation, for productivity and for the efficient use of public finance.

A fairer Australia because if you don’t have universal access to quality health care, the fair go has gone back out the door.

Just like it did with WorkChoices.

And we all know from history how ideologically hostile our political opponents have been towards universal health care in the past.

I know health and hospital reform won’t be easy.

It never has been.

It’ll be one of the hardest reforms that the Government will tackle.

But this Government is working hard to build Australia’s future.

We are proud of our record of achievements in keeping the economy going.

We are proud of what we are achieving in education.

And we know what we must now achieve in health.

A National Health and Hospital Network, that is funded nationally and run locally, is about delivering the basics.

And this Government intends to get on with the job.

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Malcolm Farnsworth
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