Financial 'train wreck' forces rural hospitals to make deep cuts

The 50 services - which are run on a shoestring - have been told to find cuts of between $90,000 and $1 million to non-clinical staff and services, but many have said it will inevitably hit patient care.

The mandates were sent out on March 1 as the government grapples with a public hospital system in historical financial peril.

ACM revealed in February that in just the first six months of 2023-24, the state's public hospitals had recorded their worst ever deficits, with every health service in the state in the red and many running out of the operating cash needed to pay their staff.

The latest data for the seven months to January 31, obtained by ACM, showed the situation had deteriorated further.

The internal documents showed more than half the state's health services didn't have enough available cash to ensure staff and services were maintained.

Hospitals are contractually required to keep 14 days' cash available to maintain operations, but 41 of the 75 services had already crossed that mark.

The data also showed the system overall dipped below the 14-day threshold in early March and would hit zero days by mid-April. A chart showed the cash decline rapidly accelerating.

Some services that have relied on top ups in previous years said they were seriously worried about getting the necessary extra funds this year.

The state government has repeatedly downplayed the current historic deficits and cash shortfalls, saying hospitals have regularly recorded deficits in previous years. But experts told ACM the data showed the system was completely out of control.

"The reform required to turn this train wreck around is so incomprehensible that no political or health leaders with have the stomach for it," one hospital executive said.

The leaked January data showed the hospital system statewide was heading for a cash deficit equivalent to 24.7 days' operating costs.

The same data showed Small Rural Health Services were tracking to a surplus of 55 days available cash, but the small services said the mandated cuts would burn through that buffer.

One former rural hospital CEO said the cuts made no sense from a government revenue perspective but could do huge damage to the health services.

"Financially [the savings] are marginal at best and this will have an impact on their local communities," they said.

"What normally happens in these smaller services is they use funding from a variety of sources to deliver fundamental clinical services.

"Small adjustments like this can have a huge impact if it means they need to reduce the EFT of a particular staff member.

"The position becomes less attractive to the clinician because they are not getting sufficient work. Typically they will relocate to another centre as a result."

A state government spokesperson said the non-clinical cuts were part of an effort "to prioritise the frontline health services [Victorians] need".

"Streamlining back of house functions will not impact our frontline health workers," the spokesperson said.

But many services said any further non-clinical cuts would force doctors and nurses to take on administrative tasks, affecting patient care.

The Victorian Healthcare Association - which represents the public hospital sector - said rural services had already made the cuts they could afford to make.

"Small rural health services are already running an incredibly lean operation," VHA CEO Leigh Clarke said.

"While all affected services will struggle to absorb these costs, we're worried that the government is taking a blanket approach without considering the scale of smaller services."

Ms Clarke also criticised the lack of transparency behind the size of the cuts.

"We're also not clear how the proposed savings requests will contribute to the overall budget deficit in the Victorian public healthcare system," she said.