Public hospital spending in Australia is high and rising fast. Spending pressure will continue to grow as Australians live longer with more chronic conditions and new treatments are developed. Hospitals will keep costing more, leaving governments with tough decisions: bigger tax hikes, squeezing other public services or hollowing out hospitals. 

This report shows that spending on public hospitals increased by $3 billion every year on average over the past decade. Yet hospitals are still under strain. It identifies the need to get the best value out of every hospital dollar to ensure Australians can count on getting essential care. The report provides recommendations for the next National Health Reform Agreement and for state and territory governments.

Key findings

• Public hospital spending per person will increase by a third in the next decade – from $2,500 to $3,300 each.
• Some hospitals are much more expensive than others. The average cost of a knee replacement in Victoria varies by $13,600 between high- and low-cost hospitals. In Queensland, it’s $11,000. In NSW, $9,000.
• Some Australian hospitals excel at preventing complications, such as falls and pressure sores, that keep patients in hospital longer.
• State governments set unrealistically low budgets at the start of the year, then bail out hospitals when they run a deficit at the end of the year.
• The federal government's contribution to public hospital funding should rise in line with growing demand for care.

Key recommendations

• The federal funding cap should be based on realistic demand forecasts and cost growth.
• Governments should ask the independent pricing authority to develop prices that reflect what care should cost, freeing up at least $1 billion to reinvest in care.
• Governments should publish comparable hospital-level data on cost, length of stay, complications, and staffing.
• State and territory government should give hospitals with a good track record of financial management three-year budgets.
• Victoria should amalgamate hospital governance, so more budget goes to care and less on back-office duplication.

The report is accompanied by chart data.