Public hospitals; their efficiency and funding policy in Victoria

Abstract

This paper examines the impact of the introduction of casemix funding (together with budget cuts) to public hospitals in Victoria over the period 1992/93 to 1995/96. One of the aims of introducing casemix funding at the time was to increase efficiency, which is defined as reducing the amount of inputs required for a given output produced. However, the evidence shows that since this period in Victoria the rate of growth of overall health expenditures has increased, suggesting inefficiencies. During the implementation phase of casemix funding, there were many hospitals that either amalgamated or closed. This paper shows that this activity occurred in rural Victoria. It will be shown that, although the new funding policy alters the way in which scarce resources (government funding) are distributed to acute hospitals, it is not evident that this alteration has resulted in improved efficiency. Evidence also indicates that standards of care, as measured by the number of patients on the non-emergency waiting list, have since fallen.