By Dr Rhonda Kerr
Dr Rhonda Kerr has more than 35 years experience in health economics, health service and facilities planning. Her Ph.D examined the connection between funding for hospital buildings, medical equipment and systems with the effectiveness and efficiency of hospital services.
Hospitals and the Covid-19 pandemic
Australians involved in healthcare, and particularly hospitals, watched with growing concern as American and European hospitals were overwhelmed with patients arising from the COVID pandemic. We wondered how well our hospitals would cope when the pandemic came to Australia. COVID-19 has shone a light on weaknesses in many systems. What are the weaknesses in Australians hospitals? Clinicians required PPE for safety due to the “the constraints of the built environment, including the ageing infrastructure of most hospitals”. After PPE and staff the concerns included:
- Are there enough hospital beds for the number of patients?
- Are there enough ICU beds?
- Was there sufficient medical equipment including ventilators and monitoring equipment?
- Are clinical information systems, data systems and digital communications sufficient?
These questions relate to the quality of planning and the quantity of capital invested in public hospitals. Concerns about these factors prompted the government to close private hospitals to gain additional beds and ICU beds in particular. So, would a system where every hospital had a continuous source of capital funds to improve and upgrade facilities and equipment provide a better basis for meeting the challenges for hospitals post-2020? So far border controls and good public health practices prevented our worst fears being realised, but what does the pandemic highlight as we fund, plan, build and equip hospitals?
Is our capital funding model right?
Health Architects maintain form follows function however in my experience it is also true to say form follows finance. Hospital building projects are defined by their funding systems and budgets. My doctoral research assessed the funding needed to deliver the facilities, equipment and systems for effective and efficient clinical services in contemporary Australian hospitals.
We need to change the ineffective and outdated funding model for hospitals
My findings identified an Australian hospital capital funding system that:
- prioritises hospital projects in annual funding rounds and electoral cycles with only 14% of hospitals receiving capital funding over 4 years,
- is funded at below asset replacement levels averaging 40% of depreciation,
- varies significantly between States,
- is not directly aligned with current clinical or hospital standards,
- results in unequal access to clinical services, and
- does not provide for consistent system-wide technological and clinical change.
Our system of funding hospitals does not effectively fund patient access to appropriate care in efficient hospitals . Assessing the effectiveness of capital funding for Australian public hospitals compared with other OECD nations confirmed that the current system ranked below average for comparable nations. Nations that fund every hospital for the capital cost of the patients they treated (or Activity-Based Funding) provided better patient access and greater efficiency . Australia has successfully used Activity-based Funding for operational costs in hospitals since 2013 [3, 4] but our system of capital funding has not progressed for over 50 years.
Should we plan and build more of the same?
Yes and no.
The system of capital funding in Australia has caused inequality of access to acute services and medical equipment. Patient access to appropriate facilities and equipment has been a key issue during the pandemic. Indeed, patient access is the most important of several measures of effectiveness for Australian public hospitals (Public Hospital Performance Indicator Framework). Inequality of public hospital distribution was a theme emerging from the 13 major qualitative reviews of health services this century. Key themes found for investment levels were requiring (i) more investment (n=7), and (ii) improved alignment with clinical requirements and standards (n=4). Access for indigenous and rural residents and funding for innovation were also referenced (n=4) [6-17].
In the critical area of medical equipment, a Senate review found poor access to medical imaging for some metropolitan areas and rural areas resulting in poorer care, particularly for trauma and stroke patients , p.14. There is insufficient planning for the replacement of medical equipment . No prioritised list for equipment replacement exists and there are concerns regarding “transparency and rigour in how high value medical equipment replacement decisions are made” , p.6. For NSW, there was an absence of an effective funding model for medical equipment [21, 22].
The changed lifespan of medical equipment affects buildings
The expectation of increasing precision in clinical practice is reducing the effective lifespans for some medical equipment (by from 10 to15 years) as resolution of images fails to meet contemporary standards  p.69. Similarly, medical equipment and technology changes are making some facilities redundant earlier than planned [23-25].
Analogue hospitals in a digital age
The absence of a national system of funding for digital medical records and contemporary information systems in hospitals is acknowledged as causing patients harm [26, 27]. A range of emerging technologies offer clinical improvement that are appropriate, sustainable and fit with clinical requirement [27, 28].
But currently, there is no process for funding the capital required for the implementation of the next generation of technologies . These include, but are not limited to, artificial intelligence (AI) as a clinical aid [30, 31], wearable devices with real-time physiological outputs [28, 32, 33], Big Data [26, 28], precision and genomic medicine [28, 34].
The pandemic has changed expectations of hospitals from clinicians (who expect to have their personal safety embedded in hospital planning), politicians (who cannot risk infectious outbreaks in hospitals) and the community (who expect access to appropriate care when it is needed). To deliver these expectations when infectious disease is uncontrolled may require:
- emergency department bays with solid barriers between patients and specific ventilation solutions,
- additional PPE, cleaning and waste management spaces,
- single bed patient rooms with ensuite bathrooms to replace shared wards and bathing facilities,
- larger staff lunch and training rooms with access to fresh air, as early evidence suggests staff areas have been the sites of significant transfer of infection amongst clinicians,
- access to outdoor areas from the wards, imaging, ICU and ED areas for staff mental health stress release,
- transparent barriers between patients in ICU,
- enclosed office areas replacing hot-desking in confined spaces,
- replacing small staff change rooms with larger work clothes distribution systems,
- segregation of staff and public amenities for management of community to staff infections,
- more diagnostic equipment, and larger equipment stores and cleaning areas in clinical areas, and
- greater use of embedded information systems and centralised real-time monitoring of patients.
These changes to hospitals have costs and will need to be available for all clinicians and patients. All patients will expect access to high-quality contemporary clinical care, as our Medicare system guarantees. So we need to consider how to effectively and efficiently deliver the required changes.
What is effective capital funding for contemporary clinical practice?
Effective capital funding to ensure patient access to appropriate clinical care in efficient Australian hospitals would be:
- equitable, timely, flexible and readily available  
- aligned with the contemporary Australian clinical standards, based on verifiable data, sustainable and at the patient level [6, 8, 22, 37, 38].
A national activity-based system of capital allocation based on clinical guidelines and diagnosis groups has been assessed as superior to the current system of capital funding allocation using the Public Hospital Performance Indicator Framework adapted for capital. Using the existing mechanisms for funding operational costs for hospitals a discreet separate fund for capital could be paid to each hospital. As with the system of funding for operational costs, capital costs would be shared by the Commonwealth and the states and territories for each group of patients with the same diagnosis. This would allow continuous and specific improvement of facilities, medical equipment, technologies and systems.
Where to from here?
In summary, the pandemic has accelerated changes already happening in major hospitals. The difference is that safer hospitals are required for all patients and all staff. A national system of capital funding is the only method to achieve national improvement in safety and access to appropriate care. The old State funded project-by-project system for funding hospital is no longer fit-for-purpose. To make Australian hospitals fit-for-purpose beyond 2020 requires investment for every patient at Australian clinical and hospital standards.
This research has been formally examined as a doctoral thesis but is awaiting publication.
1. Ananda-Rajah, M., Veness, B. Miller, A. Heslop, D., Health care worker safety has fallen short of best practice. Insight plus MJA, 2020. 28 September, 2020 https://insightplus.mja.com.au/2020/38/health-care-worker-safety-has-fallen-short-of-best-practice/?utm_source=InSight%2B&utm_campaign=c9973be6e1-EMAIL_CAMPAIGN_2020_09_25_04_52&utm_medium=email&utm_term=0_7346f35e23-c9973be6e1-42113637.
2. Kerr, R. and D.V. Hendrie, Is capital investment in Australian hospitals effectively funding patient access to efficient public hospital care? Australian Health Review, 2018. 42(5): p. 501-513.
3. AIHW, Health expenditure Australia 2016–17. Health and welfare expenditure series no. 64. Cat. no. HWE 74., A.I.o.H.a. Welfare, Editor. 2018: Canberra. https://www.aihw.gov.au/getmedia/e8d37b7d-2b52-4662-a85f-01eb176f6844/aihw-hwe-74.pdf.aspx?inline=true. p. Table 3.6.
4. Biggs , A., Recent developments in federal government funding for public hospitals: a quick guide, P.o. Australia, Editor. 2018: Canberra https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/rp1819/Quick_Guides/FundingPH.
5. SCRGSP, S.C.f.t.R.o.G.S.P., Report on Government Services 2020, P. Commission, Editor. 2020: https://www.pc.gov.au/research/ongoing/report-on-government-services/2020/health/public-hospitals. p. Table 12A.57,.
6. Forster, P., Queensland Health Systems Review Final Report. 2005, Queensland Health,: Brisbane. p. 269-289.
7. Garling, P., Final Report of the Special Commission of Inquiry into Acute Care Services in NSW Public Hospitals. 2008: Sydney.
8. NHHRC, A Healthier Future for All Australians-Final Report of the National Health and Hospitals Reform Commission. 2009: Canberra. p. 168.
9. Menadue, J., Better Choices Better Health Final Report of the South Australian Generational Health Review. 2003: http://www.sahealth.sa.gov.au/wps/wcm/connect/f2f26480428ddf2ab41fb6e7eece1070/generationalhealthreviewreport-ce-0304.pdf?MOD=AJPERES&CACHEID=f2f26480428ddf2ab41fb6e7eece1070http://www.sahealth.sa.gov.au/wps/wcm/connect/f2f26480428ddf2ab41fb6e7eece1070/generationalhealthreviewreport-ce-0304.pdf?MOD=AJPERES&CACHEID=f2f26480428ddf2ab41fb6e7eece1070.
10. Richardson, J., The Tasmanian Hospital System Reforms for the 21st Century Report of the Expert Advisory Group Review into key issues for public and private hospital systems in Tasmania. 2004, Tasmanian Department of Health and Human Services: http://www.dhhs.tas.gov.au/__data/assets/pdf_file/0004/8563/2004-06-Richardson-Report-v2.pdf.
11. Reid, M., A healthy future for Western Australians. Report of the Health Reform Committee. 2004, Health Department of WA: Perth.
12. Travis, D., The Travis Review.Final Report. Increasing the capacity of the Victorian public hospital system for better patient outcomes. , Department of Health Victoria, Editor. 2015: Melbourne https://www2.health.vic.gov.au/about/publications/ResearchAndReports/Travis-review-final-report-2015.
13. Australasian College for Emergency Medicine, 2018–1 Access Block Point Prevalence Survey Summary., A.C.f.E. Medicine, Editor. 2018, Australasian College for Emergency Medicine: 34 Jeffcott St. West Melbourne VIC 3003 https://acem.org.au/News/July-2018/Emergency-department-patients-in-SA,-TAS-and-ACT-a.
14. Australian Commission on Safety and Quality in Health Care and the Australian Institute of Health and a. Welfare., The Second Australian Atlas of Healthcare Variation. 2017, ACSQHC: Sydney http://acsqhc.maps.arcgis.com/apps/MapJournal/index.html?appid=d385b9facde44ff3b99c51ab750e1c28#.
15. Australian and New Zealand Intensive Care Society, ANZICS Centre for Outcome and Resource Evaluation Annual Report 2017. 2017, Australian and New Zealand Intensive Care Society( ANZICS): Melbourne https://www.anzics.com.au/annual-reports/.
16. Australian Medical Association, Public hospital report card 2018: an AMA analysis of Australia’s public hospital system. 2018, Canberra https://ama.com.au/system/tdf/documents/AMA%20Public%20Hospital%20Report%20Card%202018_0.pdf?file=1&type=node&id=48026.
17. Productivity Commission, Public and Private Hospitals, Research Report. 2009, Productivity Commission. p. LVII.
18. Australian Senate Community Affairs and References Committee, Availability and accessibility of diagnostic imaging equipment around Australia. 2018, Parliament of Australia,: Canberra https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Community_Affairs/Diagnosticimaging/Report
19. WA Auditor General, Management of Medical Equipment. 2017: Perth https://audit.wa.gov.au/wp-content/uploads/2017/05/report2017_08-MedicalEquipment.pdf.
20. Queensland Audit Office, Efficient and effective use of high value medical equipment Report 10 2016-17. 2017: Brisbane https://www.qao.qld.gov.au/sites/all/libraries/pdf.js/web/viewer.html?file=https%3A%2F%2Fwww.qao.qld.gov.au%2Fsites%2Fqao%2Ffiles%2Freports%2Fefficient_and_effective_use_of_high_value_medical_equipment_report_10_2016-17_0.pdf.
21. Audit Office of NSW, Medical equipment management in NSW public hospitals NSW Health. 2017: Sydney https://www.audit.nsw.gov.au/publications/latest-reports/medical-equipment-management.
22. Garling, P., Final Report of the Special Commission of Inquiry. Acute Care Services in NSW Public Hospitals. 2008, NSW Government: Sydney. p. 30.
23. Diez, K.L.K. Infrastructure Planning for hospitals in relation to a primary portfolio strategy. in Better Healthcare through Better Infrastructure. 2010. Edinburgh Scotland.: HaCIRIC Tanaka Business School University College London.
24. Sun, P.P., An Integrated Project Delivery Process, in The culture for the future of healthcare architecture. Proceeedings of the 28th International Public Health Seminar, R. del Nord, Editor. 2009, Alineaa Editrice,TESIS Interuniversity Research Centre.: Florence, Italy. p. 133-140.
25. Schinko, T.L., H., Strategic design of hospitals by life-cyles, in Health for all Cultural, Operational and Technological Influences 35th UIA/PHG International Seminar on Public Healthcare Facilities. Dalian, China 2015, R. del Nord, Editor. 2016, TESIS Inter-university Research Centre,: University of Florence, Italy.
26. Productivity Commission, Data availability and use, Inquiry Report. 2017: Canberra https://www.pc.gov.au/inquiries/completed/data-access/report/data-access.pdf.
27. Tan, Z.M.-G., R. Margelis, G., Clinicians can drive innovation in digital health age. MJA Insight, 2018 (29 30 July 2018).
28. CSIRO, Future of Health: Shifting Australia’s focus from illness treatment to health and wellbeing., C. Futures, Editor. 2018: Canberra https://www.csiro.au/en/Showcase/futureofhealth?featured=F29EDEB1728C4A92B579C7A5DC28BAD5.
29. Joe, K., Innovation Transformation, in Australian Healthcare Design 2000-2015, C. K, Editor. 2013, International Academy for Health and Design: Stockholm. p. 100-105.
30. Sampler, I., “It’s going to create a revolution”: how AI is transforming the NHS, in The Guardian. 2018: https://www.theguardian.com/technology/2018/jul/04/its-going-create-revolution-how-ai-transforming-nhs?utm_source=esp&utm_medium=Email&utm_campaign=GU+Today+AUS+v1+-+AUS+morning+mail+callout&utm_term=280152&subid=13574337&CMP=ema_632.
31. Dewey, M., The future of radiology: adding value to clinical care. The Lancet, 2018. 392(10146 August 11): p. 472-3.
32. Productivity Commission, Shifting the Dial: 5 Year Productivity Review, Inquiry Report . 2017: http://www.pc.gov.au/inquiries/completed/productivity-review#report. p. 17.
33. Phillips, B., New series: making the digital health revolution. MJA Insight, 2018(42 29 October 2018).
34. Williamson, R.A., W. Duckett, SJ. Frazer, IH. Hillyard,C. Kowal, E. Mattick, JS. McLean CA. North, KN. Turner, A. Addison, C., , The Future of Precision Medicine in Australia.Report for the Australian Council of Learned Academies,. 2018, Australian Council of Learned Academies (ACOLA): https://acola.org.au/wp/wp-content/uploads/PMED_full.pdf.
35. Duckett, S., Capital Decision-making. The need to change a building block of healthcare., in Capital Charging in the Health Sector- Asset or Liability? 1995, Commonwealth Department of Human Services and Health: Sydney. p. 5-8.
36. Hellowell, M., Vecchi, V., An evaluation of the Projected returns to investors on 10 PFI projects commissioned by the NHS. . Financial Accountability and Management, , 2012. 28(1): p. 77-100.
37. Productivity Commission, Private and Public Hospitals Productivity Commission Discussion Draft 2009: Canberra. p. 261.
38. Productivity Commission, Public and Private Hospitals: Multivariate Analysis, Supplement to Research Report. 2010: Canberra http://www.pc.gov.au/inquiries/completed/hospitals/supplement.