Victorian Government Dismisses Expert Recommendations for Mandatory Hospital Service Mergers

The Victorian government has opted against implementing a key recommendation from an expert panel to consolidate hospital services, a move anticipated to enhance patient care and cut costs. Premier Jacinta Allan and Health Minister Mary-Anne Thomas presented the long-awaited report on Victoria’s public health system on Thursday, outlining their strategy for sector management.

The report, produced by an expert advisory committee led by former Labor MP and health executive Bob Cameron, proposed 27 recommendations. Central to these was the suggestion to streamline Victoria’s health services from 76 to just 11. This consolidation aimed to reduce "duplication, inefficiency, and competition for staff" across health services, aligning Victoria with other states.

Despite this recommendation, the government has pursued alternative methods to achieve savings and improvements, bypassing the suggested structural overhaul.

The report highlighted inefficiencies due to duplicating administrative, compliance, and clinical support functions, detracting from patient care.

Premier Jacinta Allan rejected the call for hospital amalgamations, asserting, “We will not be mandating hospital mergers because I believe it’s not in the best interest of patient care.” Allan criticized the previous approach under former Liberal Premier Jeff Kennett, stressing that it lacked a focus on patient care. “I’m not prepared to repeat those mistakes,” she added.

Instead, Allan announced plans to implement the remaining 26 recommendations by creating a new agency within the health department, Hospitals Victoria. This agency, led by Siva Sivarajah, current CEO of Northern Health, will work to unify hospitals under a single payroll and IT system and introduce an integrated electronic medical record system.

“We have too many disparate IT systems, payroll systems, and excessive back-office bureaucracy,” Allan said. She emphasized that Hospitals Victoria would streamline these processes, allowing hospitals to concentrate on patient care rather than administrative tasks.

While some back-office positions will be cut, Allan assured frontline services would remain unaffected. The new “local health networks,” as recommended in the report, will be established with formal connections to major tertiary, women’s, and children’s hospitals.

Charles Maskell-Knight, a former senior federal health department official and health policy analyst, noted that other states had adopted similar reforms as early as 2010, often as part of federal funding agreements. “Every state except Victoria either expanded their existing regional frameworks or created new ones,” Maskell-Knight said. “Networking has proven beneficial for clinical governance, especially in small, standalone rural facilities, and helps reduce duplication in administrative services.”

Maskell-Knight doubted significant savings from such consolidations, estimating that streamlining 76 services into about a dozen networks might save millions rather than tens of millions.

In addition to these reforms, the Victorian government has allocated an extra $1.5 billion to hospitals. This funding aims to address hospitals' concerns about potential bed closures, delayed elective surgeries, and staff layoffs due to budget constraints.

At the time, the government emphasized a record $8.8 billion in funding announced in the May budget, intended to cover deficits reported by over half of Victoria’s public hospitals. Hospitals were instructed to implement measures to manage their deficits moving forward.

Public backlash, reflected in recent polling showing a decline in Labor’s primary vote share, led the government to adopt a “pared-back” response to the health services report. Additional funding details will be included in the mid-year budget update.

Opposition leader John Pesutto criticized the government’s approach as a “humiliating backdown,” attributing the funding cuts to addressing the fallout of financial mismanagement and record debt rather than real efficiencies and improved services. “What a dysfunctional circus this Allan Labor government is,” Pesutto remarked.

Cameron’s report suggested that a unified board and chief executive oversee the 11 “local health networks” while retaining their individual branding. This model reflects New South Wales and Queensland structures, which have 16 and 18 local hospital networks, respectively.

For those seeking short-term accommodations near hospitals in Victoria, there are options available through services like Hospital Stays, which offer flexible lodging solutions suitable for family and patient stays.