Victoria's hospitals are facing a historic financial crisis and the state government has refused to rule out cuts to staff and services.
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The Standard can reveal the hospital system racked up a $697 million operating deficit - spending significantly more than its budget - in the first quarter of 2023-24.
All but one of the state's 23 regional health services were in the red as of September.
Warrnambool-based South West Healthcare recorded a deficit of $6.31 million after a $234,000 surplus in 2022-23.
Ballarat's Grampians Health notched a $25.26 million deficit, Albury Wodonga Health $22.24 million, and Bendigo Health $15 million, while Gippsland Southern Health was the only service in the black, with a $60,000 surplus.
The state government has responded with strict belt-tightening measures.
SWH hired 375 new staff and expanded services in 2022-23, and The Standard asked whether the substantial deficit put these jobs and services at risk. A SWH spokesperson said there were "no plans to reduce any services".
"Like all health services, SWH continues to review cost structures to ensure services are provided as efficiently as possible," the spokesperson said.
A state government spokesperson said the record deficits were "simply a first quarter update" and that health services reported deficits in 2022-23 before finishing the year with a $15 million surplus.
But The Standard has seen some hospitals' mid-year results and end of financial year projections showing the deficit accelerating, rather than turning around.
On the current trajectory the hospital system state-wide would finish the year $2.8 billion in the red.
'The worst I've ever seen'
One senior hospital executive said he had never seen so many Victorian hospitals in financial trouble.
"For me this is the worst that I have ever seen the health service budgets in a two-decade career. It's a sea of red," the executive said on condition of anonymity.
"If those first quarter deficits continue, even to quarter two, it would be more than $1 billion.
"That would be unprecedented; it's never happened before."
A state government spokesperson could offer no reason for the huge budget shortfalls other than "higher than expected demand".
The executive said the record deficits had been made even more challenging with the fact the government only released the budgets for each hospital in late January, seven months into the financial year.
"That's also unprecedented," he said.
"Hospitals have been operating on a wing and a prayer."
The executive said hospitals had been forced to continue surgeries, procedures and other care with "no idea" how they were tracking against their budget.
"What's going on in Victoria that it takes seven months for the minister and the treasurer to work out what dollars they're going to allocate to the state's hospitals?" he said.
The Standard asked the government why it had released the budgets so late but did not receive an explanation.
Hospitals dangerously low on cash
The architect of Victoria's hospital funding system, Dr Stephen Duckett, said the government was to blame for the deficits because it had set the hospitals "unachievable" budgets.
"Treasury and the government have been in denial about the state of the Victorian hospital system for at least five years, pre-dating COVID," Dr Duckett told The Standard.
He said this year's deficits - which are tracking at 10 times worse than previous years - were a sign the hospitals had "given up and they expect to be bailed out, and their experience to date is that they have been".
Hospitals are required to have at least 14 days' cash available to maintain operations and the huge deficits mean many are running dangerously low.
Essentially the hospitals cannot afford to run out of cash, because then they can't meet the payroll and the system basically collapses
- Stephen Duckett
But Dr Duckett said, rather than letting them run out of cash, the government would write each hospital a "letter of comfort" guaranteeing it funds to pay its debts.
"Essentially the hospitals cannot afford to run out of cash, because then they can't meet the payroll and the system basically collapses," he said.
"The government obviously can't afford that but has been in denial of that reality for a number of years and lets it continue, which I think is very poor management."
The Standard asked the office of the Health Minister, Mary-Anne Thomas, what guarantees the government could give Victorians services would not be cut.
The spokesperson replied: "The Department of Health works with all 77 services to manage cash flow throughout the year including additional funding as required to ensure differing and changing needs are always met."
Training, maintenance 'already gone'
Dr Duckett said if deficits continued to grow the government might pressure hospitals to reduce services.
"But in the context of very long waiting times for elective procedures and highly politicised emergency department activity it's very hard for hospitals to do that," he said.
"The trouble is, the things that are first to go have already gone: it's staff training, maintenance and all those sorts of things - the things the public don't notice - that have all gone already."
Dr Duckett said another option was to push out elective surgery wait times or reduce outpatient services but most of those cuts had also already been made. At SWH elective surgery wait times surged to near record highs in late 2023.
He said the size of the health budget - which consumes a third of the government's overall spending - made the hospital funding crisis a monumental problem.
"Hospital care is a significant proportion of the state government, so to have it out of control and to have problems with budget setting is a really significant issue for the whole of government," he said.
The senior hospital executive said the government had kicked the can down the road as far as it would go.
"It's been three years now that the system has been growing and growing with no controls," he said.
"It has come to the point of either being funded substantially more than it is now, or having the brakes applied in a serious way."