'Looking to bleed us': Victoria's hospitals served with 'brutal' budgets

Some of the hardest hit hospitals are the small rural services that already operate on a shoestring.

Several health service CEOs told ACM they believed the government was intentionally weakening smaller services to soften them up for looming statewide hospital amalgamations.

A government spokesperson said hospitals had just been pledged an extra $8.8 billion in the state budget, which had provided "significant uplift across the sector".

"[This] aims to ensure services can plan further in advance and better manage cash flow, while also reducing deficits and reliance on top up funding," the spokesperson said.

But the state's hospital lobby said the new budget cuts and other recent austerity measures had completely undermined the extra funding and created a serious risk of bed closures.

The Health Department sent out summaries of their "model budgets" for the 2024-25 financial year on June 12.

Many rural services had their funding slashed by millions of dollars, while others faced cuts of just $120,000. One CEO said the level of cuts depended on how much cash the service had saved.

"Basically if you had money put away you had your funding slashed," they said.

Victoria has dozens of rural health services spanning the state from Heywood to Timboon to Beaufort, Heathcote, Beechworth and Corryong. They are a crucial resource for country residents who would otherwise have to drive hundreds of kilometres for care.

Health services are generally supposed to break even each financial year, but financially sound services run modest surpluses to ensure a small financial buffer.

Many services, especially in the regions, are also heavily dependent on local bequests and community fundraising to save money for life-saving equipment.

The same CEO said the new budgets were forcing them to spend bequest and fundraising money, which they'd saved up in their consolidated cash, on day-to-day operations.

"We haven't had a deficit for 15 years, and now we're being punished for that long period of responsible financial management," they said.

A government spokesperson denied it had ordered the use of money from fundraising and bequests.

"These claims are wrong," they said.

"We have not, and never will touch bequests and community fundraising - any suggestion otherwise is wrong."

The government also said the model budgets were still subject to consultation between the department and the health services.

The budget cuts are the third successive financial assault on health services in a matter of months.

The government has already forced services to make significant administrative cuts through mandatory financial management improvement plans, and more recently imposed strict cost containment measures with an effective hiring freeze.

Some health services were also ordered in early June to create budget action plans by the end of the month without any funding guidance or targets.

The suite of austerity measures meant health services had already made significant cuts when they discovered the government also planned to claw back the spare cash they hadn't been forced to spend.

Another CEO said regional health services were disillusioned with the way the government was treating them.

"[It's a] kick in the guts for sure," they said.

The same CEO said when it came to Small Rural Health Services, there was no financial logic to cutting services to the bone.

"In terms of [the] overall health budget it's peanuts, so [it's] not just about money," they said.

"I think the [amalgamation] stuff might go on for a while so in the meantime they are looking to bleed us into submission."

Rural services have been the most vocal group opposing the government's planned amalgamations under its Health Services Plan. The CEO said weakening those services financially provided both the pretext and leverage to force them to merge.

The government has denied any connection between the current budget process and the Health Services Plan.

ACM asked Health Minister Mary-Anne Thomas to respond to the allegation the government was bleeding services into submission, but she declined to provide a comment.

The Victorian Healthcare Association - which represents the state's public hospitals - condemned the cuts and said the continued assault on rural services would force beds to close.

VHA chief executive Leigh Clarke said while the government claimed there had been significant uplift in funding, the cost cutting had rendered the increase "negligible".

"This week's decision around funding cuts and clawback of cash reserves... is yet another devastating blow to Victoria's public healthcare sector, notably for our small rural health services," Ms Clarke said.

"The reality is that if you are running a small rural health service, you are likely running a total budget in the order of several million and to have up to a third of that taken away will have very tangible impacts.

"Given most small rural health services have strong balance sheets through years of good financial management, this is a rejection of good performance and it goes well beyond the recent request to find savings across non-clinical staff and services."

Health service CEOs said there were extreme levels of anxiety about the budgets, and the threat of amalgamation and they were being given no information and no support by the Health Department or the government.

Ms Clarke said the VHA called on the government to explain its plans immediately.

"In the absence of clear information on the trajectory of this reform, the government has not filled the vacuum of noise over the past few weeks," she said.

"We want to see clarity on the timelines underpinning any major reform, the evidence supporting the options on the table and some clarity about which course of action the Victorian Government intends to pursue."

She said any large-scale reform would require an increase in funding, not cuts.

"Given we are seeing funds pulled out of services - the question now becomes how do you do health service reform well and how do you do it without compromising on the delivery of high-quality care," Ms Clarke said.