This financial year, the funding for public hospitals across the state will significantly shift under a controversial activity-based funding formula.
Under the new formula, regional hospitals receive 6.8 per cent less than metropolitan hospitals for performing the same procedures.
This change has raised concerns about the potential for a deeper divide between city and country healthcare services.
The Victorian Government established this new formula based on the Victorian Efficient Price benchmark, which is meant to align hospital payments with the actual costs of delivering healthcare.
Regional hospitals, including hospitals in Geelong, Ballarat, Bendigo, Shepparton, Traralgon, and Albury, will see significant reductions in funding for essential surgeries.
They will receive $782 less for every knee reconstruction, $1744 less for every hip replacement and $336 less for every tonsillectomy compared to hospitals in Melbourne.
A spokesperson for the Department of Health explained that the restructured funding aligned with the actual costs submitted by health services.
“The 2024-25 VEP for each region is based on cost data submitted by health services — meaning allocated prices reflect costs of delivery in these areas,” they said.
The new funding model operates on a three-tier system, with metropolitan hospitals receiving the highest rates, regional hospitals slightly less, and sub-regional and local hospitals in rural areas receiving an increase of 10 per cent over their metropolitan peers.
It is intended to reflect the varying costs associated with delivering care across different regions, taking into account factors such as patient acuity and labour expenses.
However, critics are worried that this will reduce healthcare access for individuals in regional areas.
“I have had concerns raised with me by doctors who work in regional hospitals about the impact this will have on their health services and their ability to have patients transferred from rural hospitals,” Australian Medical Association Victoria president Jill Tomlinson said.
“The tyranny of distance is why we have a maldistribution of doctors across Victoria and why rural and regional health services have a significantly greater difficulty in attracting staff.”
For Goulburn Valley Health in Shepparton, the change is coming during a particularly challenging time.
Recent data has shown that the hospital reported one of Victoria’s largest deficits for the 2023-24 financial year and had the lowest cash reserves — a shortfall of $38.38 million.
Nevertheless, the Department of Health maintains that the new model does not equate to a reduction in activity, and the pricing does not affect the frontline care Victorians receive.
“Victorians in regional areas can be assured they’ll continue to get the care they need, close to home,” the spokesperson said.
GV Health said it was unable to comment on specific budget implications until it received its final budget allocation.
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