Is capital investment in Australian hospitals effectively funding patient access to efficient public hospital care?
Authors: Kerr Rhonda , Hendrie Delia V. 
Published: August 2018

Objective
This study asks ‘Is capital investment in Australian public hospitals effectively funding patient access to efficient hospital care?’

Methods
The study drew information from semistructured interviews with senior health infrastructure officials, literature reviews and World Health Organization (WHO) reports. To identify which systems most effectively fund patient access to efficient hospitals, capital allocation systems for 17 Organisation for Economic Cooperation and Development (OECD) countries were assessed.

Results
Australian government objectives (equitable access to clinically appropriate, efficient, sustainable, innovative, patient-based) for acute health services are not directly addressed within Australian capital allocation systems for hospitals. Instead, Australia retains a prioritised hospital investment system for institutionally based asset replacement and capital planning, aligned with budgetary and political priorities. Australian systems of capital allocation for public hospitals were found not to match health system objectives for allocative, productive and dynamic efficiency. Australia scored below average in funding patient access to efficient hospitals. The OECD countries most effectively funding patient access to efficient hospital care have transitioned to diagnosis-related group (DRG) aligned capital funding. Measures of effective capital allocation for hospitals, patient access and efficiency found mixed government–private–public partnerships performed poorly with inferior access to capital than DRG-aligned systems, with the worst performing systems based on private finance.

Conclusion
Australian capital allocation systems for hospitals do not meet Australian government standards for the health system. Transition to a diagnosis-based system of capital allocation would align capital allocation with government standards and has been found to improve patient access to efficient hospital care.

What is known about the topic?
Very little is known about the effectiveness of Australian capital allocation for public hospitals. In Australia, capital is rarely discussed in the context of efficiency, although poor built capital and inappropriate technologies are acknowledged as limitations to improving efficiency. Capital allocated for public hospitals by state and territory is no longer reported by Australian Institute of Health and Welfare due to problems with data reliability. International comparative reviews of capital funding for hospitals have not included Australia. Most comparative efficiency reviews for health avoid considering capital allocation. The national review of hospitals found capital allocation information makes it difficult to determine ’if we have it right’ in terms of investment for health services. Problems with capital allocation systems for public hospitals have been identified within state-based reviews of health service delivery. The Productivity Commission was unable to identify the cost of capital used in treating patients in Australian public hospitals. Instead, building and equipment depreciation plus the user cost of capital (or the cost of using the money invested in the asset) are used to estimate the cost of capital required for patient care, despite concerns about accuracy and comparability.

What does this paper add?
This is the first study to review capital allocation systems for Australian public hospitals, to evaluate those systems against the contemporary objectives of the health systems and to assess whether prevailing Australian allocation systems deliver funds to facilitate patient access to efficient hospital care. This is the first study to evaluate Australian hospital capital allocation and efficiency. It compares the objectives of the Australian public hospitals system (for universal access to patient-centred, efficient and effective health care) against a range of capital funding mechanisms used in comparable health systems. It is also the first comparative review of international capital funding systems to include Australia.

What are the implications for practitioners?
Clinical quality and operational efficiency in hospitals require access for all patients to technologically appropriate hospitals. Funding for appropriate public hospital facilities, medical equipment and information and communications technology is not connected to activity-based funding in Australia. This study examines how capital can most effectively be allocated to provide patient access to efficient hospital care for Australian public hospitals. Capital investment for hospitals that is patient based, rather than institutionally focused, aligns with higher efficiency.