'Threat to services': record state hospital shortfall nears $1.5 billion

Internal health department figures, sighted by ACM, showed the state's public hospitals were $1.46 billion in deficit in the six months to December 2023, with every single regional health service recording a shortfall.

It puts the sector on track for a $3 billion deficit by the end of June.

The Victorian Healthcare Association - which represents the public hospital sector - raised immediate alarm at the figures.

Chief executive Leigh Clarke said the massive deficit figures were "consistent with what we are hearing on the ground".

"Our members are four months out from the financial year and still don't know where the money is going to come from," Ms Clarke said.

She said the shortfall posed "significant risks" to both non-clinical staff and services.

"When health services don't have sufficient cash reserves to draw on for essential services, they have to make some really hard choices.

"Left unchecked, health services will continue to struggle to absorb these additional costs - and we know regional health services in particular are doing it tough," Ms Clarke said.

"We're concerned that health services could be forced to reduce staffing, increasing the risk of staff burnout, longer waiting lists for some services, and a reduction in affordable care - especially for vulnerable communities who are reliant on public health services."

ACM revealed on February 14 the state's hospitals had racked up a $697 million deficit in the first quarter 2023-24, but the new figures showed the system plunging a further $765 million into the red in the second quarter.

A government spokesperson had dismissed the initial figures as "simply a first quarter update", which could turn into a surplus by the end of the year.

ACM asked the office of Health Minister Mary-Anne Thomas about the second quarter figures and whether it still believed things could turn around.

"The cost of delivering health care has increased significantly right across Australia, but the Allan Labor government has and will continue to ensure that the delivery of health services and patient care remains world class," Ms Thomas said.

ACM has spoken to multiple hospital CEOs who were worried the government had "lost control" of spending in the system.

One senior executive, who spoke on condition of anonymity, said the state's hospitals had never accrued a billion-dollar deficit.

The first quarter results showed Gippsland Southern Health as the lone regional service in surplus but by the end of December it, too, was in deficit.

Grampians Health was deepest in the red, with a $59.75 million deficit.

All but five of the 23 regional health services recorded bigger deficits in the second quarter than the first.

The huge deficits mean many hospitals have already burned through their cash reserves.

Ms Clarke from the Victorian Healthcare Association said some were relying on government "top-ups" which kept the hospitals' doors open, but made it impossible to "operate a sustainable budget".

She said many hospitals were also having to shift funds from other areas of their budgets to pay for basic staff support and wellbeing, and that escalating costs were endangering spending in critical areas.

"We need to have a really honest conversation about the gap between the revenue provided to health services, and what it actually costs Victoria's health services to deliver quality healthcare," she said.