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A key Sydney hospital is on the precipice of insolvency, according to leaked internal memos, and will soon be unable to pay its staff. By Rick Morton.

Exclusive: St Vincent’s Hospital to be insolvent by April

ICU staff at St Vincent’s Hospital Sydney.
ICU staff at St Vincent’s Hospital Sydney.
Credit: AAP Image / Kate Geraghty / St Vincent’s Hospital

A critical public hospital in inner-city Sydney has forecast it will run out of money from April 2024 and will not be able to pay its staff, according to a leaked internal finance update.

Management at St Vincent’s Hospital Sydney – a full-service public facility with about 460 beds – gave a financial update to senior leaders pointing to a $70 million deficit by July next year, with a $7.5 million shortfall for salaries, wages and other goods and services.

The hospital is owned and run by the Catholic healthcare group St Vincent’s Health Australia but largely financed by the New South Wales government. This arrangement provides the state little control over how its funding of the hospital is spent. The government essentially funds all the health services at the hospital but does not own the hospital itself.

The November finance update, obtained by The Saturday Paper, notes leaders are “compiling a budget recovery plan focused on workforce reform”, but even with this work “it is not anticipated that the impacts … will be able to fully close the forecast gap and therefore management will continue to focus on negotiations with NSW Health to secure supplementary funding in advance of reform impacts being achieved”.

The internal memo says: “The general fund operating cashflow impact of the above indicates a cash deficit from April 2024.”

Sources familiar with the hospital’s operating position told The Saturday Paper it was already asking for almost $500 million in extra funding from the state government, to be spent on a major redevelopment at the public hospital, IT network upgrades, an electronic patient management system to replace the largely paper-based model it has been promising to eliminate for years, a new commercial kitchen, and toilets for the mental health unit.

The owners, St Vincent’s Health Australia (SVHA) – which includes a network of 10 private hospitals across the country, the twin public facility St Vincent’s Hospital Melbourne and 26 aged-care facilities – managed to invest “in excess of $300 million in our private hospitals over the current building cycle” to boost growth in the more lucrative side of the business, according to its annual report released last month.

The same cannot be said for its public facilities.

“St Vincent’s public hospitals continue to work with state governments and other key stakeholders to ensure that their funding adequately reflects the true value they provide the community, both now and in the future,” the report says.

The SVHA group has $3.6 billion in assets and almost $400 million in cash and cash equivalents at hand, although this is apparently not to be spent to rescue its failing public operation. In 2017, it doubled a loan it took from St Vincent’s Private Hospital Sydney – which shares the same block of land in Darlinghurst with its destitute public cousin – to $86 million.

SVHA used this loan from the private hospital to pay off almost half of $96 million in secured bank loans the group used to buy out the remaining 50 per cent stake in what is now known as St Vincent’s Private Hospital Melbourne.

“I bet the private hospital next door is not short of a penny, but they’re asking the government to bail them out,” a source tells The Saturday Paper, referring to the operator’s hospitals in Darlinghurst.

“We’re talking about public money propping up Catholic health assets so NSW Health can buy services from them.”

Under NSW legislation, St Vincent’s public hospital Sydney is an affiliated health organisation, which allows “certain non-profit, religious, charitable or other non-government organisations and institutions to be treated as part of the public health system where they control hospitals, health institutions, health services or health support services that significantly contribute to the operation of that system”.

As a Catholic healthcare organisation, St Vincent’s Health Australia – under the stewardship of the Trustees of Mary Aikenhead Ministries – has publicly declined to support voluntary assisted dying laws introduced in several states, most recently in NSW.

The public hospital in Sydney legally forms part of what is called St Vincent’s Health Network (SVHN) and includes the dedicated palliative care hospice Sacred Heart Health Service and, until early November this year, St Joseph’s Hospital in Western Sydney.

In the 2023-24 service agreement between NSW Health and St Vincent’s Health Network, the state government notes the SVHN supports the “core values” of NSW Health but “acknowledges that the values of the Network are determined by the Board of St Vincent’s Health Australia”.

“NSW Health acknowledges that the Network operates facilities under the care and stewardship of Mary Aikenhead Ministries and are part of the healing ministry of the Catholic Church,” it says.

“A significant part of the mission of the Network includes the provision of services to the poor, disadvantaged and marginalised members of the community and must (including in its delivery of services and clinical planning) act in accordance with the Code of Ethical Standards for Catholic Health and Aged Care Services in Australia, the St Vincent’s Health Australia Code of Conduct and operate under the vision, mission and ethical framework of Mary Aikenhead Ministries.”

There is precedent for what happens when this use of private healthcare to service public hospitals fails.

When St Vincent’s Health Australia made the “extremely difficult” decision to close St Joseph’s Hospital in Auburn earlier this year, it said it was because it couldn’t get state government funding for the site.

“Despite our best efforts over the past 10 years, we have not been able to secure the necessary funding to address the deteriorating infrastructure,” SVHA said in a statement in July.

“In more recent years we have been working with the NSW Ministry of Health to identify a viable strategic option for St Joseph’s, including relocating to the Westmead campus (which involved exploration of two different viable options) and developing the existing site at Auburn to improve scale and amenity (involving two planning options).

“Despite significant efforts to explore these options, previous governments prioritised investment in other facilities across western Sydney, including the growth of sub-acute services at Westmead and Auburn Hospitals.”

When the hospital closed, its services transferred to the public health system in the Western Sydney Local Health District and the budget for the St Vincent’s Health Network was reduced commensurately by about $13.1 million.

In total, the SVHN will receive about $451 million from both state and federal governments for emergency department presentations, acute and subacute inpatient admissions and mental health treatment at its facilities.

Before Covid, in 2019-20, the same network received $40 million less in funding for providing slightly more care. Its financial woes run deeper than simple changes in volume, however.

According to its internal calculations, the St Vincent’s Health Network – which now features just the public hospital in Sydney and the palliative care service on the same site – has lost $16.1 million in “own source revenue” and saw known expenses increase this financial year by $12.7 million.

The size of the network’s unfunded leave liability increased by $4.5 million. Along with other funding reductions and a $5 million “SVHA board surplus expectation” the network has identified a turnaround target of $71.5 million.

To do this, it promises to cut staffing levels using the corporate speak for redundancy: “right sizing”. Even that won’t be enough, however, with leaders promising to go cap-in-hand to government for emergency cashflow funding.

It is not clear whether this request has even been seriously considered by the NSW government. The department did not respond to written questions.

Meanwhile, staff at the hospital will bear the brunt of the urgent budget recovery.

In nursing, areas of “focus” for a reduction in headcount are in non-frontline positions, “including nurse managers, nursing educators, [advanced] clinical nurse consultants and clinical nurse specialists”. In addition, the nursing workforce will undergo a “right size to scope and scale of clinical service profile and activity”.

A similar approach will be taken with doctors and medical staff in two phases: by cracking down on overtime and then, when that is done, by targeting these roles for the “right size to clinical and activity profile”.

Corporate is not unscathed and will be subject to “structure reform” with some reduction in headcount.

A spokesperson for St Vincent’s Hospital Sydney said in a statement it was “working constructively with NSW Health to address our current financial position”.

“Like most Australian hospitals providing public services, St Vincent’s Hospital Sydney is experiencing budgetary pressures as it shifts out of a COVID-response phase and returns to more predictable operating tempo,” the spokesperson said.

 “This is a common and frequently told story in today’s public health system, which is experiencing significant change and adjustment in the wake of the pandemic.

 “As in every year, St Vincent’s Hospital is focussed on improving its performance. We are introducing new models of care and operational responses that continue to meet the needs of our community.

 “Just as we have for more than 165 years, St Vincent’s Hospital is looking forward to going from strength-to-strength in 2024.”

Financial accounts for 2022, filed with the national charities regulator, show that in Victoria the state government provided $140.3 million in funding to St Vincent’s Hospital Melbourne – its public offering in the state – “compensating the hospital for lost revenue with direct and indirect COVID-19 costs also reimbursed”.

The then Victorian department of health and human services – which has since been split in two – also “committed to providing temporary cash flow support to enable the Health Service to meet its current and future operational obligations as and when they fall due for a period up to 30 September 2023 should it be required to enable continued trade in the short term for provision of health services to Victorians”.

In NSW, the Sydney public hospital, which has about 420 fewer beds than the Melbourne facility, received $70.8 million in similar compensation, but SVHA does not mention any cashflow support from the state government.

Last month, writing to introduce the 2023 annual report for SVHA, the group’s senior leadership team conceded governments were not a “magic pot of gold”.

“While governments continue to support health and aged care in Australia to the best of their ability, we know there is no magic pot of gold,” the leaders wrote.

“Healthcare, particularly at the acute end, is increasingly expensive; and we are caring for an ageing population with ever more complex needs. As a result, the system is overburdened and, particularly since the COVID pandemic, we have felt the full effects of that constant strain.

“But we never want economic considerations to compromise the care we give, particularly to those who are most vulnerable. This means we need to make the health and aged care we provide sustainable while keeping the compassion and humanity that is the hallmark of St Vincent’s at the very centre of everything we do.”

SVHA did not answer detailed questions put by The Saturday Paper about whether the group had considered using its more lucrative private hospitals as a source of “supplementary funding” before asking the state government. NSW Health also declined to answer specific questions about whether it was in negotiations about a bailout, but a spokesperson said in a statement all service agreements include “purchased activity and performance expectations” and it monitors these outcomes.

As it stands, St Vincent’s Hospital Sydney will be insolvent within months. 

This article was first published in the print edition of The Saturday Paper on December 23, 2023 as "Exclusive: St Vincent’s Hospital to be insolvent by April".

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