Inquiry report exposes brutal truths about NSW public health system

The long-awaited report from the Special Commission of Inquiry into Healthcare Funding has delivered a searing assessment of the NSW public health system, with 41 recommendations following 70 hearing days over 18 months. The message? The system needs “significant work”, and both state and federal governments share the blame.

“It is clear to me that the level of funding presently provided to NSW public hospitals is inadequate to deliver the service that the public of NSW expect…,” said the Hon. Justice Richard Beasley who led the Inquiry.

He further explained, “The failure to reform Medicare and the funding models for primary care, and to ensure adequate and timely primary care to all Australians, is close to (but not quite) beyond my comprehension.

“The failure to embed prevention in all its forms into the health system despite repeated and evidence-based recommendations to do so is beyond my comprehension. So, too, is how we have allowed NSW public hospitals to have so many patients in wards for extended periods of time beyond any need for acute care.”

At the heart of the dysfunction is a fragmented funding model between the Commonwealth and the states. The report singles out the National Health Reform Agreement (NHRA) and its Addendum as toothless without joint, coordinated financial commitment.

Dr Michael Bonning, GP and Immediate Past President AMA (NSW), said “The arbitrary divide in funding and administration between state and Commonwealth government funding for many services leaves communities falling into gaps which neither government can support on their own. Start first with the community’s needs and then work out how to deliver the service.”

One of the most glaring casualties of this fragmented model is prevention. Although hailed as a ‘priority’ in the NHRA Addendum, it receives less than 2% of the health budget. The National Preventive Health Strategy recommends 5% of funding allocation by 2030, yet the Inquiry report casts serious doubt over this ambition without dedicated investment.

“Reform without funding seems wildly optimistic (at best) as a plan for ‘prioritising prevention’. The result seems to be that the Commonwealth does not fund the states, including NSW, to do much more than provide acute care services.

“Given the role of primary care in promoting and maintaining population health, it is of no surprise that there is a correlation between a decline in access to primary care and a subsequent increase in patients presenting to hospitals with higher levels of acuity,” the report noted.

Health Services Union Secretary Gerard Hayes echoed the findings, saying “We know the future of healthcare is in allied and preventative care, which will keep people out of hospital and help them recover faster…which is not only good for individuals but the wider community.”

The report also lifts the lid on a workforce under siege. A decade of wage caps, outdated conditions, and lagging pay compared to other states have pushed NSW public hospital clinicians to breaking point, culminating in their first industrial action in 25 years.

Professor Jennifer Martin, President of the Royal Australasian College of Physicians (RACP), stated “Without immediate investment in expanding the medical workforce and improving working conditions, we risk further straining the state’s healthcare workforce.”

Activity Based Funding (ABF) also faces criticism for discouraging innovation, as hospitals risk funding cuts when activity metrics decline. While NSW has trialled promising pilot programs, it lacks a dedicated innovation fund, unlike Victoria’s $2 billion investment to drive growth in the life sciences sector.

“There is a risk that ground-breaking innovations that, by their nature, will benefit a smaller patient cohort may receive disproportionate attention and support compared to those with the potential to enhance health outcomes for more of the population,” the report cautioned.

NSW Health Secretary, Susan Pearce AM, addressed the tone of the Inquiry and defended the spirit of its findings amid mounting scrutiny.

“For those who may try to portray the Inquiry, or NSW Health, as something it is not, it should be noted the opening paragraph of the Inquiry Report says ‘Rather than being an inquiry into the failure of government and its agencies, or into their poor conduct, misconduct or unlawful conduct, it has been an inquiry into how a government service might be improved.’

“Disagreement and criticism of the way things are done are not unwelcome. This includes supporting staff who raise concerns or make complaints to pursue these matters. I strongly encourage them to do so constructively.”

Justice Beasley closed with a pointed reminder that reform is not optional, but it is also not free.

“There is a significant amount of work to be done, and system change takes time. Although NSW Health should advance that work urgently, I accept it is not a short term project,” he wrote.

He further emphasised, “NSW Health cannot be expected to ‘find’ the funding for that work from its already stretched budget. It must receive a new funding stream, and one that is quarantined from other budgetary pressures to be used for that purpose.”

To maintain transparency and accountability, the Commissioner has called for six-monthly progress updates from the Health Secretary to the Health Minister – an effort to prevent this report from meeting the same fate as others that have been quietly shelved.

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