Supply and demand – a health economic perspective on the Australian hospital and elective surgery crisis

In 2022, COVID-19 was the third highest cause of mortality in Australia, about 12 times greater than the annual road toll.^1,2 Simultaneously, Australian life expectancy estimates fell for the first time since WW1 due to COVID-19, and COVID-19-related excess deaths from dementia, diabetes, ischaemic heart disease, cerebrovascular disease contributed to an extraordinary 16% increase in mortality.³ Beyond loss of life, waves of COVID-19 related morbidity are affecting healthcare workers and the sustainability of Australian health services.

Despite these figures, COVID-19 seems no longer a focus of political and media attention, and policy at all levels appears to be increasingly disconnected from the experience of frontline healthcare workers affected by fear of COVID-19 exposure, psychological stress, and adverse working conditions.⁴ The current Commonwealth National Medical Workforce Strategy was developed⁵ before the pandemic, and therefore does not consider pandemic-emergent drivers such as decreased GP accessibility, increased healthcare worker departures, fragmentation of healthcare, and competing workforce demands upon the aged care and disability sector.

The COVID-19 pandemic has contributed to longstanding structural shortfalls in the supply of healthcare services high-income countries, including Australia.^6–8 Relevant indicators of this shortfall include the UK NHS waiting list,⁹ and German ICU capacity.⁶ These shortfalls are also reflected in current Australian public hospital key performance indicators for acute care,⁷ and for elective surgery.¹⁰ The supply challenges occur in the context of increased demand following the suspension of a range of healthcare services, and especially elective surgery, during the pandemic.¹¹ Rebalancing of supply and demand in healthcare is a challenge that must be met.

The demand side has been documented by the Australian Medical Association (AMA) in recent analyses of public hospital performance⁷ and elective surgery metrics¹⁰ from the Australian Institute of Health and Welfare.¹² These analyses revealed a significant decline in time-performance metrics compared to previous analyses, with, for example, only three public hospitals in Australia performing to standard, compared to 15 in 2020–21.^11,13 The rest of the public hospitals in Australia were below standard on delivering urgent care,⁷ and elective surgery within specified timeframes, with a 17.8% decrease in elective surgery access compared to 2018–19 before the pandemic.¹⁰

There is also a demand side problem of exit block, where public hospital bed capacity is constrained by shortfalls in the ability to return patients to home or supported care from Aged Care and Disability services.⁸ These sectors face ongoing worker shortages, especially Aged Care which requires skilled staff, while overall worker shortages have affected the Disability sector, as seen in the UK and Australia.^14,15

Australia also faces healthcare workforce supply challenges in primary care that have arisen from a reimbursement system through Medicare that may be less suited to the present century.^11,16 The resulting shortfalls of GP and allied health primary care service accessibility likely increased demand for acute hospital services.¹¹

These shortfalls have been exacerbated by the departure of healthcare workers who have borne over three years of pandemic-exacerbated healthcare supply and demand challenges.^11,17–19 Burgeoning evidence of increased burnout and decreased work-life satisfaction underline some of the potential drivers of physician and other healthcare worker exits from healthcare.²⁰ A recent systematic review of 43 international studies of turnover intentions found that fear of COVID-19 exposure, psychological stress, adverse working conditions, lack of organisational support, and sociodemographic characteristics were factors in intention to turnover.⁴ This study stated: ‘Globally, the health workforce has long suffered from labour shortages,’ and ‘The COVID-19 pandemic has caused an unprecedented wave of resignations,’ citing research from the USA and Singapore.⁴ Furthermore, in related non-acute healthcare sectors, such as aged care and disability support services, there is a projected shortfall of over 200 000 healthcare workers by 2049–50 in Australia, who also need to be sourced from the same worker pool as for public hospitals.¹⁵

Policy responses to the healthcare crisis, both in Australia and globally, are likely to include measures aiming to deal with the demand side including so-called urgent care centres,²¹ expansion of options for telehealth, commissioning new physical infrastructure, and expanding scope of practice for non-medical health professionals. These will be insufficient on their own.¹¹ All of these options require healthcare workers. For this reason, they will fail without parallel attention to the supply side requirement of a healthcare workforce.

In order to address this issue, there is a serious requirement for significantly improved nationwide and regional analysis of workforce supply and demand shortages in hospitals, aged care, disability sector, community sector and primary care. In addition, there is also a need for better analysis of demand related healthcare variables, particularly factoring in recent changes related to COVID and issues specifically related to ‘exit block’. In order to conduct this important analysis we need to nationally standardise and record our measurement of ‘exit block’ within all our hospital networks.⁸ The private healthcare sector has a yet unrealised role in addressing problems of access block, exit block and workforce if the capacity in the sector can be harnessed in innovative partnerships as in the pandemic.²²

The tragedy of the global commons²³ is that all nations are now competing for a short supply of healthcare workers. We recommend a greater focus on the supply side of the medical and healthcare workforce, which, in turn should positively affect the supply of healthcare. Recruitment and retention of healthcare workers is therefore essential, although challenging to surmount. However, change is possible: this must involve directly and urgently addressing current drivers of turnover, as noted above.⁴ Globally, populations have joined with their healthcare workers to combat the pandemic thus far. Governments must respond to an increasing population demand for healthcare: there is an urgent need to pivot policy and practice towards maintaining a sustainable supply of healthcare workers, especially in Australia, without having to necessarily rely on workforce supply from countries, which may have more dire shortages. Otherwise, there may be an ongoing healthcare supply shortfall in the context of increased demand – hastening Keynes’s wry observation: ‘In the long run, we are all dead.’

Data availability

Data sharing is not applicable as no new data were generated or analysed during this study.

Conflicts of interest

The authors declare there is no conflict of interest.

Declaration of funding

This research received no specific grant from any funding agency in the public, commercial, or not-for-profit sectors.

Author contributions

All authors have satisfied the requirements for authorship: Substantial contributions to the conception or design of the work; or the acquisition, analysis or interpretation of data for the work; and drafting the work or revising it critically for important intellectual content; and final approval of the version to be published; and agreement to be accountable for all aspects of the work in ensuring that questions related to the accuracy or integrity of any part of the work are appropriately investigated and resolved.

Ethics and consent

No ethics approval or consent was required as this paper does not involve research with humans or animals.