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Legislative Assembly for the ACT: 1996 Week 12 Hansard (20 November) . . Page.. 3913 ..

Report on Review of Auditor-General's Report No. 3 of 1996

MR WOOD (4.37): Mr Speaker, I present Report No. 21 of the Standing Committee on Public Accounts entitled "Review of Auditor-General's Report No. 3, 1996 - VMO Contracts". I move:

That the report be noted.

In a letter dated 14 June 1995 to all members of the Assembly, the Minister for Health and Community Care provided information about VMO contracts finalised in the ACT public hospital system and about agreed savings arising from the contracts. Those savings were given as $2.67m a year. Following consideration of the new contracts, the committee sought comment from the Auditor-General on the contracts and on a cost model of aggregated VMO arrangements and the projected contract savings; hence the audit report which has now been reviewed by this committee.

The audit did not extend to an assessment of potential benefits generated from medical practice changes being developed at the Canberra Hospital as part of an integrated approach involving the new contracts. The audit noted that in the extended time of four years taken by the contract negotiations there had been changes in the individuals concerned as well as industrial action by VMOs which had seriously affected hospital services and generated intense community pressure for settlement of the dispute. These factors had a major influence on the content of the contracts.

The committee's report discusses the audit findings, together with comments on the audit obtained from the Minister, and in some detail. The overall conclusion reached by the audit was that the VMO contracts would not lead to the forecast savings of $2.67m, at least in the short term. The audit expressed considerable doubt as to the overall validity of the cost model used by Health and queried the relevance of dated activity data used to estimate savings. The committee noted the Minister's advice that the cost model would not be used to predict savings in any future negotiations on VMO contracts. The committee also noted the Minister's comment that careful management of contract arrangements would be the key to achieving improvements in productivity; but the committee is sceptical that this will, of itself, produce the forecast savings. Arising from this review, the committee's principal concern is that there be clear and identifiable costs associated with VMO contractual arrangements and that estimates of future cost savings be realistic and based upon hard data and an appropriate cost model.

The committee concluded that the estimated costs and projected savings from the VMO contracts were not based upon viable cost models and that the Assembly is entitled to expect that these issues are fully tested before being presented as achievable. The committee considers that, while there may be scope for achievable savings from the new contracts, it is not possible at this stage to quantify those savings, and any savings are unlikely to be measurable before the contracts are reviewed in June 1998, when possible savings will be calculated over the three-year life of the contracts. I commend the report to the Assembly.

Question resolved in the affirmative.

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