In short:
The Victorian government has allocated an extra $1.5 billion to the state's health sector and will not force hospitals to merge.
The government has flagged reforms to the health system that will see hospitals collaborate more closely and share back-office operations.
What's next?
A new body called Hospitals Victoria will be formed to oversee administration of the state's hospitals.
The Victorian government has announced a major overhaul of the state's health system but has rejected a recommendation to amalgamate some health services.
The government has committed an extra $1.5 billion in funding for the state's hospitals and has revealed it will not force hospitals to merge, but it has flagged significant changes to the sector.
The government's Health Services Plan, released today, recommends reconfiguring the state's health system into a network of services based on geography.
The expert advisory committee that put together the plan found the health system was "no longer fit for purpose" and was exposed by the COVID-19 pandemic.
"The structure of our system contributes to inconsistent and inequitable access to high-quality and safe care," the committee reported.
"Our precious health resources risk being wasted through unnecessary duplication.
"We consider that these reforms are needed — and needed now."
The plan, which was 10 months in the making and included 27 recommendations, has been centred around the creation of Local Health Service Networks.
Those networks would group hospitals near each other to provide more seamless care, while retaining local leadership and hospital branding.
It recommended the government consolidate some existing health services "to reduce inequities and improve consistency in care".
However, Premier Jacinta Allan said that was the only one of the committee's 27 recommendations that the government would not implement in full or in principle.
"We will not be forcing hospitals to amalgamate because I'm not convinced that's in the best interests of patient care," she said.
The premier announced the formation of a new body — Hospitals Victoria — to oversee back-office operations at hospitals and reduce "duplication" of some administration.
"We have too many different IT systems, too many different payroll systems, too much different back office bureaucracy that can be, instead, focused on delivering patient care," she said.
Funding boost follows hospital recruitment freeze
The extra funding comes after hospitals were forced to put a freeze on recruitment amid budget uncertainty, with health sector bodies warning proposed budget cuts would result in less frontline staff and the winding back of planned surgeries.
Health Minister Mary-Anne Thomas said the funding increase recognised that hospitals were having their busiest year on record.
"This is off the back of the increase in patient demand that we've seen in the last financial year — a six per cent increase. So we are responding to that need in our hospitals and providing the funding to meet that need," she said.
"We have a world-class health care system here in Victoria, and we'll continue to back our hospitals and our hardworking healthcare workers and clinicians every single day. The government will not be forcing any hospital to amalgamate."
Victoria's peak body for public health services, the Victorian Healthcare Association (VHA), welcomed the extra funding and the decision to walk away from hospital mergers.
However, VHA chief executive Leigh Clarke said the government needed to provide more information about its plans.
"The devil is always in the details. We would note that services have already made some back of house cuts to some of their non-clinical staff and services, and we look forward to receiving more detail on the funding allocation that's being afforded to services, and where that's going to be distributed," she said.
Ms Clarke warned against large-scale reform of the health sector given the government's commitment to pay down the state's debt.
"The challenge around amalgamations in this current point in time is that they require a substantial amount of additional funding to do this sort of reform work well," she said.
"The VHA supports the intent of the reform, as do almost all health services, but it doesn't come at no cost. It's not a cost-neutral exercise."
Shadow Health Minister Georgie Crozier said it was not clear where the additional money would be spent.
"We just don't know where that money's going to, but certainly it will save some of those services that have been spoken about — dialysis units, bed closures all those things — we hope they would be preserved now," she said.
"This is going to provide some reassurance but it's not going anywhere near helping the overall health system that remains in crisis and we know that from whether its worsening ambulance response times to workforce issues."
Merger rethink welcomed in regional Victoria
There were significant demonstrations in regional Victoria last month amid fears over the potential merger of health services in some areas.
Dr Ben Nally, who helped organise a rally in Mansfield, on Thursday expressed some relief in the government's walk-back of forced hospital amalgamations but said more detail was needed on the plan for local health networks.
"If that [networks] results in better streamlining, better patient care, fantastic. But we want to be very sure from a local perspective that it's not going to dilute the quality that we offer in Mansfield."
The Mansfield community was particularly concerned about losing the local board on its 150-year-old hospital, Dr Nally said. Its preference was for the hospital to be run by locals, who understood the area's needs.
West Gippsland Healthcare Group chief executive Dan Weeks said it was "terrific" to learn that the Victorian government would not amalgamate the state's health services.
The West Gippsland Healthcare Group operates the hospital in Warragul, south-east of Melbourne, which services one of the state's fastest-growing regional areas.
Mr Weeks said there were multiple merger options being considered for the West Gippsland Hospital, including merging with Monash Health in Melbourne or amalgamating with other Gippsland health services.
But he said he was not convinced that amalgamations would have yielded immediate financial savings to hospitals.
"If we look at other states where they have this model of only a small number of health services [with] lots of hospitals, but sort of organised into big local health districts … I'm not sure that they're completely flush with money," he said.
Mr Weeks said he was also excited about the extra funding that the government was injecting into the health system.
"So we're very much looking forward to seeing over the next day or so what our budget will actually be, and then the planning will really start," he said.
As part of its 2022 election campaign, the government promised to build a new West Gippsland hospital.
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