Federal Health Minister Tanya Plibersek yesterday announced a $107 million “rescue package” to be paid directly to Victorian hospitals.

It comes after weeks of heavy criticism of the federal government for slashing funding to the Victorian government for health care.

The federal government had blamed the state government for the reduction in funding.

Ballarat Health Services (BHS) was forced to close eight beds, cut 25 jobs through non-replacement and initiate a freeze on equipment in an attempt to wipe $2.8 million from its budget five months into the financial year.

BHS chief executive officer Andrew Rowe said the reversal of their budget reduction came as a great relief for the hospital, which was going through a period of substantial increase in demand, with new services also coming on. 

The announcement also would overcome the considerable concerns of patients, who were distressed about the possible effect on services, and potential delays in treatment, Mr Rowe said.

“We’re absolutely delighted with the news that the budget reduction of $2.8 million has been reversed,” he said.

“It allows us to overcome the impacts of the cuts and determine our priorities for the remaining months of this year.

“Although we endeavoured to minimise the impact on patients, it was not possible to avoid some disruption to patient-care services.

“We are pleased to get back to what we do best, and that is care for our patients.”

Mr Rowe said BHS management would determine how to allocate the funding once full details of the announcement were made available.

The money was stripped retrospectively from BHS’s budget under a new formula for calculating federal funding based on population data. Victoria received $107 million less than it expected.

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Ms Plibersek said the funding would now go directly to frontline hospital administrators and bypass the state government.

“Instead of doing the right thing by the state, the Baillieu government has engaged in a politically-driven campaign of stunts and spin designed to distract from its own budget cuts and failure to properly manage Victoria’s health system,” she said.

Victorian Health Minister David Davis said he welcomed the first step to restore funding, but the federal government now needed to restore the full amount of $457 million over four years, cut under a technical adjustment to Victoria’s population estimate.

“The serious damage has been done to the Victorian health system,” he said.

Ballarat MP and Parliamentary Secretary for Health and Ageing Catherine King said the decision to directly provide a funding injection to Victorian hospitals was the only way to ensure they got their fair share.

“What has been increasingly clear through the Commonwealth’s dispute with Victoria over hospital funding is that local hospitals are not getting their full share of Commonwealth funding,” she said.

But Liberal candidate for Ballarat John Fitzgibbon called on Ms King to explain her role in the dispute. 

“This is a major embarrassment for the Parliamentary Secretary for Health and for the Health Minister,” he said.

rachel.afflick@fairfaxmedia.com.au