NSW Health could save $35m a year and improve patient care by giving psychiatrists a 25% pay rise compared with what it is now spending on staff due to a reliance on contractors to fill vacancies, according to modelling seen by Guardian Australia.
The modelling, conducted by a group of senior psychiatrists who have worked in medical administration, assumes the pay rise would entice psychiatrists back to work as staff specialists, who are employed in permanent roles in New South Wales public health, and reduce the state’s reliance on casual doctors, known as locums, over four years.
In a long-running dispute with NSW Health, staff specialists claim they are paid less than psychiatrists in other states. In a vicious cycle, as increasing numbers have left to work in higher paying roles in other states and the private sector – and their positions have gone unfilled – the remaining doctors say they can no longer keep working in the understaffed system.
They resigned en masse from staff specialist positions last month after the government rejected their proposed solution of a special levy to increase their pay by 25%, similar to that which emergency doctors received in 2015. Psychiatrists claim this would put their salaries on par with staff specialists in other states but still short of what their counterparts earn in private practice.
Dr Kathryn Drew, one of the authors of the modelling and the former director of medical services for mental health within one of the states’ local health districts, resigned in January because she said it was “demoralising to the extreme” that NSW Health was prepared to pay enormous premiums for locums instead of investing in paying permanent staff.
Using the latest available workforce profile and publicly available salary figures, the modelling estimates the government in the 2023-24 financial year spent $159.7m to pay 302 staff specialist psychiatrists and 70 locums filling vacancies, while 38 positions remained unfilled.
If the government had been able to find locums to fill the remaining 38 vacancies, the spend would have been $195.1m – which is $35m more than what it would cost to pay all of the state’s 410 staff specialist positions the 25% pay increase – which the modelling put at $159.8m a year.
Drew said it was important to compare those two figures because the healthcare system running with vacancies was “really bad for patients”.
“It means that psychiatrists are focusing only on the patients in front of them trying to survive, instead of doing all of the things that lead to quality of care, system improvement and efficient care,” Drew said.
The document estimates that locums – assuming they are paid $3,050 a day and working five days a week for 50 weeks – filling the role of 210 staff specialist psychiatrists after the resignations would cost $273.7m, taking into account the fee paid to the locum agency, accommodation, flights and a car which are offered to locums.
The modelling noted that those costs did not include the significant administrative costs associated with onboarding new doctors, the costs that come with the reduced continuity of care, often resulting in longer lengths of stays in hospital for patients, nor the substantial costs from the loss of clinical leadership, teaching and research.
The purpose of the modelling, which has been shared with government representatives, she said, was to show the government it would be cost-neutral to spending before resignations to give the psychiatrists a pay rise if it meant that NSW would be decreasing locum use, and that “they would be actually saving money compared with what they’re spending now, and by a long way what they’d be spending if all of the staff specialists resign”.
The latest available figures from early February showed the government had recruited an additional 51 locums since resignations started taking effect.
Of the 206 psychiatrists who had intended to resign, more than a third – 72 staff specialists – have agreed to transition to visiting medical officers (VMO) contracts, which are paid at an hourly rate of $275.85/hour or $293.75/hour dependent on seniority.
Drew said the pay for visiting medical officers is less expensive than a locum but still substantially more expensive than the 25% pay increase staff specialists had asked for.
Drew told Guardian Australia she calculated the average cost of 72 VMOs working 50 weeks would be $41m, nearly double the cost compared with the same number of staff specialists ($22.5m) and still less expensive than the cost of implementing the 25% pay rise, which would amount to $28m.
There have been 29 psychiatrists who have rescinded their resignations and 111 have deferred their resignations beyond 7 February.
Based on 185 staff specialists remaining in the public system, Guardian Australia used Drew’s VMO figure and those in the modelling to calculate that current contingency measures over the year would cost $211.58m.
All of these estimated costs are only based on salaries. They do not account for public patients who have also been transferred to private hospitals after resignations, where the government could be paying up to $20,000 a patient for a three-week program, according to Dr Tanya Ahmed, a psychiatrist who has worked in public and private hospitals.
The NSW government did not answer Guardian Australia’s question about how many public patients have been transferred to private facilities.
The NSW health minister, Ryan Park, has previously said the government cannot afford the psychiatrist’s proposed 25% wage increase, which he claimed would amount to an extra $90,000 a year for each psychiatrist – but which psychiatrists point to represents an increase for the maximum possible salary for psychiatrists working full-time in NSW.
Prof Henry Cutler, the director of the centre for the health economy at Macquarie Business School, said: “It seems locums cost more than twice as much as staff specialist salaries.”
But Cutler pointed out that wages account for 70% of healthcare system costs and therefore the government did have to consider the further pressure any raise for the psychiatrists would put on wages in other parts of the healthcare system.
Francesco Paolucci, professor of health economics at the University of Newcastle, said the government had a structural problem with its bargaining power weak compared with resigning psychiatrists, who can accept locum and VMO roles, where they are able to work in the private sector and then serve the public system at private rates. “They have basically decided to say no and act as consultants, right?”
Paolucci said: “The ultimate result is that the people who pay are the patients, in this case, where you put a frail population at risk.”
Lesley Russell, an associate professor at the Menzies Centre for Health Policy, said: “There is no justification for substantial differences in salaries and conditions for those doctors who work in public hospitals around Australia. Equivalent work should demand equivalent pay …
“Yes, there is a cost to the government budget’s bottom line. Unseen and uncalculated is the cost elsewhere in the healthcare and social welfare systems when patients don’t get ready access to the psychiatric care they need, along with the immeasurable costs to individuals.”
The mental health minister, Rose Jackson, told Guardian Australia: “The NSW government have urged psychiatrists not to resign and to stay with us as we work toward a fair and reasonable solution.
“Our preference is to build a sustainable and resilient public mental health workforce, not to rely on the private sector and locums.
“Psychiatrists are vital to our healthcare system but, if mass resignations occur, we must focus on supporting our multidisciplinary workforce to maintain continuity of care and deploying comprehensive contingency plans. Providing care for our state’s most vulnerable mental health patients is non-negotiable and we will not allow this to be compromised.”
Do you know more? Contact natasha.may@theguardian.com
