Federal spending on hospitals declined by 6% between 2010 and 2015, at the same time that hospitalisations were rising by 3.5%. Each year, there are 10.6 million hospitalisations across Australia[i] .

For Australians aged 65 to 74, hospitalisation rates are rising by 5.9% each year, faster than the population growth rate for this age group. Some states are affected more than others; in Queensland, the number of people likely to be admitted to public hospitals is forecast to double over the next 20 years.

Globally, demographic change and opportunities provided by new healthcare technologies have prompted differing responses from governments. For example, in parts of the UK, a specialist emergency care hospital deals only with urgent care, while a community hospital offers care for longer-term stays.

In the United States, the Westchester Medical Center in New York State handles only complex cases but is aligned with six other hospitals and nearly 300 healthcare partners in a hub and spoke model. In Baltimore, the Johns Hopkins Hospital has opened a command centre to manage the flow of patients using the latest in systems engineering and real-time and predictive analytics, resulting in reduced waiting times for beds, transfers and discharges.

Growing demand

In Australia, the Australian Healthcare and Hospitals Association recommended in December that our health system should be overhauled to focus on delivering services at a more local level, to cope with “mounting financial strain and increasing demand”

So how can Australia meet the challenges of financing critical infrastructure to meet the needs of an ageing population, rising community expectations about the level of health care, and rapidly evolving medical technologies?

This is where institutions such as NAB can play a role. NAB has been a leading financier of the majority of large public-private partnership (PPP) hospital developments around Australia in recent years, and several of those projects have involved innovative financing solutions unique to NAB[ii].

Coupled with NAB’s expertise as a health-care bank supporting individual medical practitioners up to large-scale hospitals[iii], we are experienced in assisting governments and the healthcare sector in developing innovative healthcare models.

Our track record includes PPPs to develop project finance for the Sunshine Coast University Hospital, the Victorian Comprehensive Cancer Centre, the Northern Beaches Hospital, and the Bendigo Hospital project among others.

Community outcomes

“What matters to the community are the outcomes — the services delivered by infrastructure, not the infrastructure as an asset,” said Phillip Mak, Head of Infrastructure, Corporate Finance.

The $1 billion Victorian Comprehensive Cancer Centre, which opened in 2016, has been hailed as the jewel in Australia’s medical research crown, enabling the collaboration of 10 major cancer organisations including the Peter MacCallum Cancer Centre, Melbourne Health and the University of Melbourne. NAB was the sole domestic bank involved in the financing and acted as coordinating bank for the international banks involved.

Northern Beaches Hospital is a partnership with Healthscope that has allowed NBH to be built faster and at a reduced cost to the taxpayer, with NAB mandated to arrange project finance for a new PPP structure that will deliver 488 public and private beds. A state-of-the-art hospital in the northern beaches area has been a long-held ambition for the local community and it will employ 1,300 staff when it opens later in 2018.

It’s an example of infrastructure that helps lift the economic and social outcomes of a region, and shifts the focus to delivering on customer outcomes.

Focus on the customer

“At NAB, we’re keen supporters of this trend towards customer-centric infrastructure. It ties together so many of the megatrends that underpin tomorrow’s world,” Mr Mak said.

These megatrends include the increase of digitisation, new sources of capital as governments are constrained and responding to the ageing demographics.

In health care, this may mean a variety of visions for the hospitals of the future. Will hospitals become health care hubs, offering super-precincts that provide different types of care? Will the trend towards moving inpatient health care to outpatient or home care services accelerate, leaving hospitals with the most complex cases? Will digital and artificial intelligence technologies improve remote monitoring, decision-making and the patient’s experience?

These are all issues for health leaders, economists, industry analysts and the community to grapple with. Where NAB can help is the financing of healthcare infrastructure and innovative design.

NAB has successfully used innovative financing structures in the form of social infrastructure bonds to fund affordable housing in the UK. These forms of financing have attracted new types of investors by providing a product that ticks the boxes on both financial and environmental, social and governance (ESG) measures.

Solutions such as social bonds could be adapted to health projects as well, potentially attracting non-traditional investors. Australia’s superannuation funds like to invest in mid- to long-term income-producing infrastructure projects — and with a growing emphasis on ESG considerations they are looking to fund significant community projects that benefit their members.

Over the past 10 years, NAB has ranked #1 in Australia for infrastructure and PPP origination by both number of deals originated and by total debt volume[iv]. We look forward to working with you to develop financing solutions for the health care models of the future.

[i]  AIHW, NSW Budget

[ii] Inframation, 01/01/2010 – 31/12/2017

[iii] NAB Health is a three-tiered structure with a national corporate business, supported by 230 specialist health bankers who work exclusively with businesses and professionals in the industry. We were proud to be awarded “Best Industry Specialisation” in the Australian Business Banking Awards for 2017.

[iv] Infra-Deals (as at 21/12/2017) – Cumulative Results for 2007-2017 excluding Power.