'Great grief': Why our local health district is $48 million over budget

The information was revealed by WNSWLHD chief executive Mark Spittal at the Special Commission of Inquiry into Healthcare Funding.

The inquiry is looking into the way public health services are funded, while also looking to develop strategies that address escalating costs and limit wastage.

Mr Spittal said not being able to balance the books came with "great grief" but there were other outcomes the health district was focused on achieving.

He attributed a large portion of the blowout to staff costs, in particular the costs associated with locums and agency nursing personnel, which he said was a "necessary investment" to fill gaps in the health workforce.

"A transfer of wealth from taxpayers to a very, very small portion of Australian society, those who have the education and skill to capture those income demands they're making on the health system, is not a good an equitable use of funds," Mr Spittal said.

However, he said without getting the locums and agency nurses, "the district would not be functioning and our deficit would be greater".

In the lead up to Christmas, the chief executive said they were being forced to pay "extremely high" nursing costs. However, he made a decision to "play chicken" with the agencies providing the nurses that the district would pay "premium but not hyper-premium" costs to ensure adequate staffing.

Mr Spittal said there was a "desperate need at both a commonwealth level and across multiple states... to bring discipline into the locum and medical market and at a state level to bring discipline into the agency nurses market".

He gave an example of one position being advertised in Queensland at the moment, where the wage would be the equivalent rate of $430,000 a year, as well as accommodation.

But balancing the books is not always to the benefit of the community, Mr Spittal said.

"Our LHD until this current year... we were one of a very small number of LHDs in NSW who met its budget and had consistently done so for a decade or more. The health outcomes the population served are some of the worst in the state, so we've been financially good performers but poor performers in terms of health outcomes," he said.

"Over that period of time health outcomes did improve... but there are also indicators where it got worse."

Mr Spittal wants the funding model to change so that health districts are given funding based on the number of people in their region. However, to make it equitable, the funding should be adjusted for societal factors such as disease burden and disproportionate access to society.

He said in regional and rural areas, and especially in remote areas, there was a need to do things differently to get better outcomes for the community.

"When I call for reform, I am in no way being dismissive of what's there, but there are tensions in the system. We can and need to do things differently," Mr Spittal said.

"If we don't fill the gap... it will only get larger. Health services will only get more fragile."

In the WNSWLHD, Mr Spittal said there were three funding priorities: a person's first 2000 days, First Nations people and citizens 70-years and older.

The Special Commission of Inquiry into Healthcare Funding continued in Dubbo on Friday.