The NSW government’s multibillion-dollar hospital-building program is systematically locking in budgets before the true costs are known, forcing them to slash medical services, downgrade facilities, and leave entire hospital floors empty to stay on budget.
An Audit Office report found NSW Health could not demonstrate that its capital investment prioritised what future patients needed most, favouring expensive hospital construction over community care hubs, outpatient clinics, and preventative digital services.
NSW Auditor-General Bola Oyetunji found hospital building budgets are routinely approved long before preliminary or full business cases are developed.
Under a structured cost-cutting exercise called “value management”, Health Infrastructure NSW and local health districts must then scale back the projects by deleting planned inpatient wards, operating theatres, medical imaging and laboratories, or “cold shelling” – leaving hospital spaces without power, plumbing, ceilings, or clinical fitouts.
The NSW government has allocated $11.9 billion to health capital expenditure between 2026-27 and 2029-30, but the audit found recurrent funding for staffing and running hospital expansions was rarely addressed until roughly 12 months before opening, risking hospitals operating at diminished capacity from day one.
In 2025-26, the cost of bridging the operational funding gap for newly opened facilities was $90.5 million, the report, published on Thursday , found.
$2 billion: The estimated total cost of projects managed by Health Infrastructure per year
$11.9 billion: The state budget for health infrastructure from 2026-27 to 2029-30
~50 per cent: The percentage of NSW Health’s annual capital budget allocated to building or upgrading hospitals
At Bathurst Hospital, more than 15 per cent of the originally planned scope was removed to keep within its $200 million budget, including a day surgery inpatient unit and pharmacy, and an inpatient mental health unit was salvaged via an emergency draw on contingency reserves.
At Manning Hospital in Taree, an entire 1600-square-metre fourth floor was built as an empty shell. The 28-bed inpatient ward has been shelved until future funding can be secured.
NSW Health does not monitor the number of unfinished shells that exist across the state, according to the report.
The $558 million Albury Wodonga Regional Hospital redevelopment was subject to $63.7 million in cuts, including an abandoned helipad, and cold-shelling operating theatres and paediatric units.
The report found the redevelopment’s complex cross-border co-funding agreement – in which Victoria manages the hospital’s operations – meant NSW had limited oversight.
NSW’s 20-Year Health Infrastructure Strategy warned the pace of acute hospital construction was financially unsustainable, with too little spent on non-hospital infrastructure and maintaining existing facilities.
The audit also found accountability was weak, with post-completion reviews almost non-existent. Of the 49 health capital projects completed between 2022 and 2024, only two evaluation reports were completed, and neither published.
The audit report makes six recommendations to be implemented by November 2027. NSW Health accepted four, and two in principle.
Health Minister Ryan Park said he would review the report, adding the government had been focused on delivering 32 new and upgraded hospitals and more than 2500 additional beds and treatment spaces across the state.
“These rapidly growing communities were waiting too long and this government was determined to do something about it as quickly as possible,” Park said.
NSW Health Secretary Susan Pearce said, in her formal response to the audit, she was pleased the report acknowledged the improvements since the 2020 audit, including the development of the 20-Year Health Infrastructure Strategy and strengthening of capital planning processes and strategic frameworks.
“Our focus is on improving service capacity, access and quality of care, and delivering better health outcomes for patients,” Pearce said.
Australian Medical Association NSW president Dr Fred Betros said doctors would support a mechanism to ensure hospital builds incorporated appropriate workforce budgeting at the outset.
“A hospital without the staff to fill it is just a useless build,” he said.
The AMA NSW is advocating for an extra 1000 specialists across NSW’s hospitals the next four years to meet patient demand, and expanding the rest of the workforce in step.
In April 2025, a Special Commission of Inquiry exposed systemic weaknesses in health service planning, prompting the NSW government to accept key recommendations requiring major hospital builds and upgrades to be grounded in verified population health needs rather than premature budget commitments.
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