White Paper

Economic Viability of Centralised vs Decentralised Sterilisation in Rural Australian Hospitals

October 2026

Disclaimer

This content is provided for information only. The authors make no representation or warranty regarding the accuracy, completeness or currency of the content. No information in this whitepaper should be construed as medical advice. Readers should seek appropriate professional guidance before acting on any information contained in this document. The authors expressly disclaim all liability for any direct or indirect loss or damage arising from the use of or reliance on this information.

Executive Summary

This paper compares decentralised sterilisation (a compliant central sterile services department, or CSSD, at each hospital) with centralised sterilisation (a regional hub serving spoke hospitals) for rural Australian hospital networks. It covers 20 year cost, transport and inventory, AS 5369:2023 obligations and patient safety controls.

Cost: In an illustrative five-hospital network with spokes within 60 km [37 mi] of the hub, the hub is 21 % lower in 20 year present value (A$24.29M against A$30.64M), or A$74.98 against A$94.56 per set. The saving comes mainly from avoided site upgrade capital. It disappears where existing CSSDs can be brought to AS 5369:2023 for less than about A$0.98M each, and falls to 4 % where each hospital uses 40 sets per day, because hub staffing then rises with workload.

Distance: Transport cost does not set the practical service radius. Turnaround time, road reliability and emergency access do.

Compliance: AS 5369:2023 applies in full to both models. A hub adds transport risk assessment, contract and cross-site traceability obligations. Spokes retain receipt, storage and point-of-use obligations.

Safety: A hub concentrates competent staff and redundant plant but creates a common point of failure. Spokes need emergency sets and a business continuity plan, because AS 5369:2023 prohibits routine immediate-use sterilisation to cover inventory shortfalls.

Selection: Model each region with local inputs. Hubs suit clustered networks. Isolated hospitals retain on-site reprocessing.

Introduction

Rural health services can reprocess reusable medical devices (RMDs) in a CSSD at each hospital or in a regional hub that serves several hospitals. AS 5369:2023, which superseded AS/NZS 4187:2014 and AS/NZS 4815:2006, applies to both. Bringing a small CSSD to AS 5369:2023 requires segregated clean and dirty activities with unidirectional workflow, environmental control, validated equipment and water of specified quality. In September 2024 the Victorian Government allocated A$3.0 million from the Regional Health Infrastructure Fund to upgrade the Kerang District Health CSSD and replace sterilising equipment. This paper sets out a cost model, its sensitivities, and the logistics, compliance and safety controls needed to choose between the two models.

Financial Modelling: 20 Year Cost Comparison

Method: Compare whole-of-life cost in constant 2026 dollars and as present value at a 5 % real discount rate. The illustrative network has five small hospitals. Decentralised: each hospital upgrades its CSSD. Centralised: the largest hospital becomes the hub, and four spokes within 60 km [37 mi] retain receipt, sterile storage and dispatch. Divide equivalent annual cost by annual sets to obtain cost per set. Replace each assumption with site quotations and local rates.

Assumptions: The model uses the following illustrative values.

Basis: The vehicle rate is the Australian Taxation Office cents per kilometre rate for the 2026 to 2027 income year, which covers fuel, registration, insurance, maintenance, repairs and depreciation. Use the actual fleet cost per km where known. Steriliser utilities use the average consumption measured over 304 days on one hospital steriliser, including standby, by McGain et al. (2017), in both models. Decentralised staffing is set by minimum cover for operating hours and leave rather than by workload. At 15 min per set and a cover factor of 1.25, workload is 0.96 FTE per local CSSD and 4.78 FTE at the hub, so the minimum staffing applies in both models. All other values are illustrative.

Illustrative 20 year cost comparison for a five-hospital rural network.

Result: The hub is A$7.74M (18 %) lower in constant dollars and A$6.35M (21 %) lower in present value. Avoided capital provides A$5.87M of the constant-dollar difference. Operating cost is A$93,560 per year lower because consolidated staffing and plant outweigh the added transport, driver, spoke staff and set repair costs. Cost per set is high in both models because 20 sets per day per hospital is well below the capacity of the minimum staff and plant.

Costs often omitted: Spoke works, additional and emergency instrument sets and spoke staff add A$1.42M of capital at year 0, A$0.42M of set replacement at year 10 and A$210,800 per year to the hub option. Include them in every hub business case.

Sensitivity to Volume and Distance

The following table varies one input at a time and gives the present value advantage of the hub, and that advantage as a share of the decentralised present value.

Site upgrade capital: This is the dominant variable. With equipment held at 40 % of the upgrade cost, the models break even at a site upgrade cost of about A$0.98M. The hub capital that eliminates the advantage, with equipment at 40 % of it, is about A$9.59M. Obtain a costed AS 5369:2023 gap closure estimate for each site before modelling.

Transport distance: Each additional 100 km [62 mi] per loop adds 52,000 km [32,300 mi] per year, A$47,320 in vehicle cost and 0.38 driver FTE (A$32,500). This is A$79,820 per year, or A$0.99M in present value. Cost break-even occurs at a loop of about 838 km [521 mi]. A 200 km [124 mi] loop already takes 3.5 h, so turnaround time and road access, not cost, set the service radius. Limit each loop to the time between the end of the operating list and the start of the hub processing window.

Workload: Decentralised staffing and plant are fixed minimums. At 40 sets per day per hospital, hub workload staffing rises to 9.56 FTE while each local CSSD remains at its 2.0 FTE minimum, and the hub advantage falls to A$1.42M. Hub capital is held constant in that case, so confirm hub equipment capacity at the higher volume. The hub advantage is greatest where each site's workload is well below the capacity of its minimum staff and plant. A regional hospital that already operates a compliant CSSD is the logical hub. Confirm it can absorb spoke workload within its validated equipment capacity and staffing before committing.

Staffing minimums: The result depends on the minimum staffing that each model can sustain. Reducing the local CSSD minimum to 1.5 FTE reduces the hub advantage by 47 %, and raising the hub minimum to 8.0 FTE reduces it by 37 %. Base the minimums on the rostered hours and leave cover of each site.

Discount rate: The present value advantage is A$6.80M at 3 % and A$5.98M at 7 %, so the result is not sensitive to the rate.

Funding: Capital grants change who pays, not the whole-of-life cost. Compare the models before applying grants, then direct funding to the lower-cost model.

Logistical Challenges and Considerations

Turnaround and inventory: AS 5369:2023 requires the total reprocessing time to be included in operational planning so that sufficient devices and reprocessing resources meet demand. Extra sets per spoke equal sets used per day multiplied by the additional days of turnaround. A schedule that collects used devices after the list, processes them overnight and returns them next morning adds about 1 day.

Time to cleaning: Delay between point-of-use pre-treatment and cleaning increases bioburden and lets soil dry on devices. Pre-treat at the point of use per the instructions for use (IFU), keep devices moist where the IFU permits, and set a maximum time from use to cleaning that the validated cleaning process covers.

Containers and vehicles: Implement procedures for transporting used devices that protect devices, personnel and the environment. Use rigid, robust, leak-proof, sealable, labelled and cleanable containers. Segregate used and sterile loads physically within the vehicle. Control compartment temperature and humidity within limits set by the risk assessment, using the sterile storage range of 18 to 25 deg C [64 to 77 deg F] and 35 % to 70 % relative humidity as the reference. Record dispatch and receipt of each container.

Transport risk assessment: AS 5369:2023 requires transport between sites to be risk assessed and the conditions under which transported devices are nonconforming to be documented, e.g. damaged, wet or open packs and breached seals. Reassess the need for revalidation when the transport route or means changes.

Redundancy: Provide enough washer-disinfectors and sterilisers at the hub to cover maintenance, requalification and breakdown without stopping service, at least one unit more than peak demand for each process. A single-steriliser site stops when its steriliser stops. A hub is a common point of failure for every spoke.

Business continuity: AS 5369:2023 requires systems, e.g. a business continuity plan, that maintain compliance under emergency or suboptimal conditions, and documented backup procedures. For a hub network, include:

• A mutual aid agreement with another compliant CSSD, stating transport times and the processes and packaging it can supply.
• Emergency sets held sterile at each spoke, sized as emergency set demand per day multiplied by the longest credible road closure, with elective lists deferred during closures.
• An on-call transport run for unplanned procedures where the loop time allows.
• A recall procedure that identifies every spoke and patient affected by a failed hub load.

Immediate-use sterilisation: AS 5369:2023 prohibits routine immediate-use sterilisation as a substitute for adequate inventory or as a cost-saving measure. A spoke steriliser retained for contingency requires a dedicated reprocessing room that meets all AS 5369:2023 requirements, plus validation and routine monitoring. Hold a validated non-routine reprocessing procedure for a dropped device with no sterile replacement.

Regulatory and Compliance Obligations

Scope: AS 5369:2023 applies equally to hubs, spokes and local CSSDs. Note 1 to clause 5.6.1 states that, wherever practicable, reprocessing should be centralised to a dedicated reprocessing facility. Point-of-use reprocessing requires a dedicated room separate from patient care that meets all requirements, including environmental control, segregation of clean and dirty activities and unidirectional workflow.

Facility: Each reprocessing facility requires segregation of clean and dirty activities, a process flow diagram that manages cross-contamination and airflow risk, compliant ventilation, a dedicated cooling area and controlled sterile storage. Include pass-through equipment in new or refurbished facilities. A hub concentrates this capital in one purpose-designed facility.

Equipment and water: Equipment must conform to ISO 15883, EN 285 or EN 13060, and ISO/TS 22421, with IQ, OQ and PQ, annual requalification and routine monitoring. Final rinse water must meet the AS 5369:2023 limits, e.g. conductivity of 30 µS/cm or less. Select treatment, e.g. reverse osmosis, by risk assessment against the supply water quality. A hub needs one treatment plant sized for total demand rather than one per site.

Traceability: NSQHS Standards Action 3.17 requires a traceability process for critical and semi-critical devices that identifies the patient, the procedure and the devices used. AS 5369:2023 requires critical devices to be traceable at least to the individual cycle of a specified steriliser. In a hub network, link hub cycle records to spoke patient records through a shared or interfaced tracking system.

Contracts: Where reprocessing is outsourced or provided by another health service, put an agreement in place that defines each party's responsibilities, including conformance to AS 5369:2023. Include evidence of accreditation, internal or external audit or other quality activities, turnaround times, transport conditions, nonconformance and recall notification, and contingency arrangements. The receiving health service remains accountable under the NSQHS Standards for devices used on its patients.

Accreditation timeline: Australian Commission on Safety and Quality in Health Care (ACSQHC) Advisory AS24/01 (November 2024) required a gap analysis against AS 5369:2023 by 30 June 2025 and a compliance plan with timeframes. AS 5369:2023 sets no compliance deadline. Assessors check evidence that the plan is being implemented. A hub can form the compliance plan for spokes whose CSSDs cannot be upgraded economically.

Patient Safety and Quality Implications

Process equivalence: A validated process delivers the same sterility assurance at a hub or a local CSSD. The models differ in staff competence, consistency and failure modes.

Competence: AS 5369:2023 requires a competent person in charge of reprocessing and competency assessment of all staff, irrespective of site size. Small sites that use multi-skilled staff must meet the same requirements. Dedicated hub staff and a single quality system reduce variation between sites. Train staff at hubs and local CSSDs to the Certificate III in Sterilisation Services (HLT37015).

Local CSSD failure modes: Single-steriliser downtime, inconsistent routine monitoring and wet packs from inadequate drying or cooling. Control them with routine monitoring, audit and equipment redundancy.

Hub failure modes: Transit damage to packaging, delay to cleaning, and network-wide impact of a failed load or plant outage. Inspect every pack on receipt and reject nonconforming packs. Treat a failed hub load as a multi-site recall.

Availability: Instrument shortage causes cancelled or delayed procedures. Size inventory and emergency sets so that no planned or emergency procedure depends on an unscheduled transport run.

Outcome monitoring: For each site, track turnaround time, nonconforming packs on receipt, procedures cancelled for instrument reasons, recalls and surgical site infection rates before and after any change of model.

Comparative Analysis: Case Studies and Scenario Modelling

Riverland, South Australia: Riverland Mallee Coorong Local Health Network is implementing a CSSD hub and spoke model across its Riverland hospital sites, with equipment and CSSD infrastructure upgraded to meet the new Australian Standard. CSSD redevelopment was completed at Riverland General Hospital in Berri and commenced at Loxton Hospital Complex in the 2023 to 2024 financial year.

Kerang, Victoria: Kerang District Health retained on-site reprocessing, with A$3.0 million from the Regional Health Infrastructure Fund in 2024 to upgrade its CSSD and replace sterilising equipment. At A$3.0M per site, the illustrative model gives a hub a present value advantage of A$12.57M, or 34 %, wherever spokes are within practical transport time.

Isolated hospital (hypothetical): The nearest hospital is 300 km [186 mi] away. A round trip of 600 km [373 mi] takes about 7.5 h of driving, so return of processed devices takes at least 24 to 48 h and emergency resupply is not possible. Retain a compliant on-site CSSD for core sets. Outsource low-volume specialist devices, e.g. flexible endoscopes, where scheduled procedures allow the turnaround. Use single-use devices where volume is too low to justify validating and maintaining a process.

Clustered network (hypothetical): Five hospitals, four within 60 km [37 mi] of the largest. The illustrative model gives the single hub a 21 % present value advantage with two 3.5 h loops per day.

Dispersed network (hypothetical): Hospitals form two clusters about 150 km [93 mi] apart, each within about 70 km [43 mi] of its largest hospital. A single hub would need loops that exceed the available time window. Two hubs, one per cluster, keep loop times within one shift and provide mutual aid to each other. Confirm each hub has enough workload to justify its fixed plant and staff.

Paired hospitals (hypothetical): Two hospitals 30 min apart can share one CSSD with several transport runs per day. Turnaround approaches on-site performance, and the second hospital avoids a full CSSD.

Single-use devices: Single-use devices remove reprocessing at the point of use at a higher unit cost and with more waste. Compare the unit cost with the reprocessing cost per use. Reprocessing single-use devices is a manufacturing activity regulated by the Therapeutic Goods Administration and is outside AS 5369:2023.

Selection rules:

• Centralise where spokes are within a loop time that allows next-morning return, and the avoided site upgrade capital exceeds the added spoke works, inventory, staff and transport cost.
• Retain local reprocessing where transport cannot return devices within the planned turnaround, where road closures are frequent, or where the hospital provides emergency surgery with no alternative within transfer distance.
• Use modular CSSD units as temporary capacity during refurbishment, operated to AS 5369:2023.

Policy Recommendations

• Regional assessment: For each region, record hospitals, procedure volumes, set demand per day, road distances and travel times, road closure history and AS 5369:2023 gap analysis results. Model the whole-of-life cost of each option with these inputs.
• Hub business case: Fund hubs where the whole-of-life comparison favours them. Include spoke works, additional sets, vehicles, drivers and spoke staff.
• Service agreements: Specify turnaround times, quality indicators, audit access, exchange of cycle and traceability records, nonconformance and recall notification, and contingency arrangements. Establish a governance committee with representation from every hospital served.
• Contingency: Put mutual aid agreements, emergency sets and on-call transport in place, and test the business continuity plan by exercise.
• Workforce: Fund Certificate III in Sterilisation Services training, appoint a competent person for each reprocessing facility, and consider a shared quality role across small sites.
• Transport risk: Apply the AS 5369:2023 risk assessment guidance to every inter-site route and document nonconformance conditions before service starts.
• Outcome review: Review cost, turnaround, cancellations, recalls and infection data annually and adjust delivery frequency, inventory or hub capacity in response.
• Service scope: State in the plan that centralising reprocessing does not change the surgical scope of spoke hospitals, and set out the contingency arrangements that protect it.

Conclusion

Centralisation is economically viable where several small hospitals each face a large AS 5369:2023 upgrade and lie within a transport loop that allows next-morning return. In the illustrative network, a hub is 21 % lower in 20 year present value, and the result depends mainly on avoided site upgrade capital and on the minimum staffing each model can sustain. The advantage falls as site workload approaches the capacity of minimum local staffing. Transport cost is a minor term. Transport time, road reliability and emergency access set the service radius.

A hub is viable only with spoke works, additional inventory, controlled transport, cross-site traceability, contracts and a tested business continuity plan in place. Isolated hospitals retain on-site reprocessing. Model each region with local costs and travel times, and fund the option with the lower whole-of-life cost that meets AS 5369:2023.

Sources

1. Standards Australia. AS 5369:2023 Reprocessing of reusable medical devices and other devices in health and non-health related facilities.
2. Australian Commission on Safety and Quality in Health Care. National Safety and Quality Health Service Standards, Action 3.17 Reprocessing of reusable equipment and devices.
3. Australian Commission on Safety and Quality in Health Care. Advisory AS24/01 Requirements for reprocessing of reusable medical devices in health service organisations, November 2024.
4. Premier of Victoria. Facilities upgrades underway at Kerang District Health, media release, 25 September 2024.
5. SA Health. Riverland Mallee Coorong Local Health Network Annual Reports, 2023 to 2024 and 2024 to 2025.
6. Australian Taxation Office. LI 2026/19 Cents per kilometre deduction rate for car expenses, 2026 to 2027 income year.
7. McGain F, Moore G, Black J. Steam sterilisation's energy and water footprint. Australian Health Review 2017, 41(1), pages 26 to 32.
8. training.gov.au. HLT37015 Certificate III in Sterilisation Services.