Glossary

Word or term Meaning
(the) Act

The National Health Reform Act 2011(external link, opens in a new window).

activity based funding (ABF)

A system for funding public hospital services based on the actual number of services provided to patients and the efficient cost of delivering those services. Activity based funding uses national classifications, cost weights and nationally efficient prices to determine the amount of funding for each activity or service.

(the) Administrator

The Administrator of the National Health Funding Pool (the Administrator) is an independent statutory office holder, distinct from Commonwealth and state and territory government departments, established under legislation of the Commonwealth and state and territory governments.

The role of the Administrator, with support from the National Health Funding Body, is to administer the payment of public hospital funding according to the National Health Reform Agreement, and to oversee payments into and out of the Reserve Bank pool account for each state and territory, collectively known as the National Health Funding Pool (the funding pool).

(the) Agreement

See 'National Health Reform Agreement'.

block funding

A system of funding public hospital functions and services as a fixed amount based on population and previous funding.

Under National Health Reform, block funding will be provided to states and territories to support teaching and research undertaken in public hospitals and for some public hospital services where it is more appropriate, particularly smaller rural and regional hospitals

COAG

The Council of Australian Governments (COAG) is the peak intergovernmental forum in Australia. The members include the Prime Minister, state and territory Premiers and Chief Ministers and the President of the Australian Local Government Association (ALGA).

The role of COAG is to promote policy reforms that are of national significance, or which need co-ordinated action by all Australian governments.

COAG Health Council

Previously known as Standing Council on Health (SCoH).

The Ministerial Council established to facilitate the provision of advice of Health Ministers to COAG. The members include all jurisdictional Ministers for Health, jurisdictional Ministers for Mental Health, Commonwealth Minister for Veterans' Affairs and the New Zealand Minister of Health and State Services.

cross-border activity based funding

When a resident of one state receives hospital treatment in another state, the 'resident state' compensates the treating or 'provider state' for the cost of that care via a 'cross-border' payment.

Commonwealth activity based funding contributions through the National Health Funding Pool to each state and territory are on a 'provider state' basis and hence already reflect the Commonwealth share of the costs of this cross-border activity.

For state and territory activity based funding contributions, the 'resident state' is required to meet the state portion of the cost of services where its resident receives hospital treatment in another state or territory. The resident state makes 'cross-border' funding contributions to the provider state's pool account, and these funds are used by the provider state as part of its activity based funding payments to local hospital networks. Cross-border agreements, including the scope of services and payment arrangements, can occur bilaterally between all states.

Independent Hospital Pricing Authority

An independent statutory authority established under the National Health Reform Act 2011 (Commonwealth) responsible for determining the national efficient price (NEP) for public hospital services.

local hospital network (LHN)

An organisation that provides public hospital services in accordance with the National Health Reform Agreement. A local hospital network can contain one or more hospitals, and is usually defined as a business group, geographical area or community. Every Australian public hospital is part of a local hospital network. Local hospital networks receive activity based and block funding under the Agreement.

Some states and territories use their own terminology to describe local hospital networks, such as 'local health districts'.

national efficient price (NEP)

A base price calculated by the Independent Hospital Pricing Authority as a benchmark to guide governments about the level of funding which would meet the average cost of providing acute care (admitted, emergency and outpatient) services in public hospitals across Australia.

The national efficient price is based on the projected average cost of a National Weighted Activity Unit (NWAU) after the deduction of specified Commonwealth funded programs.

The national efficient price for 2012-13 and 2013-14 was $4,808 and $4,993 respectively per NWAU. The national efficient price for 2014-15 is $5,007 per NWAU.

National Health Funding Body (NHFB)

An independent statutory body established under the National Health Reform Act 2011 (Commonwealth) to assist the Administrator in carrying out his or her functions under Commonwealth, state and territory legislation.

National Health Funding Pool

A collective name for the state pool accounts of all states and territories, also known as the 'funding pool'. The funding pool was established under Commonwealth and state and territory legislation for the purpose of receiving all Commonwealth and activity based state and territory public hospital funding, and for making payments under the National Health Reform Agreement.

National Health Reform (NHR) Agreement

The National Health Reform Agreement (the Agreement) outlines the funding, governance, and performance arrangements for the delivery of public hospital services in Australia. The Agreement was entered into by all states, territories and the Commonwealth in August 2011.

National Weighted Activity Unit (NWAU)

An NWAU is a measure of health service activity expressed as a common unit, against which the national efficient price (NEP) is paid. It provides a way of comparing and valuing each public hospital service (whether it is an admission, emergency department presentations or outpatient episode), by weighting it for its clinical complexity.

The average hospital service is worth one NWAU – the most intensive and expensive activities are worth multiple NWAUs, the simplest and least expensive are worth fractions of an NWAU.

The NWAU will be updated annually.

Other funding

The other funding category represents:

  • Public health funding – funding provided for various public health programs such as essential vaccines, child health and youth services.
  • Cross border funding – funding provided from other states for patients who are provided services in a state other than their resident state.
  • Over deposit funding – funding provided into the state pool account that is surplus to payment requirements for a particular month.
  • Interest – interest received on funds in the state pool account.
  • 'Other' funding – as determined by the state or territory and notated in the monthly reports.
Pricing Authority

See 'Independent Hospital Pricing Authority'.

service agreement

An agreement between a state or territory or other bodies to provide agreed hospital services, for example between a state or territory and a local hospital network in accordance with the National Health Reform Agreement (NHRA).

service categories
  • Admitted public patient services – Hospital services for patients who have been formally admitted to a public hospital, who have one or more problems which require care in an admitted patient setting, and who have elected to be treated free of charge as a public patient.
  • Admitted private patient services – Hospital services for patients who have been formally admitted to a public hospital, who have one or more problems which require care in an admitted patient setting, and who have elected to be treated as a private patient – electing to pay doctors' medical fees and any charges levied by the hospital for their stay.
  • Non-admitted services – Services for patients who require care at a hospital but do not require admission. These services are most often provided in an outpatient clinic.
    Note: People often receive care without admission in a hospital emergency department (ED), but for the purposes of counting, classifying and funding, non-admitted ED services are counted under the ED category, rather than under the general non-admitted category.
  • Emergency department services – Services for people seen in a recognised hospital emergency department.
  • Small rural hospitals – Small hospitals in rural areas often have fluctuating activity that would result in unpredictable revenue if funded on the basis of activity. The Agreement specifically provides for small rural hospitals to be block funded to ensure certainty of funding irrespective of activity.
  • Mental Health services – Services involving diagnostic, treatment, and preventive care that assists how persons with mental illness feel both physically and emotionally as well as how they interact with other persons. This category only includes mental health care services for patients that are not included in other categories.
  • Sub-acute services – Services for patients with disabling conditions who require care to maximise independence and quality of life, that are not already included in other categories.
  • Teaching, Training and research – Many public hospitals are major providers of teaching and training and have staff engaged in research. The Agreement provides for block funding to be provided to support the additional costs of these activities.
  • Other non-admitted services – Any non-admitted service not covered under other categories, as advised by the Independent Hospital Pricing Authority, and which is funded on a block funding basis.
state managed fund

A separate bank account or fund established by a state or territory for the purposes of health funding under the Agreement which must be undertaken in the state or territory.

state pool account

A Reserve Bank account established by a state or territory for the purpose of receiving all Commonwealth and activity based state and territory public hospital funding, and for making payments under the Agreement. The state pool accounts of all states and territories are collectively known as the National Health Funding Pool or funding pool.