New South Wales report, October 2013

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In this report

This report includes the following tables:

This report is issued by the Administrator of the National Health Funding Pool under section 240 of the National Health Reform Act 2011.

This report is prepared on a cash basis. It shows monthly and year-to-date (YTD) National Health Reform (NHR) funding and payments for New South Wales for October 2013 as part of the National Health Reform Agreement.

Local hospital networks and National Health Reform

A local hospital network (LHN) is an organisation that provides public hospital services in accordance with the Agreement. An LHN 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 an LHN.

Note: The term ‘local hospital network’ is a national term. Some states and territories use their own terminology to describe these networks, such as local health districts, health organisations, and hospital and health services.

Under the Agreement, LHNs receive funding for the following public hospital services:

  • All admitted and non-admitted services
  • All emergency department services provided by a recognised emergency department
  • Other outpatient, mental health, sub-acute services and other services that could reasonably be considered a public hospital service.

Note: LHNs also receive funding from other sources, including the Commonwealth, states and territories, and third parties for the provision of other specific functions and services outside the scope of the Agreement, for example dental services, primary care, home and community care, residential aged care and pharmaceuticals. For further information on total funding to a particular LHN, contact the NSW Ministry of Health to view the service agreement for that LHN.

Basis for National Health Reform payments – New South Wales, October 2013

For the basis of the Commonwealth contribution to NHR funding, see Basis of Commonwealth NHR funding, 2013-14.

The basis used to determine NHR payments to local hospital networks (LHNs) in New South Wales for October 2013 was advised by the NSW Ministry of Health to be as follows:

Basis used to determine NHR payments to local hospital networks (LHNs) – New South Wales

The process for determining 2013-14 NHR payments to LHNs encompassed three distinct elements of preparation for the individual LHN Service Agreements, including development of annual activity estimates, discussion/negotiation of activity levels with individual LHNs, and total state-wide activity across each activity type.

Consistent with last year’s methodology and pursuant with the National Health Reform Agreement (NHRA), the Ministry of Health has adopted the National Weighted Activity Unit (NWAU) as the currency for Activity Based Funding with the applicable version being NWAU13, which is different from the previous year (NWAU12). In addition, the scope of services under the NHRA from 1 July 2013 has now been expanded to include Mental Health services (Admitted only) and Sub and non acute services (Admitted and Non Admitted), as such a greater number of facilities are now in scope for ABF.

The Independent Hospital Pricing Authority (IHPA) has also introduced a National Efficient Cost funding model that applies to small regional and remote hospitals. NSW has adopted the mechanics of this funding model expressed in a matrix to determine the funding allocation to LHNs for these small hospitals.

Ensuring access to health services for local populations is a key objective of NSW health policy. The Health Services Act 1997 stipulates that in determining LHN budgets, the Minister have regard to the size and health needs of the local population and provision of services to residents outside the local area. Accordingly, targets are adjusted considering factors appropriate to each LHN and service type, rather than simple extrapolation from historical activity data. The factors considered are reviewed on an annual basis.

In 2013-14 a series of elements were applied to each in scope service stream to ensure that activity targets are tailored to the requirements and patterns of each LHN. Activity targets are developed by the Ministry and LHNs based on analysis of activity levels over four years to 2011-12 plus forecast 2012-13 activity. This analysis was further informed in 2013/14 by the following factors:

  • Weighted population change: providing an indication of expected ‘natural’ growth
  • Rate of unplanned re-admissions within 28 days, to offset growth
  • Potentially preventable hospitalisation (PPH), to offset growth
  • Relative Utilisation Rate (RUR) and Health Need Index (HNI)
  • Inter-district and cross-border flows (where relevant)
  • Current year activity relative to targets
  • Known service changes and developments, including planned capacity increases.

Price weight adjustments which are being applied in 2013-14 include:

  • Specialist paediatric hospitals
  • Aboriginal patients
  • Patients from outer regional, remote or very remote locations
  • Private patients (service and accommodation adjustments).

Provisional activity estimates are generally created at a facility level to provide the basis for discussion and negotiation with individual health services to determine agreed LHN level activity targets, with the activity volumes measured using the weights for each Service Category. Additionally, where applicable, activity estimation is split by financial class to allow differential funding mechanisms to be applied to the respective service groups to reflect the variation in funding source. These financial classes include Public, Private and Compensable (DVA, MVA, Workers Compensation, Other Compensable).

Provisional estimates and historical activity measures provide the basis for discussions with individual Health Services and subsequent negotiations for approval or adjustment.

The negotiation process allows for relevant local LHN service issues and activity impact to be communicated with the NSW Ministry of Health (Ministry) to assess the potential impact on future year activity volumes and the relevance of related service strategies to address these. It is important that negotiation processes recognise that funding and purchasing are undertaken in the environment of a capped State / Commonwealth funding pool for 2013/14 and recognition that NSW contributes the larger portion of these funds as well as being responsible for management of the system as a whole. When negotiations have concluded, the Ministry incorporates the final activity targets in each LHN’s annual Service Agreement. Where an LHN achieves delivery of selected services through Affiliated Health Organisations or contracted services with a private provider these arrangements are to be specified in agreements between the LHN and the respective provider. Both the funding (and subsidy) and associated activity pertaining to such providers are included in the budget and the activity estimates appearing in the LHN’s annual Service Agreement.

Cash payments processed within the National Health Funding Pool (NHFP) Payments System and included within the Administrator’s monthly reports are based on the accrued budget for both ABF and in-scope block funding derived from the LHN Service Agreements after deducting an allowance to recognise own sourced revenue earned, and retained by the LHNs and liabilities for superannuation and long service leave which are accepted by the Crown.

The resultant cash value is processed through the state pool account (ABF) or the state managed fund (in-scope block). Although a consistent methodology has been applied, variations in cash prices between LHNs reflect the differing mix of the above components (own sourced revenue and Crown accepted liabilities) of each local hospital network’s accrued cost.

In addition to receiving weekly cash payments from the state pool account and the state managed fund, LHNs also receive direct State Government funding for 2013-14 for all “out of scope” services not subject to the National Health Reform Agreement arrangements as required under their 2013-14 Service Agreements.

Monthly reports – Basis on which payments were made

For NSW, all dollar values included in the tables issued by the Administrator are cash payments from either the NSW state pool account to LHNs or cash payments from the state managed fund to LHNs, and one exception that requires a quarterly cash payment to the Victorian Department of Health for NSW contribution for the Albury-Wodonga inter-jurisdictional agreement.

The weekly cash payment to an LHN reflects the estimated cost of patient related services anticipated to be delivered during the monthly cash payment period. The estimated monthly activity and the weekly cash payments are determined based on the annual LHN Service Agreements.

Cash payments from the NSW state pool account and from the state managed fund to LHNs are processed each Tuesday. Reporting by the Administrator is based on cash payments made during a given month and is therefore dependent on the number of Tuesdays in a particular month. During 2013-14, July 2013, October 2013, December 2013 and April 2014 each have five Tuesdays, with all other months having four Tuesdays. If accrual accounting principles were being applied within the NHFA Payments System, the value of the reported cash payments would recognise only the number of calendar days in a particular month, not the 35 days (five weeks paid) or 28 days (four weeks paid), as reported by the Administrator.

Cash payments to LHNs from both the NSW state pool account and state managed fund are generally calculated based on equal weekly instalments to health services unless otherwise negotiated.

Other payments will occur in 2013-14 that are outside the regular weekly (Tuesday) payment cycle. Such payments include the full year insurance premium, quarterly payments to the Australian Red Cross Blood Service, quarterly payments to Victoria Health for the Albury-Wodonga inter-jurisdictional agreement and payments to other States/Territories for NSW residents treated in their public hospitals. Payments to LHNs may also vary where their cash entitlement alters during the financial year.

Monthly comparison of cash payments from the NSW state pool and state managed fund can vary month to month predominately due to these planned payments.

The cash payments from the NSW state pool account or state managed fund do not reflect the full budgeted funding available to health services in NSW. Other sources of funds available to LHNs include separate payments from the Crown (for example, defined superannuation scheme and long service leave cash recovery) as well as own sourced revenues earned and retained by each LHN.

Total deposits to the NSW state pool account were less than the total payments to LHNs in the month of October by $197,459,985. This was primarily due to a State deposit of $201,014,244 that was made to the pool account on 30 September 2013 for payments due on 1 October 2013. Additionally, there was residual Commonwealth funding of $3,554,259 in the NSW state pool account relating to Far West Local Health District (FWLHD) that was paid out in October 2013.

For more information on budget allocations, see the 2013-14 LHN Service Agreements which are available on each NSW LHN website from 1 September 2013.

Reference information

The financial information outlined in the following report is categorised as:

  • NHR funding – when the Commonwealth or state or territory government pays NHR funding into a state pool account or state managed fund.
  • NHR payments – when NHR funding that has been deposited into a state pool account or state managed fund is paid out of the state pool account by the Administrator, or is paid out of the state managed fund by the state or territory.

State pool account transactions

Table 1a – State pool account transactions – New South Wales, October 2013

This table shows funding paid into the New South Wales state pool account by the Commonwealth, New South Wales or other states/territories, and payments out of the state pool account to LHNs, the state managed fund, the NSW Ministry of Health or the state pool accounts of other states/territories for October 2013.

NHR funding by source Paid Into state pool account Paid Out of state pool account
To Local hospital networks To State
Managed Fund
To state
health department
To state pool (other State) Total paid out
($) ($) ($) ($) ($) ($)
Commonwealth
ABF funding
300,263,256 504,831,759 504,831,759
Commonwealth
Block funding
59,221,805 59,221,805 59,221,805
Commonwealth
Other funding
8,685,520 8,685,520 8,685,520
Total C'wealth
funding
368,170,581 504,831,759 59,221,805 8,685,520 572,739,084
NSW
funding
426,216,176 426,069,944 146,232 0 426,216,176
Other state/territory funding 0 0
Total 794,386,756 930,901,703 59,221,805 8,831,752 0 998,955,260

See definitions and explanatory notes following table 1b.

Table 1b – State pool account transactions YTD – New South Wales, October 2013

Following on from table 1a, this table shows year-to-date (YTD) funding paid into the New South Wales state pool account by the Commonwealth, New South Wales or other states/territories, and payments out of the state pool account to LHNs, the state managed fund, the NSW Ministry of Health or the state pool accounts of other states/territories as at October 2013.

NHR funding by source Paid Into state
pool account
Paid Out of state pool account
To Local hospital
networks
YTD
To State
Managed Fund
YTD
To state health
department
YTD
To state pool (other State)
YTD
Total paid out
YTD
($) ($) ($) ($) ($) ($)
Commonwealth
ABF funding
1,219,485,736 1,219,485,736 1,219,485,736
Commonwealth
Block funding
218,583,305 218,583,305 218,583,305
Commonwealth
Other funding
34,742,079 34,742,079 34,742,079
Total C'wealth
funding
1,472,811,120 1,219,485,736 218,583,305 34,742,079 1,472,811,120
NSW
funding
1,853,767,834 1,852,982,111 785,723 0 1,853,767,834
Other state/territory funding 0 0
Total 3,326,578,954 3,072,467,846 218,583,305 35,527,802 0 3,326,578,954

Commonwealth ABF funding represents Acute admitted public, Acute admitted private, Non-admitted, and Emergency department, Sub-acute, and Admitted mental health service categories, which are funded by the Commonwealth through the state pool account and subsequently paid to LHNs.

Commonwealth Block funding represents Non-admitted mental health, Small rural hospitals, Teaching, training & research, and Other non-admitted categories, which are funded by the Commonwealth and paid to the state managed fund.

Commonwealth Other funding represents other amounts funded by the Commonwealth, transacted through the state pool account and subsequently paid to state or territory health departments. This currently represents the Commonwealth contribution to public health.

NSW funding represents funding contributions paid by New South Wales into its own state pool account, and subsequently paid to LHNs within the state, to the New South Wales health department and/or to other state pool accounts.

Other state/territory funding represents contributions paid to New South Wales by other states and territories for cross-border activity.

Note: The grey shaded areas in these tables reflect that these amounts are not applicable for a particular 'paid out' column. For example, Commonwealth block funding is only paid to state managed funds and is not applicable for local hospital networks or state or territory health departments.

NHR funding and payments shown in these tables include GST where applicable.

For more information, see National Health Reform funding and payments.

State managed fund transactions

Table 2a – State managed fund transactions – New South Wales, October 2013

This table shows funding paid into the New South Wales state managed fund by the Commonwealth and New South Wales, and payments out of the state managed fund to LHNs and other provider organisations for October 2013.

NHR funding by source Paid into state managed fund Paid out of state managed fund
To local hospital networks To Other Total paid out
($) ($) ($) ($)
Commonwealth Block funding 59,221,805 59,221,805
State/territory Block funding 150,541,504 150,541,504
Total 209,763,309 184,460,309 25,303,000 209,763,309

See explanatory notes following table 2b.

Table 2b – State managed fund transactions YTD – New South Wales, October 2013

Following on from table 2a, this table shows year-to-date (YTD) funding paid into the New South Wales state managed fund by the Commonwealth and New South Wales, and YTD payments out of the state managed fund to LHNs and other provider organisations as at October 2013.

NHR funding by source Paid into state
managed fund
YTD
Paid out of state managed fund YTD
To local hospital
networks
YTD
To Other
YTD
Total paid out
YTD
($) ($) ($) ($)
Commonwealth Block funding 218,583,305 218,583,305
State/territory Block funding 596,681,346 596,681,346
Total 815,264,652 758,701,913 56,562,739 815,264,652

Block funding represents Non-admitted mental health, Small rural hospitals, Teaching, training & research, and Other non-admitted categories.

Commonwealth Block funding represents Commonwealth block funding contributions paid into the state managed fund from the state pool account, and block payments out of the state managed fund to LHNs and other provider organisations.

State/territory Block funding represents New South Wales block funding contributions into the state managed fund, and block payments out of the state managed fund to LHNs and other provider organisations.

Note: The grey shaded areas in these tables reflect that these block payments cannot at this stage be identified by source of funding (state, territory or Commonwealth contribution).

NHR funding and payments shown in these tables include GST where applicable.

For more, see National Health Reform funding and payments.

NHR funding and payments by service category

Table 3 – NHR funding and payments by service category – New South Wales, October 2013

This table shows NHR funding and payments by service category on both a monthly and year-to-date (YTD) basis for New South Wales for October 2013. NHR funding and payments are separated into the following service categories – activity-based funding (ABF), block funding, and other funding.

Service category NHR funding NHR payments YTD NHR
funding
YTD NHR
payments
($) ($) ($) ($)
ABF
Acute admitted - public 378,542,574 484,734,226 1,600,440,709 1,600,440,709
Acute admitted - private 59,357,666 75,875,758 250,146,317 250,146,317
Non-admitted 119,874,222 154,258,773 507,274,058 507,274,058
Emergency department 84,632,560 108,765,061 359,064,558 359,064,558
Admitted mental health 44,557,432 56,976,570 188,893,618 188,893,618
Sub-acute 39,368,747 50,291,315 166,648,587 166,648,587
Total ABF (Pool) 726,333,200 930,901,703 3,072,467,846 3,072,467,846
Block
Non-admitted mental health 36,042,270 36,042,270 167,230,150 167,230,150
Small rural hospitals 105,924,764 105,924,764 377,779,406 377,779,406
Teaching, training & research 31,848,959 31,848,959 125,509,922 125,509,922
Other non-admitted services 35,947,317 35,947,317 144,745,173 144,745,173
Total Block (SMF) 209,763,309 209,763,309 815,264,652 815,264,652
Other
Public health funding 8,685,520 8,685,520 34,742,079 34,742,079
Overdeposit 0 0 0 0
Cross-border 0 0 0 0
Interest 146,232 146,232 785,723 785,723
Total Other (Pool) 8,831,752 8,831,752 35,527,802 35,527,802
Grand Total 944,928,260 1,149,496,764 3,923,260,300 3,923,260,300

Total ABF (Pool) is an aggregate of both Commonwealth and state or territory NHR funding and payments for activity-based funding (ABF) which is transacted through the state pool account.

Total Block (SMF) is an aggregate of both Commonwealth and state or territory NHR funding and payments for block funding which is transacted through the state managed fund (SMF).

Total Other (Pool) represents other funding and payments, which are transacted through the state pool account, including public health funding, overdeposits, cross-border funding and payments, and interest.

State and territory cross-border payments can either be:

  • Paid to the relevant state or territory's LHNs - included within ABF and/or block payments in the above table, or
  • Reimbursed to the relevant state or territory where the state or territory's LHNs are already being funded for the cost of treating cross-border patients - shown in the Cross-border row under Other in the above table.

NHR funding and payments shown in these tables include GST where applicable.

For more information, see National Health Reform funding and payments.

NHR contributions by local hospital network

Table 4a – NHR contributions by local hospital network – New South Wales, October 2013

This table shows NHR contributions (from state, territory and Commonwealth sources) made to each LHN in New South Wales during October 2013.

NHR contributions to LHNs are separated into an activity-based funding (ABF) component and a block component.

Local hospital network (LHN) ABF component
(ex GST)
Block component
(ex GST)
Total NHR payment
(ex GST)
($) ($) ($)
Central Coast Local Health District 44,248,956 4,834,000 49,082,956
Far West Local Health District 4,429,596 1,793,618 6,223,215
Hunter New England Local Health District 92,623,562 30,663,500 123,287,062
Illawarra Shoalhaven Local Health District 55,941,654 4,908,400 60,850,054
Justice Health & Forensic Mental Health Network 0 17,356,000 17,356,000
Mid North Coast Local Health District 32,513,046 7,180,500 39,693,546
Murrumbidgee Local Health District 20,219,290 18,322,267 38,541,557
Nepean Blue Mountains Local Health District 50,399,163 8,733,480 59,132,643
Northern NSW Local Health District 43,940,342 6,823,000 50,763,342
Northern Sydney Local Health District 81,862,472 22,620,600 104,483,072
South Eastern Sydney Local Health District 100,609,826 5,026,172 105,635,997
South Western Sydney Local Health District 105,166,903 4,185,600 109,352,503
Southern NSW Local Health District 17,957,088 6,139,259 24,096,348
St Vincent's Health Network 22,838,571 1,779,000 24,617,571
Sydney Children's Hospitals Network 46,230,638 4,280,713 50,511,351
Sydney Local Health District 91,684,224 7,849,700 99,533,924
Western NSW Local Health District 33,688,385 16,776,414 50,464,799
Western Sydney Local Health District 86,547,986 15,188,085 101,736,071
Total 930,901,703 184,460,309 1,115,362,012

See explanatory notes below table 4b.

Table 4b – NHR contributions by local hospital network YTD – New South Wales, October 2013

This table shows YTD NHR contributions (from state, territory and Commonwealth sources) made to each LHN in New South Wales as at October 2013.

NHR contributions to LHNs are separated into an activity-based funding (ABF) component and a block component.

Local hospital network ABF component YTD
(ex GST)
Block component YTD
(ex GST)
Total NHR payment YTD
(ex GST)
($) ($) ($)
Central Coast Local Health District 152,970,943 25,923,193 178,894,136
Far West Local Health District 18,148,210 7,939,715 26,087,925
Hunter New England Local Health District 326,176,783 127,119,184 453,295,967
Illawarra Shoalhaven Local Health District 171,694,236 31,453,056 203,147,293
Justice Health & Forensic Mental Health Network 0 49,165,032 49,165,032
Mid North Coast Local Health District 98,901,325 33,474,266 132,375,591
Murrumbidgee Local Health District 67,584,388 56,478,613 124,063,001
Nepean Blue Mountains Local Health District 162,563,217 22,178,911 184,742,128
Northern NSW Local Health District 133,841,053 35,873,976 169,715,030
Northern Sydney Local Health District 267,382,364 75,714,536 343,096,899
South Eastern Sydney Local Health District 330,902,944 33,646,154 364,549,098
South Western Sydney Local Health District 358,088,913 33,930,489 392,019,402
Southern NSW Local Health District 62,691,488 23,845,859 86,537,347
St Vincent's Health Network 79,802,409 10,432,183 90,234,592
Sydney Children's Hospitals Network 137,310,714 13,363,041 150,673,755
Sydney Local Health District 304,739,472 51,286,277 356,025,749
Western NSW Local Health District 113,079,746 64,761,712 177,841,458
Western Sydney Local Health District 286,589,642 62,115,714 348,705,356
Total 3,072,467,846 758,701,913 3,831,169,759

NHR contributions in this table are GST exclusive to enable comparability of NHR payments in each LHN report.

Note: This table excludes GST.
The majority of government funding to LHNs is not subject to GST. However in some cases hospital funding to non-government entities does attract GST, for example, denominational hospitals, privately and commercially owned health facilities, or any other non-government third party provider of health services or related supplies.

For more information, see National Health Reform funding and payments.

Estimated monthly, YTD and annual activity

States and territories provide service volume estimates at the start of each financial year, and if required, can continue to refine these estimates during the course of the year. These estimates form the basis of monthly reporting of service volumes until actual service numbers become available. These estimates are expressed as National Weighted Activity Units (NWAU).

States and territories provide estimated annual NWAU to the Administrator as a basis for determining the Commonwealth activity-based funding. Current month NWAU estimates accumulate through the year-to-date (YTD) NWAU, to be equal to the annual NWAU at the end of the financial year.

States and territories may also provide activity information relating to the delivery of other public hospital functions funded.

Table 5 – Estimated monthly, YTD and annual NWAU by local hospital network – New South Wales, October 2013

This table shows estimated state or territory hospital activity for activity-based funding services expressed as NWAU for October 2013, the associated cumulative year-to-date (YTD), and total estimated annual NWAU for each LHN in New South Wales.

Local hospital network (LHN) Estimated NWAU delivered in current month Estimated NWAU delivered YTD Estimated annual NWAU 2013-14
Central Coast Local Health District 7,950 31,801 139,405
Far West Local Health District 823 3,293 53,301
Hunter New England Local Health District 18,799 75,196 248,266
Illawarra Shoalhaven Local Health District 10,197 40,788 101,631
Mid North Coast Local Health District 5,506 22,023 74,877
Murrumbidgee Local Health District 3,824 15,296 59,580
Nepean Blue Mountains Local Health District 8,652 34,608 95,470
Northern NSW Local Health District 7,399 29,597 84,943
Northern Sydney Local Health District 14,878 59,512 180,906
South Eastern Sydney Local Health District 19,573 78,291 182,558
South Western Sydney Local Health District 22,257 89,027 247,657
Southern NSW Local Health District 3,317 13,267 67,787
St Vincent's Health Network 5,183 20,733 51,994
Sydney Children's Hospitals Network 8,029 32,115 86,739
Sydney Local Health District 17,252 69,007 202,537
Western NSW Local Health District 6,180 24,720 76,739
Western Sydney Local Health District 17,611 70,443 197,542
Total 177,429 709,716 2,151,933

An NWAU is a measure of health service activity expressed as a common unit. It provides a way of comparing and valuing each public hospital service, whether they are admissions, emergency department presentations or outpatient episodes, by weighting them for their clinical complexity. The average hospital service is worth one NWAU - the most intensive and expensive activities are worth multiple NWAU, the simplest and least expensive are worth fractions of an NWAU.

Monthly NHR payments relate to the cash needs of public hospitals and do not necessarily reflect the volume of services to be delivered in the month.

For more information on the NWAU calculation, see Calculation of NWAU.