New South Wales report, October 2015

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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 2015 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 2015

For the basis of the Commonwealth contribution to NHR funding, see Basis of Commonwealth NHR funding, 2015-16.

The basis for NHR payments to local hospital networks (LHNs) in New South Wales 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 2015/16 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 NWAU15, which is different from the previous year (NWAU14).

The Independent Hospital Pricing Authority (IHPA) has issued the second National Efficient Cost (NEC15) funding model that applies to small regional and remote hospitals. NSW has adopted the mechanics of this funding model expressed in the NEC15 matrix to determine the aggregate 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 2015/16 a series of elements will be applied to each in-scope service stream to ensure that activity targets are tailored to the requirements and patterns of each LHD/SHN. Activity targets are developed by the Ministry and LHDs/SHNs based on analysis of activity level drivers. This analysis was informed for 2015/16 by the following factors:

  • Weighted population change: providing an indication of expected 'natural' growth
  • Recent trends in activity growth for each LHD/SHN
  • Rate of unplanned re-admissions within 28 days
  • Potentially preventable hospitalisations (PPH)
  • Relative Utilisation Rate adjusted for relevant demographic factors
  • Service quality and appropriateness performance in selected key area
  • Inter-district and cross-border flows (where relevant)
  • Current year activity relative to targets (for adjustment of baseline volumes, where relevant)
  • Known service changes and developments, including planned capacity increases.

Price weight adjustments which are being applied in 2015/16 include:

  • Paediatric Adjustment;
  • Specialist Psychiatric Age Adjustment;
  • Patient Remoteness Area Adjustment;
  • Indigenous Adjustment;
  • Radiotherapy Adjustment;
  • Dialysis Adjustment;
  • Intensive Care Unit (ICU) Adjustment for eligible facilities;
  • Private Patient Service Adjustment;
  • Private Patient Accommodation Adjustment;
  • Multidisciplinary Clinic Adjustment.

Provisional activity estimates are created at a LHD level to provide the basis for discussion and negotiation with individual health services to determine agreed LHD level activity targets, with the activity volumes measured using the NWAU 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.

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

The negotiation process allows for relevant local LHN service issues and activity impacts 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 2015/16 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 2015/16 for all “out of scope” services not subject to the National Health Reform Agreement arrangements as required under their 2015/16 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 2015/16, September 2015, December 2015, March 2016 and May 2016 each have five 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.

In 2015/16 cash payments to LHNs from the NSW state pool account are generally calculated based on equal weekly instalments to health services unless otherwise negotiated. State Managed Fund cash payments occur as cash is required and dependent on the LHD bank balance in accordance with NSW Treasury Circular TC15-01 Cash Management – expanding the Scope of the Treasury Banking System.

Other payments will occur in 2015/16 that are outside the regular weekly (Tuesday) payment cycle including 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.

For more information on budget allocations, see the 2015/16 LHN Service Agreements which are available on each NSW LHN website as the Chief Executive and Board of the LHN's provide sign-off.

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 2015

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 2015.

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
401,654,903 401,654,903 401,654,903
Commonwealth
Block funding
51,539,741 51,539,741 51,539,741
Commonwealth
Other funding
9,484,929 9,484,929 9,484,929
Total C'wealth
funding
462,679,573 401,654,903 51,539,741 9,484,929 462,679,573
NSW
funding
416,339,428 396,339,678 199,749 19,800,000 416,339,428
Other state/territory funding 10,200,000 0 10,200,000 10,200,000
Total 889,219,000 797,994,581 51,539,741 19,884,678 19,800,000 889,219,000

See definitions and explanatory notes following table 1b.

Table 1b – State pool account transactions YTD – New South Wales, October 2015

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 2015.

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
1,580,515,058 1,580,515,058 1,580,515,058
Commonwealth
Block funding
206,158,965 206,158,965 206,158,965
Commonwealth
Other funding
37,939,715 37,939,715 37,939,715
Total C'wealth
funding
1,824,613,738 1,580,515,058 206,158,965 37,939,715 1,824,613,738
NSW
funding
1,899,598,904 1,858,234,856 564,048 40,800,000 1,899,598,904
Other state/territory funding 14,100,000 0 14,100,000 14,100,000
Total 3,738,312,642 3,438,749,914 206,158,965 52,603,762 40,800,000 3,738,312,642

Commonwealth ABF funding represents Acute admitted, Non-admitted, 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 cells that are not applicable for a particular 'paid out' column. For example, Commonwealth block funding is only paid to state managed funds and not to 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 2015

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 2015.

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 51,539,741 51,539,741
State/territory Block funding 48,026,343 48,026,343
Total 99,566,084 74,895,741 24,670,343 99,566,084

See explanatory notes following table 2b.

Table 2b – State managed fund transactions YTD – New South Wales, October 2015

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 2015.

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 206,158,965 206,158,965
State/territory Block funding 119,918,294 119,918,294
Total 326,077,259 276,656,916 49,420,343 326,077,259

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 2015

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 2015. 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
NHR
funding YTD
NHR
payments YTD
($) ($) ($) ($)
ABF
Acute admitted 463,356,005 463,356,005 1,997,872,820 1,997,872,820
Admitted mental health 51,193,035 51,193,035 220,083,112 220,083,112
Sub-acute 41,636,648 41,636,649 179,196,083 179,196,083
Emergency department 97,955,458 97,955,458 422,678,464 422,678,464
Non-admitted 143,853,435 143,853,435 618,919,436 618,919,436
Total ABF (Pool) 797,994,581 797,994,581 3,438,749,914 3,438,749,914
Block
Small rural hospitals 66,005,349 66,005,348 196,671,371 196,671,370
Teaching, training & research 14,987,968 14,987,968 59,483,171 59,483,171
Non-admitted mental health 18,572,767 18,572,767 69,922,717 69,922,717
Other non-admitted services 0 0 0 0
Total Block (SMF) 99,566,084 99,566,084 326,077,259 326,077,259
Other
Public health funding 9,484,929 9,484,929 37,939,715 37,939,715
Overdeposit 0 0 0 0
Cross-border 30,000,000 30,000,000 54,900,000 54,900,000
Interest 199,749 199,749 564,048 564,048
Total Other (Pool) 39,684,678 39,684,678 93,403,762 93,403,762
Grand Total 937,245,343 937,245,343 3,858,230,936 3,858,230,936

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 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 2015

This table shows NHR contributions (from state, territory and Commonwealth sources) made to each LHN in New South Wales during October 2015.

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 37,598,636 1,859,778 39,458,414
Contracted Services 745,671 745,671
Far West Local Health District 4,469,658 1,104,952 5,574,610
Hunter New England Local Health District 92,159,452 15,753,794 107,913,246
Illawarra Shoalhaven Local Health District 40,904,006 5,004,262 45,908,268
Justice Health & Forensic Mental Health Network 0 0 0
Mid North Coast Local Health District 26,985,209 2,169,600 29,154,809
Murrumbidgee Local Health District 17,943,618 6,376,145 24,319,763
Nepean Blue Mountains Local Health District 35,106,253 3,272,725 38,378,978
Northern NSW Local Health District 35,692,005 2,695,180 38,387,185
Northern Sydney Local Health District 67,457,915 6,754,739 74,212,654
South Eastern Sydney Local Health District 80,784,638 2,341,272 83,125,910
South Western Sydney Local Health District 89,202,224 1,964,920 91,167,144
Southern NSW Local Health District 18,259,197 2,618,361 20,877,558
St Vincent's Health Network 20,420,529 2,092,000 22,512,529
Sydney Children's Hospitals Network 32,308,863 2,090,196 34,399,059
Sydney Local Health District 73,651,169 8,191,028 81,842,197
Western NSW Local Health District 35,867,616 9,658,914 45,526,530
Western Sydney Local Health District 88,437,923 947,875 89,385,798
Total 797,994,581 74,895,741 872,890,322

See explanatory notes below table 4b.

Table 4b – NHR contributions by local hospital network YTD – New South Wales, October 2015

This table shows YTD NHR contributions (from state, territory and Commonwealth sources) made to each LHN in New South Wales as at October 2015.

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 163,526,843 7,732,184 171,259,027
Contracted Services 2,982,634 2,982,634
Far West Local Health District 19,394,855 4,143,570 23,538,425
Hunter New England Local Health District 396,118,620 50,431,897 446,550,517
Illawarra Shoalhaven Local Health District 173,519,141 9,063,808 182,582,949
Justice Health & Forensic Mental Health Network 0 26,000,000 26,000,000
Mid North Coast Local Health District 114,137,869 7,928,216 122,066,085
Murrumbidgee Local Health District 76,830,302 21,105,394 97,935,696
Nepean Blue Mountains Local Health District 198,126,132 9,068,704 207,194,836
Northern NSW Local Health District 151,812,248 10,036,978 161,849,226
Northern Sydney Local Health District 289,025,979 18,645,016 307,670,995
South Eastern Sydney Local Health District 344,908,183 8,779,770 353,687,953
South Western Sydney Local Health District 374,109,697 10,327,623 384,437,320
Southern NSW Local Health District 77,582,596 6,115,804 83,698,400
St Vincent's Health Network 77,115,948 7,845,000 84,960,948
Sydney Children's Hospitals Network 139,756,024 8,264,091 148,020,115
Sydney Local Health District 315,338,260 30,716,355 346,054,615
Western NSW Local Health District 153,214,376 36,194,115 189,408,491
Western Sydney Local Health District 371,250,207 4,258,391 375,508,598
Total 3,438,749,914 276,656,916 3,715,406,830

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 2015

This table shows estimated state or territory hospital activity for activity-based funding services expressed as NWAU for October 2015, 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 2015-16
Central Coast Local Health District 9,667 38,668 116,003
Contracted Services 359 1,435 4,299
Far West Local Health District 867 3,469 10,416
Hunter New England Local Health District 23,812 95,247 285,735
Illawarra Shoalhaven Local Health District 10,897 43,589 130,773
Mid North Coast Local Health District 7,451 29,804 89,409
Murrumbidgee Local Health District 4,930 19,719 59,151
Nepean Blue Mountains Local Health District 10,037 40,149 120,456
Northern NSW Local Health District 9,272 37,088 111,268
Northern Sydney Local Health District 16,142 64,568 193,707
South Eastern Sydney Local Health District 22,285 89,139 267,407
South Western Sydney Local Health District 22,847 91,389 274,173
Southern NSW Local Health District 4,415 17,660 52,984
St Vincent's Health Network 6,284 25,136 75,410
Sydney Children's Hospitals Network 8,250 33,000 98,995
Sydney Local Health District 19,614 78,456 235,367
Western NSW Local Health District 8,096 32,383 97,144
Western Sydney Local Health District 22,063 88,251 264,749
Total 207,288 829,151 2,487,446

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.