New South Wales report, September 2016

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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 September 2016 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, September 2016

For the basis of the Commonwealth contribution to NHR funding, see Basis of Commonwealth NHR funding, 2016-17.

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 Health Networks (LHNs) – New South Wales

The process for determining 2016/17 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 NWAU16, which is different from the previous year.

The Independent Hospital Pricing Authority (IHPA) has issued the National Efficient Cost (NEC16) funding model that applies to small regional and remote hospitals. NSW has adopted the mechanics of this funding model expressed in the NEC16 matrix to determine the aggregate funding allocation to LHNs for these small hospitals within the NSW funding model parameters.

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 2016/17, 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 2016/17 by the following factors:

  • Weighted population change: providing an indication of expected 'natural' growth
  • Recent trends in activity growth for each LHD/SH
  • 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 2016/17 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;
  • Emergency Care Age 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 2016/17 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 2016/17 for all “out of scope” services not subject to the National Health Reform Agreement arrangements as required under their 2016/17 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 and or cash payments from the state managed fund to LHNs. This includes cash payment to the Victorian Department of Health for 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 2016/17, August 2016, November 2016, January 2017 and May 2017 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 2016/17 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. As a result not all of the Commonwealth funding was paid to LHNs. The residual of $6.2M Commonwealth will be paid in August 2016.

Other payments will occur in 2016/17 that are outside the regular weekly (Tuesday) payment cycle for 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 and cash requirements of an LHN.

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 2016/17 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, September 2016

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 September 2016.

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
421,320,890 424,523,564 424,523,564
Commonwealth
Block funding
54,993,779 54,993,779 54,993,779
Commonwealth
Other funding
9,920,382 9,920,382 9,920,382
Total C'wealth
funding
486,235,051 424,523,564 54,993,779 9,920,382 489,437,725
NSW
funding
427,987,628 407,074,939 112,689 7,800,000 414,987,628
Other state/territory funding 1,600,000 0 1,600,000 1,600,000
Total 915,822,679 831,598,503 54,993,779 11,633,071 7,800,000 906,025,353

See definitions and explanatory notes following table 1b.

Table 1b – State pool account transactions YTD – New South Wales, September 2016

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 September 2016.

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
1,251,421,746 1,251,421,746 1,251,421,746
Commonwealth
Block funding
164,981,338 164,981,338 164,981,338
Commonwealth
Other funding
29,761,146 29,761,146 29,761,146
Total C'wealth
funding
1,446,164,231 1,251,421,746 164,981,338 29,761,146 1,446,164,231
NSW
funding
1,477,554,335 1,427,740,032 414,303 23,400,000 1,451,554,335
Other state/territory funding 4,800,000 0 4,800,000 4,800,000
Total 2,928,518,566 2,679,161,778 164,981,338 34,975,449 23,400,000 2,902,518,566

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, September 2016

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 September 2016.

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 54,993,779 54,993,779
State/territory Block funding 45,095,634 45,095,634
Total 100,089,413 100,089,413 0 100,089,413

See explanatory notes following table 2b.

Table 2b – State managed fund transactions YTD – New South Wales, September 2016

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 September 2016.

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 164,981,338 164,981,338
State/territory Block funding 238,990,703 238,990,703
Total 403,972,041 403,972,041 0 403,972,041

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, September 2016

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 September 2016. 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 482,972,614 485,279,566 1,561,939,028 1,561,939,028
Admitted mental health 44,768,337 44,768,337 144,340,032 144,340,032
Sub-acute 55,713,545 55,892,479 180,134,387 180,134,387
Emergency department 99,913,799 100,495,513 323,923,788 323,923,788
Non-admitted 145,027,533 145,162,608 468,824,543 468,824,543
Total ABF (Pool) 828,395,828 831,598,503 2,679,161,778 2,679,161,778
Block
Small rural hospitals 48,306,638 48,306,638 235,215,597 235,215,597
Teaching, training & research 23,445,374 23,445,374 85,126,529 85,126,529
Non-admitted mental health 28,337,401 28,337,401 83,629,915 83,629,915
Other non-admitted services 0 0 0 0
Total Block (SMF) 100,089,413 100,089,413 403,972,041 403,972,041
Other
Public health funding 9,920,382 9,920,382 29,761,146 29,761,146
Overdeposit 0 0 0 0
Cross-border 9,400,000 9,400,000 28,200,000 28,200,000
Interest 112,689 112,689 414,303 414,303
Total Other (Pool) 19,433,071 19,433,071 58,375,449 58,375,449
Grand Total 947,918,313 951,120,987 3,141,509,268 3,141,509,268

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, September 2016

This table shows NHR contributions (from state, territory and Commonwealth sources) made to each LHN in New South Wales during September 2016.

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)
($) ($) ($)
Albury NSW Local Health District 6,405,349 1,978,682 8,384,031
Central Coast Local Health District 41,512,196 3,162,302 44,674,498
Contracted Services 0 0
Far West Local Health District 4,398,645 1,368,640 5,767,285
Hunter New England Local Health District 95,419,427 18,737,438 114,156,865
Illawarra Shoalhaven Local Health District 45,695,282 3,645,055 49,340,337
Justice Health & Forensic Mental Health Network 0 3,493,856 3,493,856
Mid North Coast Local Health District 30,416,945 2,338,854 32,755,799
Murrumbidgee Local Health District 18,898,499 6,391,761 25,290,260
Nepean Blue Mountains Local Health District 40,595,373 333,780 40,929,153
Northern NSW Local Health District 38,336,090 2,963,754 41,299,844
Northern Sydney Local Health District 66,767,248 8,738,738 75,505,986
South Eastern Sydney Local Health District 80,209,859 6,296,070 86,505,929
South Western Sydney Local Health District 93,593,520 4,545,096 98,138,616
Southern NSW Local Health District 18,984,792 4,175,256 23,160,048
St Vincent's Health Network 20,065,946 1,516,000 21,581,946
Sydney Children's Hospitals Network 32,916,331 2,557,048 35,473,379
Sydney Local Health District 75,343,608 10,286,000 85,629,608
Western NSW Local Health District 33,037,485 10,197,195 43,234,680
Western Sydney Local Health District 89,001,906 7,363,888 96,365,794
Total 831,598,503 100,089,413 931,687,916

See explanatory notes below table 4b.

Table 4b – NHR contributions by local hospital network YTD – New South Wales, September 2016

This table shows YTD NHR contributions (from state, territory and Commonwealth sources) made to each LHN in New South Wales as at September 2016.

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)
($) ($) ($)
Albury NSW Local Health District 13,607,407 2,968,023 16,575,430
Central Coast Local Health District 130,946,116 8,429,792 139,375,908
Contracted Services 784,141 784,141
Far West Local Health District 13,523,088 9,074,635 22,597,723
Hunter New England Local Health District 304,754,020 54,842,018 359,596,038
Illawarra Shoalhaven Local Health District 149,846,005 13,606,109 163,452,114
Justice Health & Forensic Mental Health Network 0 25,259,782 25,259,782
Mid North Coast Local Health District 99,659,841 5,675,644 105,335,485
Murrumbidgee Local Health District 62,273,148 92,038,646 154,311,794
Nepean Blue Mountains Local Health District 147,618,148 36,085,238 183,703,386
Northern NSW Local Health District 125,760,970 8,271,221 134,032,191
Northern Sydney Local Health District 220,023,509 22,758,809 242,782,318
South Eastern Sydney Local Health District 257,569,179 17,314,192 274,883,371
South Western Sydney Local Health District 291,574,248 8,443,035 300,017,283
Southern NSW Local Health District 60,416,901 15,108,806 75,525,707
St Vincent's Health Network 58,333,695 4,169,000 62,502,695
Sydney Children's Hospitals Network 111,965,732 7,031,882 118,997,614
Sydney Local Health District 235,869,118 28,286,500 264,155,618
Western NSW Local Health District 113,564,621 25,848,007 139,412,628
Western Sydney Local Health District 281,071,893 18,760,702 299,832,595
Total 2,679,161,778 403,972,041 3,083,133,819

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, September 2016

This table shows estimated state or territory hospital activity for activity-based funding services expressed as NWAU for September 2016, 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 2016-17
Albury NSW Local Health District 1,608 4,823 19,911
Central Coast Local Health District 9,777 29,332 117,328
Contracted Services 338 1,013 4,050
Far West Local Health District 864 2,592 10,369
Hunter New England Local Health District 25,369 76,107 304,430
Illawarra Shoalhaven Local Health District 11,427 34,280 137,121
Mid North Coast Local Health District 7,963 23,889 95,554
Murrumbidgee Local Health District 4,700 14,100 56,402
Nepean Blue Mountains Local Health District 10,406 31,218 124,874
Northern NSW Local Health District 9,861 29,583 118,332
Northern Sydney Local Health District 16,929 50,787 203,150
South Eastern Sydney Local Health District 22,023 66,069 264,277
South Western Sydney Local Health District 23,528 70,585 282,342
Southern NSW Local Health District 4,546 13,637 54,547
St Vincent's Health Network 6,142 18,426 73,702
Sydney Children's Hospitals Network 8,251 24,752 99,008
Sydney Local Health District 20,288 60,865 243,462
Western NSW Local Health District 8,298 24,895 99,580
Western Sydney Local Health District 23,031 69,094 276,374
Total 215,350 646,049 2,584,814

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.