The basis of Commonwealth NHR funding for 2020-21 to 2024-25 as specified in the Addendum is as follows:
Public Health (A14)
Payments for Public Health activities will continue to grow by the former National Healthcare Specific Purpose Payment (SPP) growth factor. That is, payments for public health activities will be equal to the previous year’s payment indexed by the former National Healthcare SPP growth factor.
Block Funding (A49)
The Commonwealth will continue to provide funding to States for public hospital services or functions that are more appropriately funded through block funding, and will fund 45 per cent of the growth in the efficient cost of providing these services or performing these functions. Payments will consist of the previous year’s payment plus 45 per cent of the growth in the efficient cost of providing the services, adjusted for the addition or removal of block services as provided in clauses A52 to A55 (calculated in accordance with clause A7).
Activity Based Funding (A33-A35)
The Commonwealth will fund 45 per cent of the efficient growth of ABF Service delivery, subject to the operation of the national funding cap. The Commonwealth’s funding for all ABF Service Categories will be calculated individually for each State by summing:
- previous year amount— the Commonwealth’s contribution rate for the relevant State in the previous year, multiplied by the volume of weighted ABF Services provided in the previous year, multiplied by the national efficient price in the previous year;
- price adjustment—the volume of weighted services provided in the previous year, multiplied by the change in the national efficient price relative to the previous year, multiplied by 45 per cent; and
- volume adjustment—the net change in volume of weighted services provided in the relevant State (relative to the volume of weighted ABF Services provided in the previous year), multiplied by the national efficient price, multiplied by 45 per cent.
Commonwealth funding will be distributed across all ABF Service Categories in each State at a single Commonwealth contribution rate
Funding Cap (A56)
Overall growth in Commonwealth funding will be capped at 6.5 per cent a year (the national funding cap).
States may be entitled to additional funding over the Soft Cap if there is funding available under the National Funding Cap (a Redistribution Amount) upon completion of the Annual Reconciliation. The Redistribution Amount will be determined as the total of any funding remaining under the National Funding Cap, resulting from a State with growth less than 6.5 per cent.
Safety and Quality Adjustment (A163, A165, A175)
Services that are considered to put patient safety and quality at risk will be subject to a Safety and Quality Adjustment, calculated as part of a state or territory’s actual National Weighted Activity Unit (NWAU) during the Reconciliation process. Adjustments will be included for Sentinel Events, Hospital Acquired Complications (HACs). Adjustments for Avoidable Hospital Readmissions will come into effect 1 July 2021.
Data Conditional Payment (A155)
A temporary deferral of an agreed percentage of Commonwealth NHR funding will apply in the event a state or territory has not provided the required data for Annual Reconciliation to the Administrator by 30 September of the relevant financial year. If the required data is not provided by 31 October of the relevant financial year, a deferral of further funds will occur.