National Health Reform (NHR) funding occurs when the Commonwealth or State or Territory government pays NHR funding into a State Pool Account or State Managed Fund.

NHR payments occur when NHR funding in 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. NHR payments can be made to Local Hospital Networks (LHNs), third parties (on behalf of an LHN), or other States and Territories.

Types of National Health Reform Funding

Activity Based Funding

Activity Based Funding (ABF) is a funding method for public hospital services based on the number of weighted services provided to patients, and the price to be paid for delivering those services.

The method uses national classifications for service types, price weights, the National Efficient Price (NEP) that is independently determined by the Independent Hospital Pricing Authority (IHPA), and the level of activity as represented by the National Weighted Activity Unit (NWAU).

An NWAU represents a measure of health service activity expressed as a common unit of resources. This provides a way of comparing and valuing each public hospital service (whether it is an emergency department presentation, admission or outpatient episode), by weighting it for clinical complexity.

The NEP is the price paid per NWAU.

States and Territories are required to outline their basis of payments to each LHN, including an explanation of the factors taken into account.

The following service categories were ABF funded in 2019-20:

  • emergency department services;
  • acute admitted services;
  • admitted mental health services;
  • sub-acute services; and
  • non-admitted services.

Emergency department services

These involve the provision of care for patients who may have an urgent need for medical, surgical or other care, such as treatment for a broken limb or initial treatment of a severe injury or illness.

Acute admitted services

These are services where the treatment goal is to cure or reduce the severity or symptoms of illness or injury that requires hospital admission, such as a surgery following an accident, or for general services such as obstetric care.

Admitted mental health

These are hospital-based services involving diagnosis, treatment, and preventive care that assist how persons with mental illness feel both physically and emotionally.

Sub-acute services

These sub-acute and non-acute services are specialised multidisciplinary care in which the primary need for care is optimisation of the patient’s functioning and quality of life, through rehabilitation, palliative, geriatric or maintenance care.

Non-admitted services

These are services provided to patients who do not undergo a formal admission process, and do not occupy a hospital bed, such as specialist clinics and community health services.

Block Funding

Block Funding supports teaching, training and research in public hospitals, and public health programs. It is also used for certain public hospital services where block funding is more appropriate, particularly for smaller rural and regional hospitals.

Teaching, training and research

Teaching and training are activities provided to facilitate the acquisition of knowledge, or development of skills and expertise. Research is activity undertaken to improve consumer and patient health outcomes and/or performance.

Small regional and rural hospitals

Public hospitals, or public hospital services, are eligible for block grant funding if the requirements for ABF cannot be satisfied. They may also be eligible when economies of scale are not present meaning the provision of services is not financially viable under ABF. Block funding is set in these circumstances based on a scale of NWAU activity levels for the relevant hospitals.

Non-admitted mental health

Non-admitted mental health services are specialist mental health services that do not involve an admission to hospital, such as older persons community mental health services.

Non-admitted CAMHS

Non-admitted Child and Adolescent Mental Health Services (CAMHS) provides consultation to other service providers working with children and adolescents to promote early intervention and effective delivery of primary level responses for children and young people experiencing mild to moderate mental health problems.

Non-admitted home ventilation

Non-admitted services where the patient receives ventilatory support (self-administered by the patient or the patient’s carer). Ventilatory support is a process by which gases are moved into the lungs by a device that assists respiration by augmenting or replacing the patient’s own respiratory effort.

Other non-admitted services

These are any non-admitted service not covered under other block funded categories, such as chronic disease management programs or falls prevention services.

Other public hospital programs

Programs as approved by the Pricing Authority for inclusion on the General List of In-Scope Public Hospital Services.


CAR-T Therapy (Kymriah) is a form of immunotherapy that uses specially altered T cells extracted from the patient, to directly, and precisely target their cancer cells.

Other funding types

Public Health funding

Public health funding is paid into the National Health Funding Pool by the Commonwealth as a contribution to funding population health activities within each State and Territory directed at improving the overall health of the population and seeking to prevent the development of poor health.

These activities include national public health, youth health services and essential vaccines (service delivery). States and Territories have full discretion over the application of public health funding to the outcomes set out in the Agreement.

Cross border funding

When a resident of one State or Territory receives hospital treatment in another State or Territory, the ‘resident’ State or Territory compensates the ‘provider’ State or Territory for its share of the cost of that service. This is known as a cross-border payment.

The Commonwealth’s share of the cost of these services is made directly to the ‘provider’ State or Territory. Cross-border agreements, including the scope of services and payment arrangements, can occur bilaterally between all States and Territories.


When a State Pool Account has an overnight credit balance, interest accrues in the account and is paid periodically by the Reserve Bank of Australia to the State or Territory account holder. Interest paid into the State Pool Account can be used for State and Territory funding.

Over deposit

Excess funding deposited into the State Pool Account can be earmarked as an ‘over deposit’ and paid to the State or Territory health department, or be used as part of the next payment to LHNs.