Funding Cap

From 2017-18 to 2019-20, the growth in annual Commonwealth NHR funding for national public hospital services will not exceed 6.5 per cent a year (the Funding Cap). The Funding Cap includes:

  1. a State-based Soft Cap of 6.5 per cent, to be applied to the Commonwealth NHR funding entitlement of each State throughout the financial year; and
  2. a National Funding Cap of 6.5 per cent, to be applied to the Commonwealth NHR funding entitlement for all States throughout the financial year.

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.

Summary of possible funding outcomes for States under the Funding Cap are presented in Table below.

Table: Summary of possible funding outcomes for States

Scenario

Soft Cap

National Funding Cap

Commonwealth Funding Entitlement

Commonwealth NHR funding (Cash payable to the State)

A

Not Exceeded

Not Exceeded

Full funding of activity

Full entitlement paid

B

Exceeded

Not Exceeded

Full funding of activity upon annual Reconciliation

Funding up to Soft Cap paid through the financial year

Up to the full entitlement paid in following financial year upon annual Reconciliation

C

Exceeded

Exceeded

Soft Cap entitlement PLUS proportional participation in Redistribution Pool upon annual Reconciliation

Funding up to Soft Cap paid through the financial year

Up to the full entitlement paid in following financial year upon annual Reconciliation (subject to available Redistribution Pool)

The National Funding Cap is applied to Commonwealth NHR funding at the time of annual Reconciliation. If a State does not exceed its Soft Cap it receives the full Uncapped Commonwealth Funding Entitlement.

If a State exceeds the Soft Cap, but the combined funding for all States is less than the National Funding Cap, then all States receive their Uncapped Commonwealth Funding Entitlement.

Reconciliation

Reconciliation of actual activity to estimates service volumes is the process through which the Administrator determines the actual volume of services delivered by LHNs (and thereby States) for Commonwealth NHR funding purposes. The actual patient level services delivered by LHNs, as provided by States, are used as the basis for the calculation of actual volume of services delivered (expressed in NWAU). Reconciliation of actual volume of services delivered by LHNs is done on a six-month and annual basis.

In-scope and eligible hospital activity services data is used to calculate NWAU by running the relevant data elements for these services through the NWAU calculators, price weights and reference files. Unique NWAU calculators are used for each ABF service category.

The difference between the Commonwealth NHR funding to each LHN paid based on estimates and the Commonwealth contribution to each LHN based on actuals is the reconciliation adjustment to be effected.

Funding Integrity (data matching program)

As part of the Reconciliation, one of the functions of the Administrator is to undertake funding integrity analysis. This involves linking of public hospital activity data with data from other Commonwealth programs (such as Medicare Benefits Schedule claims data), to identify instances where the Commonwealth may have inadvertently contributed funding for the same hospital service under more than one Commonwealth program.

An initial proof of concept using public hospital activity and Medicare Benefits Schedule data for the 2012-13 and 2013-14 financial years has been completed, and the next phase is currently underway. The Administrator and the National Health Funding Body are working closely with stakeholders to update the rules used to match hospital activity and Medicare Benefits Schedule data and review the outcomes of applying these rules over the data for the 2014-15, 2015-16 and 2016-17 financial years.

Safety and Quality Adjustment 

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’s actual NWAU during the Reconciliation process.

From 1 July 2017, adjustments will be included for Sentinel Events. For a service that results in the occurrence of a Sentinel Event, the adjustment will assign an NWAU weight of zero. The Sentinel Event service will not receive any Commonwealth NHR funding.

From 1 July 2018, adjustments will be included for Hospital Acquired Complications (HACs). For a service that results in the occurrence of a HAC, the adjustment will assign a reduced NWAU weight. The HAC service will receive reduced Commonwealth NHR funding.

An appropriate model for Avoidable Hospital Readmissions is yet to be agreed for implementation.  

Data Conditional Payment

A temporary deferral of an agreed percentage of Commonwealth NHR funding will apply in the event a State 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.

The deferred funds will be paid to the State once the required data is provided.