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 IHACPA, and the level of activity as represented by the National Weighted Activity Unit (NWAU) (i.e. the NEP is the price per NWAU).
A 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. 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 2020-21:
- emergency department services
- acute admitted services
- admitted mental health services
- sub–acute and non–acute services
- 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 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 assists how persons with mental illness feel both physically and emotionally.
Sub-acute and non-acute services
These 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.
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 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. Categories of Block funding in 2020-21 included:
- Teaching, training and research
- Small rural hospitals
- Non-admitted mental health
- Non-admitted Child and Adolescent Mental Health Services (CAMHS)
- Non-admitted home ventilation
- Other non-admitted services (e.g. chronic disease management)
- Highly Specialised Therapies (e.g. CAR-T )
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 rural hospitals
Public hospitals, or public hospital services, are eligible for Block funding if the requirement 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 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 child and adolescent mental health services (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 home ventilation services are where the patient received 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 services not covered under other Block funded categories, such as chronic disease management programs or falls prevention services.
Highly Specialised Therapies
Under the Addendum, all Australian Governments agreed funding arrangements for new high cost, highly specialised therapies (HSTs, recommended for delivery in a public hospital setting by the Medical Services Advisory Committee (MSAC). Since the Addendum was signed, four HSTs have been recommended by MSAC:
- Kymriah - for the treatment of acute lymphoblastic leukaemia in children and young adults
- Kymriah or Yescarta (DLBCL) - for the treatment of diffuse large B-cell lymphoma, primary mediastinal large B-cell lymphoma and transformed follicular lymphoma
- Qarziba - for the treatment of high risk neuroblastoma
- Luxturna - for the treatment of inherited retinal disease.
Other Funding Types
Public Health funding
Public Health funding is paid into the 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 Heath funding to the outcomes set out in the NHR Agreement.
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 the 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 the services and payment arrangements, can occur bilaterally between all States and Territories.
When a State Pool Account has an overnight credit balance, interest accrues into the account and is paid periodically by the RBA to the State or Territory account holder. Interest paid into the State Pool Account can be used for State and Territory funding.
Excess funding deposited into the State Pool Account can be earmarked as an ‘over deposit’ or 'withdrawal of ABF in excess of funding obligations' and paid to the State or Territory health department, or be used as part of a subsequent payment to LHNs. In 2021-22 and 2022-23, Victoria were the only State to make over deposits.