Under the National Health Reform (NHR) Agreement reforms to improve the transparency of public hospital funding, the Commonwealth, State and Territory governments are jointly responsible for funding public hospital services through the National Health Funding Pool (the Pool).

The Administrator of the National Health Funding Pool (the Administrator), with the assistance of the National Health Funding Body, has oversight of the payment of activity–based funding (ABF) and block funding through the Pool.

It is worth noting that public hospitals, operating under Local Hospital Networks (LHNs), are involved in broader non–hospital health services, including community health, preventive health, integrated care and regional health planning, the latter in conjunction with the relevant Primary Health Networks (PHNs).

Funding and payments

NHR funding occurs when the Commonwealth or States and Territories pay NHR funding into a State Pool Account or State Managed Fund.

NHR payments occur when funding is paid out of the State Pool Account by the Administrator, or is paid out of the State Managed Fund by the States and Territories.

The National Health Funding Pool

The single Pool, comprising a Reserve Bank of Australia (RBA) account for each State and Territory, was established on 1 July 2012 through enabling legislation to receive all Commonwealth (ABF and block) and State and Territory (ABF only) public hospital funding. Each State and Territory has established a State Managed Fund to manage block funding.

Commonwealth payments into the Pool are made as equal monthly instalments of an estimated annual payment, while States and Territories can determine how much and when they deposit funds into the Pool and State Managed Funds.

The Commonwealth’s contributions to LHNs are adjusted in arrears at the end of each 6 and 12 months for each financial year once actual volumes have been validated.

To ensure that payments from the Pool are correct, no payment will be made until the respective State or Territory has validated and instructed the Administrator to make payment on its behalf.

The Pool accounts are audited each year, have transparent accounting and reporting, and meet all other COAG and legislative requirements.

Who receives payments?

The payment recipients are LHNs, third parties on behalf of LHNs, State and Territory health departments, and other providers.

The figure below highlights the source, types and amount of funding that flows through as payments to LHNs.

Public Hospital Funding Payment Flows

How do we manage deposits and payments?

The States and Territories work closely with the NHFB and the Administrator to process deposits and payments through the Administrator of the National Health Funding Pool Payments System (Payments System). The Payments System User Manual provides health officials with additional guidance on how this is managed.