National Health Reform
Public hospital funding
New South Wales report
Issued by the Administrator of the National Health Funding Pool
under section 240 of the National Health Reform Act 2011
Available from the Public Hospital Funding website
New South Wales report, January 2013
Table of Contents:
- Participation in the National Health Funding Pool
- Local hospital networks and National Health Reform
- Basis for National Health Reform payments
- Reference information
- Transactions on the state pool account
- Transactions on the state managed fund
- NHR funding and payments by service category
- NHR payment distribution by LHN
- Estimated monthly, YTD and annual NWAU by LHN
This report is issued by the Administrator of the National Health Funding Pool under section 240 of the National Health Reform Act 2011.
This report is prepared on a cash basis. It shows monthly and year-to-date (YTD) National Health Reform (NHR) funding and payments for New South Wales for January 2013 as part of the National Health Reform Agreement.
Participation in the National Health Funding Pool
In signing the National Health Reform Agreement (the Agreement), it was the intention of all states and territories that they would have the necessary legislation in place to enable them to participate in the National Health Funding Pool from 1 July 2012.
New South Wales has participated in the National Health Funding Pool since 1 July 2012.
Local hospital networks and National Health Reform
Under the Agreement, local hospital networks receive funding for the following public hospital services:
- All admitted and non-admitted services
- All emergency department services provided by a recognised emergency department
- Other outpatient, mental health, sub-acute services and other services that could reasonably be considered a public hospital service.
Note: Local hospital networks also receive funding from other sources, including the Commonwealth, states and territories, and third parties for the provision of other specific functions and services outside the scope of the Agreement, for example dental services, primary care, home and community care, residential aged care and pharmaceuticals. For further information on total funding to a particular local hospital network, contact the New South Wales Department of Health to view the service agreement for that local hospital network.
Basis for National Health Reform payments
The basis for NHR payments to local hospital networks (LHNs) in New South Wales was advised by the NSW Ministry of Health to be as follows:
Basis used to determine NHR payments to local hospital networks (LHNs) – New South Wales
The process for determining 2012-13 NHR payments to local hospital networks encompassed three distinct elements of preparation for the individual LHN Service Agreements, including development of annual activity estimates, discussion/negotiation of activity levels with individual local hospital networks, and total state-wide activity across each activity type.
Annual activity estimates for inpatient and emergency department services were developed from actual historical activity levels over the previous five years and forecast 2011-12 actual.
Generally, a linear extrapolation model was used to produce a provisional activity estimate for 2012-13 for each local hospital network. The provisional results were then reviewed to take into account volume variations considered excessive (for example, unusually high peaks or troughs in any given year), known capacity enhancements or limitations to physical capacity, population growth projections, current year activity relative to targets.
The resulting activity estimates were provided for the basis of discussion and negotiation with individual local hospital networks to determine agreed 2012-13 activity targets. Activity weights used in these calculations were NSW cost weighted separations – for acute admitted/inpatient services and cost weighted attendances (UDAG) – for emergency department services.
The projections for the acute admitted activity were further split between public, private and compensable weighted patient activity, based on the historic trends at each facility. This allowed for differential funding mechanisms to be applied to the respective service groups to reflect the variation in funding sources available to an individual local hospital network.
Provisional activity estimates for each activity-based funding (ABF) service type were provided to individual local hospital networks for each facility in-scope for ABF funding. The provisional estimates and historical activity measures provided the basis for discussions with individual local hospital networks. Following feedback from local hospital networks, the resultant weighted activity volumes were then incorporated within the Service Agreements issued to all local hospital networks in June 2012.
It is important to note that the activity volume information was subsequently converted into the National Weighted Activity Unit (NWAU) to be multiplied by the state price or average cost. The result led to the development of a Service Agreement for each local hospital network. Also included in the LHN Service Agreement, which is available on each local hospital network website, was activity information in both ‘activity currencies’ those being the standard NSW cost weights, and the new National Weighted Activity Unit (NWAUs).
Due to the lack of available national systems for counting, coding and classification for mental health, subacute, and teaching, training and research services, the amounts presented for these services under block funding are based on an extrapolation from the 2009-10 National Health Cost Data Collection. These cash amounts are estimations for the amounts spent by local hospital networks in 2012-13 and do not necessarily relate directly to numbers of services provided. NSW Health is working with national bodies and other jurisdictions to progress standardised costing methodology for these services.
Cash payments processed within the National Health Funding Pool (NHFP) Payments System and included within the Administrator’s monthly reports are based on the accrued budget for both ABF and in-scope block funding derived from the LHN Service Agreements after deducting an allowance to recognise own sourced revenue earned, and retained by the local hospital networks and liabilities for superannuation and long service leave which are accepted by the Crown.
The resultant cash value is processed through the state pool account (ABF) or the state managed fund (in-scope block). Although a consistent methodology has been applied, variations in cash prices between local hospital networks reflect the differing mix of the above components (own sourced revenue and Crown accepted liabilities) of each local hospital network’s accrued cost.
In addition to receiving weekly cash payments from the state pool account and the state managed fund, local hospital networks also receive direct State Government funding for new initiatives implemented in 2012-13, including start-up funding for new services, such as new intensive care beds and increasing the number of new nurses within local hospital networks to support a reasonable nursing workload. In addition, further cash payments for all “out of scope” services not subject to the National Health Reform Agreement arrangements are also provided to local hospital networks as required under their 2012-13 Service Agreements.
Monthly reports – Basis on which payments were made
For NSW, all dollar values included in the tables issued by the Administrator are cash payments from either the NSW state pool account to local hospital networks or cash payments from the state managed fund to local hospital networks, and one exception that requires a quarterly cash payment to the Victorian Department of Health for NSW contribution for the Albury-Wodonga inter-jurisdictional agreement.
The weekly cash payment to a local hospital network reflects the estimated cost of patient related services anticipated to be delivered during the monthly cash payment period. The estimated monthly activity and the weekly cash payments are determined based on the annual LHN Service Agreements.
Cash payments from the NSW state pool account and from the state managed fund to local hospital networks are processed each Tuesday. Reporting by the Administrator is based on cash payments made during a given month and is therefore dependent on the number of Tuesdays in a particular month. During 2012-13, July 2012, October 2012, January 2013 and April 2013 each have five Tuesdays, with all other months having four Tuesdays. If accrual accounting principles were being applied within the NHFA Payments System, the value of the reported cash payments would recognise only the number of calendar days in a particular month, not the 35 days (five weeks paid) or 28 days (four weeks paid), as reported by the Administrator.
Due to the Christmas/New Year public holidays, payments from the NSW state pool account and state managed fund that would normally have occurred on Tuesday 1 January 2013 were processed in late December 2012.
Cash payments to local hospital networks from both the NSW state pool account and state managed fund are generally calculated based on equal weekly instalments to health services unless otherwise negotiated.
Other payments will occur in 2012-13 that are outside the regular weekly (Tuesday) payment cycle. Such payments include the full year insurance premium, quarterly payments to the Australian Red Cross Blood Service, quarterly payments to Victoria Health for the Albury-Wodonga inter-jurisdictional agreement, and payments to other states and territories for NSW residents treated in their public hospitals. Payments to local hospital networks may also vary where their cash entitlement alters during the financial year.
Monthly comparison of cash payments from the NSW state pool and state managed fund can vary month to month predominately due to these planned payments.
The cash payments from the NSW state pool account or state managed fund do not reflect the full budgeted funding available to health services in NSW. Other sources of funds available to local hospital networks include separate payments from the Crown (for example, defined superannuation scheme and long service leave cash recovery) as well as own source revenues earned and retained by each local hospital network.
For more information on budget allocations, see the 2012-13 LHN Service Agreements which are available on each NSW local hospital network website.
The financial information outlined in the following report is categorised as:
- NHR funding – when the Commonwealth or state or territory government pays NHR funding into a state pool account or state managed fund.
- NHR payments – when NHR funding deposited into 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.
Transactions on the state pool account
This table shows funding paid into the New South Wales state pool account by the Commonwealth and New South Wales, and payments out of the state pool account to local hospital networks, the state managed fund, and the state health department for January 2013.
Table 1a – State pool account transactions – New South Wales, January 2013
|NHR funding by source||Paid into state pool account||Paid out of state pool account|
|To local hospital networks||To state
|Total paid out|
See definitions and explanatory notes following table 1b.
Following on from table 1a, this table shows the year-to-date (YTD) funding paid into the New South Wales state pool account by the Commonwealth and New South Wales, and payments out of the state pool account to local hospital networks, the state managed fund, and the state health department as at January 2013.
Table 1b – State pool account transactions YTD – New South Wales, January 2013
|NHR funding by source||Paid into state pool account YTD||Paid out of state pool account YTD|
|To local hospital networks||To state managed
|To state health department||Total paid out
Commonwealth ABF funding represents Acute admitted public, Acute admitted private, Non-admitted, and Emergency department service categories, which are funded by the Commonwealth through the state pool account and subsequently paid to local hospital networks.
Commonwealth Block funding represents Mental health, Small rural and metropolitan hospitals, Sub-acute, Teaching, training and research, and Other categories, which are funded by the Commonwealth and paid to the state managed fund.
Commonwealth Other funding represents other amounts funded by the Commonwealth, transacted through the state pool account and subsequently paid to state or territory health departments. This currently represents the Commonwealth contribution to public health.
State/territory funding represents funding contributions paid in by New South Wales into its own state pool account, and subsequently paid to local hospital networks within the state or territory and/or to state or territory health departments.
Note: The grey shaded areas in these tables reflect that these amounts are not applicable for a particular 'paid out' column. For example, Commonwealth block funding is only paid to state managed funds and is not applicable for local hospital networks or state or territory health departments.
NHR funding and payments shown in these tables include GST where applicable.
Transactions on the state managed fund
This table shows funding paid into the New South Wales state managed fund by the Commonwealth and New South Wales and payments out of the state managed fund for January 2013.
Table 2a – State managed fund transactions – New South Wales, January 2013
|NHR funding by source||Paid into state managed fund||Paid out of state managed fund|
|To local hospital networks||To Other||Total paid out|
|Commonwealth Block funding||105,655,010||105,655,010|
|State/territory Block funding||149,742,006||149,742,006|
See explanatory notes following table 2b.
Following on from table 2a, this table shows the year-to-date (YTD) funding paid into the New South Wales state managed fund by the Commonwealth and New South Wales and payments out of the state managed fund as at January 2013.
Table 2b – State managed fund transactions YTD – New South Wales, January 2013
|NHR funding by source||Paid into state managed fund YTD||Paid out of state managed fund YTD|
|To local hospital networks||To Other||Total paid out
|Commonwealth Block funding||769,914,002||769,914,002|
|State/territory Block funding||1,321,525,212||1,321,525,212|
Block funding represents Mental health, Small rural and metropolitan hospitals, Sub-acute, Teaching, training and research, and Other categories.
Commonwealth Block funding represents Commonwealth block funding contributions paid into the state managed fund from the state pool account, and block payments out of the state managed fund to local hospital networks and other provider organisations.
State/territory Block funding represents New South Wales block funding contributions into the state managed fund, and block payments out of the state managed fund to local hospital networks and other provider organisations.
Note: The grey shaded areas in these tables reflect that these block payments cannot at this stage be identified by source of funding (state, territory or Commonwealth contribution).
NHR funding and payments shown in these tables include GST where applicable.
NHR funding and payments by service category
This table shows the NHR funding and payments by service category on both a monthly and year-to-date (YTD) basis for New South Wales for January 2013.
NHR funding and payments are separated into an activity based funding (ABF) component, block component, and other components.
Table 3 – NHR funding and payments by service category – New South Wales, January 2013
|Service category||NHR funding||NHR payments||NHR funding
|Acute admitted - public||356,068,024||356,068,024||2,718,313,905||2,718,313,905|
|Acute admitted - private||48,866,548||48,866,548||373,712,566||373,712,566|
|Total ABF (Pool)||575,922,649||575,922,649||4,398,395,465||4,398,395,465|
|Small rural & metro hospitals||48,444,731||48,444,731||419,908,330||419,908,330|
|Teaching, training & research||29,059,179||29,059,179||253,767,608||253,767,608|
|Total Block (SMF)||255,397,017||255,397,017||2,091,439,214||2,091,439,214|
|Public health funding||8,185,088||8,185,088||58,794,152||58,794,152|
|Total Other (Pool)||8,400,659||8,400,659||59,882,151||59,882,151|
Total ABF (Pool) is an aggregate of both Commonwealth and state or territory NHR funding and payments for activity based funding (ABF) which is transacted through the state pool account.
Total Block (SMF) is an aggregate of both Commonwealth and state or territory NHR funding and payments for block funding which is transacted through the state managed fund (SMF).
Total Other (Pool) represents other funding and payments, which are transacted through the state pool account, including public health funding, overdeposits, cross border funding and payments, and interest.
State and territory cross border payments can either be:
- Paid to the relevant state or territory's local hospital networks - included within ABF and/or block payments in the above table, or
- Reimbursed to the relevant state or territory where the state or territory's local hospital networks are already being funded for the cost of treating cross-border patients - shown in the Cross border payment row under Other in the above table.
Cross border funding arrangements between states and territories are yet to be put in place for state and territory contributions.
NHR funding and payments shown in these tables include GST where applicable.
NHR payment distribution by LHN
This table shows NHR payments (from state, territory and Commonwealth sources) made to each local hospital network (LHN) in New South Wales during January 2013.
NHR payments are separated into an activity based funding (ABF) component and a block component.
Table 4 – NHR payment distribution by LHN – New South Wales, January 2013
|Local hospital network (LHN)||ABF component
|Total NHR payments
|Central Coast Local Health District||25,510,348||11,292,338||36,802,686|
|Far West Local Health District||2,973,696||3,040,654||6,014,350|
|Hunter New England Local Health District||62,992,000||38,909,103||101,901,103|
|Illawarra Shoalhaven Local Health District||29,871,412||12,632,890||42,504,302|
|Justice Health & Forensic Mental Health Network||0||3,728,000||3,728,000|
|Mid North Coast Local Health District||20,338,672||8,415,244||28,753,916|
|Murrumbidgee Local Health District||12,670,288||10,401,085||23,071,373|
|Nepean Blue Mountains Local Health District||24,885,840||10,072,514||34,958,354|
|Northern NSW Local Health District||25,183,028||11,388,649||36,571,677|
|Northern Sydney Local Health District||45,733,048||25,651,313||71,384,361|
|South Eastern Sydney Local Health District||59,687,756||17,894,765||77,582,521|
|South Western Sydney Local Health District||71,912,320||13,340,515||85,252,835|
|Southern NSW Local Health District||9,387,284||8,062,651||17,449,935|
|St Vincent's Health Network||18,213,008||5,770,277||23,983,285|
|Sydney Children's Hospitals Network||28,408,548||2,996,951||31,405,499|
|Sydney Local Health District||58,640,737||21,810,243||80,450,980|
|Western NSW Local Health District||18,223,092||18,383,326||36,606,418|
|Western Sydney Local Health District||61,291,572||12,106,499||73,398,071|
A local hospital network (LHN) is an organisation that provides public hospital services in accordance with the National Health Reform Agreement. A local hospital network can contain one or more hospitals, and is usually defined as a business group, geographical area or community. Every Australian public hospital is part of a local hospital network.
NHR payments in this table are GST exclusive to enable comparability of NHR payments in each local hospital network report.
Note: This table excludes GST and payments to other provider organisations (non-local hospital networks).
Note: The majority of government funding to local hospital networks is not subject to GST. However in some cases hospital funding to non-government entities does attract GST, for example, denominational hospitals, privately and commercially owned health facilities, or any other non-government third party provider of health services or related supplies.
Estimated monthly, YTD and annual NWAU by LHN
This table shows estimated state or territory hospital activity for activity based funding services expressed as National Weighted Activity Units (NWAU) for January 2013, the associated cumulative year-to-date (YTD) and total annual estimated NWAU for each local hospital network in New South Wales.
NHR funding amounts and service volumes are provided by states and territories as service estimates at the start of each financial year, and may continue to be refined during the course of the year. These estimates form the basis of monthly reporting of service volumes until actual service numbers become available.
The estimated annual NWAU for each local hospital network (LHN) was provided to the Administrator as a basis for determining the Commonwealth NHR activity based funding. Current month NWAU estimates accumulate through the year-to-date NWAU to equal the annual NWAU at the end of the financial year.
Table 5 – Estimated monthly, YTD and annual NWAU by LHN – New South Wales, January 2013
|Local hospital network (LHN)||Estimated NWAU delivered in current month||Estimated NWAU delivered YTD||Estimated annual NWAU 2012-13|
|Central Coast Local Health District||6,525||50,533||84,725|
|Far West Local Health District||787||6,100||10,232|
|Hunter New England Local Health District||16,117||124,483||208,303|
|Illawarra Shoalhaven Local Health District||6,467||50,120||84,073|
|Mid North Coast Local Health District||4,624||35,827||60,088|
|Murrumbidgee Local Health District||2,706||20,954||35,131|
|Nepean Blue Mountains Local Health District||5,337||41,338||69,316|
|Northern NSW Local Health District||5,789||44,731||74,947|
|Northern Sydney Local Health District||11,011||84,616||141,176|
|South Eastern Sydney Local Health District||13,893||107,643||180,524|
|South Western Sydney Local Health District||18,269||134,828||217,983|
|Southern NSW Local Health District||2,079||16,115||27,031|
|St Vincent's Health Network||4,031||31,215||52,334|
|Sydney Children's Hospitals Network||6,368||49,191||82,362|
|Sydney Local Health District||15,087||111,605||180,897|
|Western NSW Local Health District||4,550||34,806||57,898|
|Western Sydney Local Health District||13,098||99,498||164,543|
An NWAU is a measure of health service activity expressed as a common unit. It provides a way of comparing and valuing each public hospital service, whether they are admissions, emergency department presentations or outpatient episodes, by weighting them for their clinical complexity. The average hospital service is worth one NWAU - the most intensive and expensive activities are worth multiple NWAU, the simplest and least expensive are worth fractions of an NWAU.
Monthly NHR payments relate to the cash needs of public hospitals and do not necessarily reflect the volume of services to be delivered in the month.