The A-Z of Commonwealth Funding (and payments to LHNs)National Health Reform Funding Commonwealth Contribution Model and Payments System

Proudly assisting the Administrator of the National Health Funding Pool

Lynton NorrisCEO, National Health Funding Body

Healthcare Financial Management AssociationQueensland Conference, Brisbane22 May 2017

$41.4Billion paid for public

hospital services

$24.8Billion from

States or Territories

$17.2Billion from

Commonwealth

8.1% growth in overall expenditure by

Australian governments

7,712,325 National Weight Activity Units (NWAUs) delivered

FUNDING RECEIPTS BY TYPE PAYMENTS TO LHNs BY SOURCE

2015-16 ANNUAL REPORT www.publichospitalfunding.gov.au/publications/annual-reports

About the Administrator and the NHFB, and legislation

Australian Funding and

Payments Framework

Administrator’s Policy

FrameworkAdministrator’s

Operational Framework – CCM

and Payments System

Commonwealth Funding Integrity

Overview

• Created from National Health Reform Agreement, independent of both Commonwealth and state/territory governments

• NHFB exists to support the Administrator in delivering his functions:- Calculate the Commonwealth NHR funding contribution to LHNs by service category,

and reconcile payment for actual services against estimates

- Oversee Commonwealth and state funding and payments, contributing to “the sustainability of funding for public hospitals”

- Enable transparency and funding integrity through financial/payment insights and the use of deterministically integrated hospital, MBS and PBS data holdings

• COAG Heads of Agreement on Public Hospital Funding reinstated the Administrator and NHFB and has extended ABF through to 2020

www.publichospitalfunding.gov.au

www.nhfb.gov.au

Role and function of the Administrator and the National Health Funding Body

• NHRA created the Administrator and NHFB• NHRA introduced new financial arrangements (ABF) for the

Commonwealth and states and territories in partnership• Confirmed state and territories as system managers• Objectives:

- Improve patient access to services and public hospital efficiency through the use of ABF based on a National Efficient Price (NEP)

- Ensure the sustainability of funding for public hospitals by increasing the Commonwealth's share of public hospital funding

- Improve the transparency of public hospital funding through a National Health Funding Pool

National Health Reform Agreement

• In April 2016, COAG signed a Heads of Agreement (HoA) to continue ABF until 30 June 2020

• The intention of the HoA is to improve health outcomes and decrease avoidable demand for public hospital services through:- 6.5% cap on growth in Commonwealth funding- better coordinated care, particularly for patients with complex

and chronic disease, focused at the primary care level- funding and pricing for quality and safety, to avoid funding

unnecessary or unsafe care- reducing avoidable readmissions to hospital- timely submission of data by states and territories

Heads of Agreement/Addendum

YOU ARE HERE

NHFB IS HERE

• Commonwealth funding is determined by the Commonwealth Contribution Model, further detailed later

• State or territory funding meets the cost of services not funded by the Commonwealth

• State or territory costs can be higher if local cost per weighted activity (NWAU) is higher than the NEP ($4,910 in 2017-18)

FUNDING(Paid into the NHFP/State Managed

Fund)

PAYMENTS(Paid out of the NHFP/State

Managed Fund)

STATE POOL ACCOUNT

• All Commonwealth funding• State Contribution to ABF• Other funding (Cross-border, Over

Deposit, Interest)

• ABF to LHNs or Other Providers• Public Health contribution

and other funding to State or Territory

STATE MANAGED

FUND

• Block funding from State Pool Account (Commonwealth contribution)

• Block funding from State or Territory

• Block funding to LHN or Other Provider

Funding and Payments

FUNDING(Paid into the NHFP/SMF)

PAYMENTS(Paid out of the NHFP/SMF)

STATE POOL ACCOUNT

STATE MANAGED

FUND

Funding and Payments: Queensland 2015-16

THREE YEAR DATA PLAN AND FILE SPECIFICATIONS• Describes the Administrator's determination of

the minimum level of data required from the Commonwealth and states and territories

INFORMATION REQUIREMENTS• Estimates of activity (in NWAU) to be delivered (31 March and

31 May) which can be updated throughout the year

• Actual activity (individual services) (Submission A) and associated individual Medicare numbers (Submission B), to be submitted by 31 March (six-month) and 30 September (annual)

• Monthly funding and payment amounts (LHN level) and estimated activity delivered (in NWAU)

Policy FrameworkThree Year Data Plan

DATA PRIVACY, SECRECY AND SECURITY• Details the policy for dealing with the collection, use, storage, disclosure and destruction of

data received by the Administrator and the NHFB

DATA COMPLIANCE• Outlines the policy for publishing details of Commonwealth, state and territory compliance

with the data requirements of the Administrator's Three Year Data Plan

Policy Framework Data Privacy, Secrecy and Security and Compliance

GROWTH AND FUNDING • Sets out the approach and processes for implementing and calculating the growth and

funding guarantee clauses of the NHRA and the Heads of Agreement/Addendum

• Commonwealth funding including growth is calculated using the NHFB Commonwealth Contribution Model (CCM)

+ 6.5% State and National Funding Cap

+ Safety & Quality Adjustment

Policy Framework Growth and Funding

• The CCM uses activity inputs (estimated or actual NWAU) to calculate efficient growth and total Commonwealth funding

• Monthly payments paid prospectively by the Commonwealth are based on estimated NWAU from LHNs (reported by the State or Territory and in line with Service Agreements)

• Funding is to be provided on the basis of activity delivered• Reconciliation of actual NWAU to estimated NWAU occurs on a

six-month and annual basis, with the difference paid to the LHN (or recouped from future payments)

• Process and rules are outlined in the Methodology, Reconciliation Framework and Growth and Funding document

• The Administrator requires actuals data to be submitted on 30 March (six-month) and 30 September (annual) each year

What is the Commonwealth Contribution Model?

• Public Health (population health) funding is determined by Special Purpose Payment (SPP) growth factor multiplied by the base year’s Commonwealth contribution for Public Health

• SPP growth factor is provided by Commonwealth Treasury• Paid directly to the State or Territory Department of Health, via the

State Pool Account

Commonwealth Contribution ModelPublic Health

• Block funding - The growth funding percentage (45 per cent) is multiplied by the change in the National Efficient Cost of each Block funding service category and is then added to the base year Commonwealth contribution for the relevant service category

• The funding for each service category is aggregated to determine the total Block funding for each state and territory Block service

categories:• Small Rural• Teaching, Training &

Research• Non-admitted Mental

Health• Other non-admitted

services

Commonwealth Contribution ModelBlock Funding

ABF service categories:• Acute Admitted• Admitted Mental Health• Subacute• Emergency Department• Non-Admitted

Commonwealth Contribution ModelActivity Based Funding

• 6.5% Funding Cap for growth in Commonwealth funding for public hospitals

Commonwealth Contribution ModelActivity Based Funding – HoA impact

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2016-17 2017-18 2018-19

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Commonwealth NHR funding to Australian Public Hospitals • 6.5% Soft Cap –guaranteed funding for State or Territory

• 6.5% National Cap – total pool of funding available for all jurisdictions

• If a state does not grow 6.5%, the remaining funding is available for redistribution

Growth funding

Uncapped funding entitlement

Uncapped Funding compared to Funding Cap

• Under the NHRA, the Administrator is required to publish monthly reports on the funding from the Commonwealth and states and territories, and payments to LHNs

• Prepared for National, State and Territory and individual LHNs and available from publichospitalfunding.gov.au

Monthly Reporting by the Administrator

• Annual Report published each year and tabled by state and territory Health Ministers in their respective Parliaments

• Contains a financial statement for each State Pool Account (audited by the relevant Auditor-General) and a summary of amounts paid into and out of the State Pool Accounts, State Managed Funds and the number of NWAU funded

• The figures reported in the Monthly Reports add to the figures reported in the Annual Report

Annual Reporting by the Administrator & NHFB

• Safety and Quality Adjustment• Sentinel Events – No Commonwealth funding (from 1 July 2017)• Hospital Acquired Complications (HACs) – Reduced Commonwealth funding

(from 1 July 2018)• Avoidable Hospital Readmissions – TBA (no earlier than 1 July 2018)

• Data Conditional Payment (DCP)• 10% if annual actual activity data not received by 30 Sep• 15% if annual actual activity data not received by 31 Oct• DCP is first applicable from 2016-17 annual activity data

submission, due 30 September 2017

Other impacts of the Heads of Agreement on payments

• The National Health Funding Pool consists of eight state and territory bank accounts with the Reserve Bank of Australia

• Each state and territory has a separate State Managed Fund• The accounts are supported by the National Health Funding Administrator

Payments System (Payments System), operated by the NHFB• The Payments System is accessed by all states and territories to

enable payments to LHNs• The Administrator is not entitled to delegate any function, including

approving all payments out of the National Health Funding Pool• In 2015-16, a total of 5,279 transactions were processed through

the Payments System

National Health Funding Administrator Payments System

Administrator/NHFB delivering hospital funding integrity & sustainability

• Clause A6 of the National Health Reform Agreement states:

‘… the Commonwealth will not fund patient services through this Agreement if the same service, or any part of the same service, is funded through any of the benefit programs or any other Commonwealth program.’

• Responsibility to identify where the same hospital service has been funded more than once by the Commonwealth (e.g. NHR, MBS, PBS, DVA)

• Involves reviewing patient pathway through the hospital setting and relationship of primary and specialist care to the hospital episode (continuum of care)

• Involves additional data analysis covering: cost, service use, geographic regions and health conditions

• A data matching ‘proof of concept’ project over the 2013-14 data identified over $480M (including day of admission and discharge) in Commonwealth hospital funding as potentially having received MBS claims totalling over $68M (analyses over 2014-15 data are underway)

Commonwealth Funding Integrity

• The Administrator, the NHFB and National Health Funding Pool exist under the arrangements agreed in the National Health Reform Agreement and the HoA/Addendum

• The Commonwealth Contribution Model is used to calculate the level of Commonwealth funding across ABF, Block and Public Health service streams

• The Addendum will bring changes to the way in which funding is calculated from 1 July 2017

• The National Health Funding Administrator Payments System is used to process payments from the Commonwealth, state and territory governments to LHNs

Summary