Budget Allocations

Northern NSW Local Health District Initial Budget Allocations and Activity

Northern NSW LHD remains committed to Activity Based Funding (ABF) as a corner stone of budget transparency and devolution, providing patient-focused insight for decision-making in health care.

This fourth year of NSW Health ABF budgeting reflects the maturity of the funding model as we progress with expanding its coverage and application. An additional 2 hospitals will be funded by ABF in 2015/16 Maclean Hospital and Casino Hospital.

For 2015/16 the Commonwealth government is continuing to provide its contribution to public hospital funding through the National Health Funding Pool, largely on an ABF basis, including a contribution to funding growth at the rate of 45% of the National Efficient Price.

The LHD Service Agreement with the MOH provides the basis on which anticipated patient volumes are notified to the Administrator of the National Health Funding Pool. From 1 July 2015, all sub-acute inpatient episodes must be grouped to an appropriate AN-SNAP class to be eligible for the Commonwealth funding contribution. The quality of this data will be carefully monitored and improved where necessary.

NSW State Price

The NSW State Price per National Weighted Activity Unit (NWAU15) applicable for 2015/16 is $4,569. This price is not directly comparable with last year’s State Price ($4,583 per NWAU14) as IHPA, in its annual National Efficient Price Determination (February 2015), has further refined the NWAU price weight values and introduced a number of significant changes to the various classifications used for ABF. In determining the State Price, we have determined the average cost for NWAU15 by escalation of the most recently available cost data, namely 2013/14. The 2015/16 State Price reflects year on year changes in average cost per NWAU which are influenced by productivity improvements, changes in input cost, better capture and reporting of activity and refinements in standardisation of cost allocation.

Transition Grants

Northern NSW LHD has no Transition Grants in acute admitted and emergency department service streams and had growth funded at the State Price.

While transition grants relating to sub-acute services were flagged for inclusion in this year’s reduction methodology, this has been deferred to next year to account for the significant changes that IHPA has introduced to this classification.

Non-admitted patients will be included in the State Price and Transition Grants calculation from 2016/17. Northern NSW LHD will review their activity coverage and cost allocation methodologies in preparation for the following financial year.

Purchasing Model Improvements

In 2015/16, the activity target-setting methodology has been further refined. Weighted population growth (adjusted for age and gender) continues to be the primary basis of activity growth.

The purchasing model includes several adjustors focussed on patient outcomes. Two of these adjustors – unplanned readmissions and potentially preventable hospitalisations – have been retained with technical refinements applied to both. This includes changes to make the unplanned readmissions more sensitive to differences in hospital peer groups and the underlying casemix experienced in each District or Network.

Two further outcome-related adjustors have been introduced in 2015/16. The first one provides additional NWAU to hospitals which have demonstrated adoption of the Agency for Clinical Innovation-endorsed model of care for the management of hip fracture in the elderly. The second adjustor focuses on occurrence of hospital-acquired complications (specifically with respect to pressure injuries, deep vein thrombosis and pulmonary embolism).

Planned service changes, capacity increases and cross-border flows have also been taken into consideration when determining the activity targets. This provided additional activity, over and above the base growth figures derived from the model.

Activity Targets, Small Hospitals

Block funded hospitals have been funded having regard to the principles applied in the Independent Hospital Pricing Authority (IHPA) model for determining an efficient cost for these small hospitals and applying more recent data than used in the IHPA model. Similar to last year, an additional growth funding component of 1% of the small hospitals funding has been provided in excess of the standard input indexation to ensure adequate service growth and development.