What we do
The Independent Health and Aged Care Pricing Authority (IHACPA) assists the Australian Government to fund hospital and aged care services more efficiently by providing evidence‑based price determinations and pricing advice.
IHACPA was established in 2011 under the National Health Reform Act 2011 to promote improved efficiency in, and access to, public hospital services through the provision of independently determined pricing advice to all Australian governments.
In 2022, the scope of IHACPA's functions were expanded under various legislations to provide advice about certain aged care pricing and costing matters to each relevant Commonwealth Minister and to approve higher maximum accommodation payment amounts and extra service fees for residential aged care.
Our program of work
We deliver an annual program of work through consultation and collaboration with Australian government, state and territory governments, advisory committees, key stakeholders and the public.
Our main activities include:
- developing national classifications for healthcare and other services delivered by public hospitals
- undertaking several major areas of work designed to inform the annual determination of the national efficient price (NEP) and national efficient cost (NEC), including ongoing consultation with all Australian health departments, expert advisory committees and key stakeholders.
- providing residential aged care and respite care pricing and costing advice, refundable accommodation deposit approvals and extra service fee approvals
- resolving cost-shifting and cross-border disputes upon request by a health minister.
IHACPA's role in health care is to determine the annual national efficient price (NEP) and national efficient cost (NEC) to enable activity based funding for public hospital services.
Activity based funding for hospital services
Activity based funding in the healthcare sector is a way of funding hospitals whereby they get paid for the number and mix of patients they treat. If a hospital treats more patients, it receives more funding. Because some patients are more complicated to treat than others, activity based funding also takes this into account.
National efficient price
The NEP is based on the average cost of a hospital admission across Australia. NEP is a factor, along with the volume of services delivered, of the government’s funding contribution to public hospitals.
National efficient cost
The NEC represents the average cost of government funding contributions for services that are not suitable for activity based funding, such as small rural and regional hospitals. The fixed-plus-variable structure enables changes in activity delivered in small rural hospitals to be reflected in funding and ensures there is no disincentive for states to provide services in rural areas.
Sustainable growth in hospital costs
The national weighted activity unit is a measure of health service activity expressed as a common unit, against which the NEP is determined.
Safety and quality
IHACPA works with the Australian Commission on Safety and Quality in Health Care to incorporate safety and quality measures into the determination of the NEP. Under the 2020-25 Addendum to the National Health Reform Agreement, IHACPA is required to integrate safety and quality into the pricing and funding approaches for public hospital services, to further improve the health outcomes of patients and decrease avoidable demand for public hospital services.
Following the recommendations of the Royal Commission into Aged Care Quality and Safety, the Australian Government commenced a new approach for funding aged care services based on the volume of activity each provider performs, transitioning to a system of activity based funding.
IHACPA provides costing and pricing advice to support aged care reform. While IHACPA’s role is to provide pricing advice to the Minister for Health and Aged Care, it is the government who determines the price for aged care services.
Activity based funding for aged care services
Activity based funding in the aged care sector is a system of funding service providers whereby providers are paid for the number and characteristics of people they provide services to. If more people are provided services, the service provider receives more funding. Because some people’s needs are more complex than others, activity based funding also takes this in to account.
Australian National Aged Care Classification (AN-ACC)
IHACPA provides independent advice to the Australian Government on the pricing of aged care services through the new AN-ACC funding model, replacing the Aged Care Funding Instrument from 1 October 2022.
Under the AN-ACC funding model, activity data from residential aged care providers will be reported to the government. This will include data on the assessed AN-ACC classes of the residents as well as demographic and facility data.
Aged care pricing advice
The development of efficient pricing is a multi-year process that requires refinement over time. IHACPA will conduct consultation, policy development, data collection and costing and pricing studies to provide advice to inform government pricing decisions on residential aged care, residential respite aged care and the Support at Home Program.
Refundable accommodation deposit (RAD) approvals
A RAD is the lump-sum payment for a room (or part of a room) in an aged care home. The price is for residents who are not eligible for Australian Government assistance.
Residential aged care providers seeking to charge a resident more than $550,000 as a RAD or equivalent daily amount must apply to IHACPA for approval.
Extra service fee approvals
Extra service status is granted to residential aged care providers by the Australian Government to charge a fee for significantly higher standards of food, entertainment options, enhanced personal services, specific products and/or organised outings.
Providers with extra service status who are seeking to charge a resident an increase to the extra service fee must apply to IHACPA for approval.
