As outlined in the National Health Reform Agreement, the NEP and NEC determine the Commonwealth funding contribution to Australian public hospitals.
Currently the majority of Commonwealth funding is determined by Activity Based Funding (ABF). This is a way of funding public hospitals where by they get paid for the number and mix of patients they treat. The NEP underpins ABF to approximately 260 hospitals nationwide including all the large metropolitan hospitals.
Shane Solomon, Chair of the Pricing Authority said, “the National Efficient Price provides a clear benchmark for all Australian governments regarding the costs of delivering the services provided by public hospitals across Australia.
“IHPA continues to improve its pricing model ensuring that the costs of delivering the many different public hospital services are more accurately reflected and better understood.”
The NEP for 2016-17 is $4,883 per National Weighted Activity Unit (NWAU). This is approximately a two percent increase in price from the revised NEP for 2015-16.
The price of each public hospital service is calculated by multiplying the NWAU allocated to that service by the NEP.
For example:
- A tonsillectomy has a weight of 0.7131 NWAU which equates to $3,482.
- A coronary bypass (minor complexity) has a weight of 5.2430 NWAU which equates to $25,602.
- A hip replacement (minor complexity) has a weight of 4.0965 NWAU which equates to $20,003.
The NEC for 2016-17 is $5.020 million. The NEC is used when activity levels are not suitable for funding based on activity such as small rural hospitals. In these cases services are funded by a block allocation based on size and location instead. This type of funding applies to approximately 380 small rural hospitals.
For a full copy of the National Efficient Price and National Efficient Cost and a guide to understanding the Determinations for 2016-17, visit www.ihacpa.gov.au.
