Attachment C - Changes to Second Tier Eligible Hospitals

Administrative Arrangements for the Second Tier Default Benefits for Overnight and Day Only Treatment September 2015

Page last updated: 18 September 2015

Printable version of Attachment C (PDF 119 KB)

Introduction

These administrative arrangements apply to second tier default benefits.

Part 1 - Overview of Second Tier Default Benefits

1.1 Schedule 5 of the Private Health Insurance (Benefit Requirement) Rules (the Rules) made under item 3A of the table in section 333-20 of the Private Health Insurance Act 2007 (the Act), requires private health insurers (health insurers) to pay at least the minimum level of benefit set by Schedule 5 (“second tier default benefits”) in relation to most episodes of hospital treatment provided in private hospitals specified in Schedule 5 with which the health insurer does not have a negotiated agreement.

1.2 Facilities specified in the Second Tier Advisory Committee (“the Committee”) approved list are those eligible for the payment of second tier default benefits.

1.3 Any facility that wishes to be considered for inclusion as a second tier approved facility or any facility that wishes to remain specified as an approved facility after its eligibility expires may apply to the Committee for approval that it continues to satisfy the criteria in Clause 4 of Schedule 5 of the Rules, which is reproduced in Part 5 of these administrative arrangements. The Committee will consider each application against the criteria in Part 5 and compile a complete list of Committee-approved facilities eligible for second tier benefits (“the Committee-approved list”). The Committee-approved list of eligible facilities will then be published by the Commonwealth Department of Health (the Department) in a Departmental Circular.

1.4 Under Schedule 5, the minimum level of benefit payable by a health insurer in relation to most ‘episodes of hospital treatment’ provided, between 1 September of any year (“the first year”) and 31 August of the next year, in a facility specified in Schedule 5 with which it does not have a negotiated agreement, is not less than 85% of the average charge for the equivalent episode of hospital treatment under that health insurer’s negotiated agreements in force on 1 August of the first year with comparable facilities in the State. For example, for the period 1 September 2011/2012 to 31 August 2012/2013, the second tier default benefit payable by a health insurer for treatment provided in a category (a) private hospital (which provides psychiatric care for at least 50% of the episodes of hospital treatment) specified in Schedule 5 that is located in New South Wales would be no less than 85% of the average charge for the equivalent episode of hospital treatment in that health insurer’s negotiated agreements in force on 1 August 2011 with all category (a) private hospitals in New South Wales.

1.5 In making the above calculations:
(a) each episode of hospital treatment must be identified using the patient classification system and payment structure used in the majority of the relevant health insurer’s negotiated agreements with comparable facilities in the State;
(b) the “average charge for the equivalent episode of hospital treatment" must:
(i) include the sum of the amount payable by the health insurer under that health insurer’s negotiated agreements and any excesses or co-payments payable by members;
(ii) not include charges for surgically implanted prostheses; and
(iii) not include charges for hospital treatment provided to nursing-home type patients.

1.6 In cases where a health insurer has less than five negotiated agreements in force on 1 August of any year with a particular category of comparable private hospitals in a State, then all of that insurer's negotiated agreements with all classes of private hospitals in that State are to be used to calculate the minimum benefit.

1.7 If the minimum level of benefits calculated in accordance with the second tier rules summarised in paragraphs 1.5-1.8, is below the benefit set in the Rules, then Schedule 5 specifies that the minimum second tier benefit is the benefit set by the Rules.

1.8 In order to facilitate the operation of Schedule 5, the Department expects health insurers to perform the tasks outlined in Part 6 of these administrative arrangements.

Part 2 – Applications

New Applications

2.1 If a facility that is not specified in the Committee-approved list believes that it complies with all the criteria in Part 5, then the facility may apply to the Committee in writing to consider its eligibility. An application to the Committee must include documentation to demonstrate that the facility satisfies each criterion in Part 5.

2.2 All new applications must be submitted to the Committee at least 21 days before the Committee meets to consider them. If an application is submitted within the 21 days, the Committee may delay considering the application until the next scheduled meeting.

2.3 Facilities must submit their application to the Committee via the Second Tier Portal.

Re-applications

2.4 All facilities that wish to remain specified in the Committee-approved list must reapply to the Committee and demonstrate that they meet the criteria in Part 5 before the facility’s eligibility expires. The Committee’s decision that a facility satisfies the criteria in Part 5 expires at the end of the following financial year. Facilities should re-apply to the Committee between 1 March and 31 March of the financial year in which the current approval will expire to ensure that the Committee has sufficient time to consider the application by 30 June. Applications received after 31 March may not be considered by the Committee before the current approval of the Committee expires on 30 June.

Note: Paragraph 2.4 does not entitle the Committee to refuse applications made after 31 March. The purpose of paragraph 2.4 is to encourage all facilities to apply by the given date to streamline administrative processes required of the Committee.

2.5 All re-applications must be submitted to the Committee at least 21 days before the Committee meets to consider them. If a re-application is submitted within the 21 days, the Committee may delay considering the application until the next scheduled meeting.

2.6 All re-applications must include documentation to demonstrate that the facility satisfies each criterion in Part 5.

2.7 If a specified facility:
(a) does not re-apply for approval by the Committee that it satisfies the criteria in Part 5 before the current approval of the Committee expires; or
(b) does re-apply, but the Committee is unable to consider the application before the current approval by the Committee expires because the application was not made at least 21 days before the Committee was to meet to consider applications;
then the facility may be removed from the Committee-approved list.

Part 3 - The Role of the Committee

Procedures and Functions of the Committee

3.1 Whenever possible, the Committee must meet every three months to consider applications.

3.2 Whenever possible, the Committee must ensure that information on the scheduled dates for meetings is made available to the private health industry in advance of such meetings.

3.3 The Committee must consider written applications from:
(a) facilities that do not have current approval from the Committee that they meet the criteria in Part 5 (ie. new applications);
(b) facilities re-applying for approval from the Committee that they meet the criteria in Part 5 (ie. re-applications); and
(c) health insurers which consider that a facility no longer satisfies one or more of the criteria in Part 5.

Assessment of Applications from Facilities

3.4 After receiving an application from a facility (whether a new application or a re application), the Committee must assess the application against the criteria in Part 5 and make a decision as to whether the facility satisfies the criteria in Part 5.

3.5 Where the Committee considers that the facility meets all of the criteria in Part 5 the Committee must approve the facility as satisfying the criteria.

3.6 If the Committee considers that a facility does not satisfy one or more of the criteria in Part 5 it must not approve the facility. The Committee may, at its discretion, request a facility to provide additional information prior to making a final decision.

3.7 The Committee must notify the facility of its decision. Notifications to the facility must specify the criterion or criteria in Part 5 that the Committee considers the facility does not satisfy.

3.8 The Committee must notify the Department of changes to the Committee-approved list by providing the Department with an up-to-date complete Committee-approved list for publication after each meeting. The list must include each second-tier eligible facility’s name and address.

3.9 When notifying the Department of these and other matters referred to in these administrative arrangements, the Committee must write to:

Assistant Secretary
Private Health Insurance Branch
Department of Health
MDP 853
GPO Box 9848
Canberra ACT 2601

Assessment of Applications by Health Insurers

3.10 If a health insurer considers that a facility specified in the Committee-approved list no longer complies with one or more of the criteria in Part 5, the health insurer may write to the Committee seeking a revocation of the Committee’s decision that the facility satisfies the criteria in Part 5, detailing its reasons and supplying supporting documentation.

3.11 Before making a decision as to whether to revoke the decision that the facility satisfies the criteria in Part 5, the Committee must provide the facility with an opportunity to provide additional information in writing to the Committee.

3.12 If, following the reconsideration, the Committee considers that the facility does not satisfy one or more of the criteria in Part 5, the Committee must revoke its decision that the facility satisfies those criteria, and must submit a revised approved list to the Department and immediately notify the facility and the health insurer.

Part 4 – Specifying Facilities in, and Removing Facilities from, the Committee approved list

4.1 The Committee will advise the Department of any revised version of the Committee approved list. The Department will publish the Committee-approved list via the Department’s private health insurance circulars. The Rules will then be amended to refer to the current published Committee-approved list. Health insurers will be obliged to pay second tier default benefits in respect of treatment provided in the facilities listed in the Committee approved list.

4.2 The Department will also notify the private health industry of any facility added or removed from the Committee-approved list by Departmental Circular.

4.3 As the Rules are the legal mechanism for establishing second tier eligibility, upon being specified in the Committee-approved list, new facilities will be eligible to receive second tier default benefits from the date of effect of the Private Health Insurance (Benefit Requirements) Amendment Rules which refer to the Committee-approved list in which the new facility appears. A facility’s second-tier eligibility expires on the date of effect of an amendment to the Rules to reference a new Committee-approved list in which the facility does not appear.

Part 5 - Criteria that the Committee Must Consider

Legislative Requirements

5.1 The facility must be a private hospital within the meaning of subsection 121-5(8) of the Act.

Note: Facilities that are private hospitals will have been issued a current Commonwealth provider number.

Accreditation

5.2 The facility must:
(a) when existing accreditation expires, be assessed by an appropriate accrediting body as being fully compliant with the National Safety and Quality Health Service Standards, subject to implementation timelines specified by the Australian Commission on Safety and Quality in Healthcare; or
(b) be a hospital that was listed in the table at Clause 4 of Schedule 5 of the Private Health Insurance (Benefit Requirements) Rules 2011 (the table) as in force immediately before the commencement of the Private Health Insurance (Benefit Requirements) Amendment Rules 2012 (No. 10) (the Amendment Rules) until the first time from the commencement of the Amendment Rules that hospital’s safety and quality accreditation expires or otherwise ceases.

Note: Facilities are not required to be assessed against the National Safety and Quality Health Service Standards until such time as their current accreditation expires or where new accreditation is sought.

The National Safety and Quality Health Service Standards are the standards developed by the Australian Commission on Safety and Quality in Healthcare under the Australian Health Services Safety and Quality Accreditation Scheme as at 1 January 2013.

Accreditation for the purposes of paragraph (b) of this definition means accreditation used in respect of the facility for the purposes of being listed in the table.

Approved Accrediting Body

5.3 An appropriate accrediting body is a body approved by the Australian Commission on Safety and Quality in Healthcare to accredit or certify health care organisations or health care providers against the National Safety and Quality Health Service Standards.

Note: The Australian Commission on Safety and Quality in Healthcare is established under section 8 of the National Health Reform Act 2011.

Simplified Billing

5.4 The facility must:
(a) provide patients, within 1 month after the patient has been discharged from the hospital, a single account in respect of that hospital treatment, covering all hospital services and related services (not necessarily including professional services); and
(b) have processes in place that would allow the inclusion of in-hospital medical bills in a simplified billing arrangement.

5.5 The facility may also issue interim accounts where an episode of hospital treatment exceeds 7 days (excluding leave periods) and where the patient to whom the admission applies has been advised that this will occur.

Informed Financial Consent

5.6 The facility must have procedures in place to inform a patient or nominee, in writing, of what hospital charges, health insurer benefits and out-of-pocket costs (where applicable) are expected in respect of the hospital treatment. The patient or nominee must be informed:
(a) for scheduled admissions, at the earliest opportunity before admission for the hospital treatment; or
(b) for unplanned admissions – as soon after the admission as the circumstances reasonably permit.

Submission of Hospital Casemix Protocol Data

5.7 The facility must provide Hospital Casemix Protocol data to health insurers electronically, where possible, with claims.

Note: Rule 4 of the Private Health Insurance (Health Insurance Business) Rules made under item 6 of the table in section 333-20 of the Private Health Insurance Act 2007, specifies the information to be provided by hospitals to the insurer.

Rule 7 of the Private Health Insurance (Health Insurance Business) Rules specifies the information to be provided by the hospital to the Department.

Part 6 – Tasks Health Insurers Should Perform

6.1 To facilitate the operation of Schedule 5, the Department expects each health insurer to:
(a) devise, on an annual basis, for each State, its listing of second tier default benefits for the upcoming payment year. This listing should be devised in accordance with Schedule 5. The payment year is the period between 1 September of one year and 31 August of the next year;
(b) on an annual basis provide a copy, in writing, of the above listings of second tier default benefits to the Department by 31 August of the year preceding the upcoming payment year or within two working days of a request by the Department;
(c) arrange for an independent audit (by an auditor acting in compliance with Australian Auditing Standards) of its listings of second tier default benefits for the current payment year and provide the Department with a statement from the independent auditor stating that its listing has been calculated in accordance with Schedule 5 by 30 September of the current payment year. Audit reports are expected to:
(i) include copies of the listings of second tier default benefits to which the audit relates; and
(d) if, as a result of the independent audit referred to above, there were changes to its listing of second tier default benefits, notify any facility likely to be affected by such changes and the Department of the revised listings by 30 September of the current payment year.

Note: Schedule 5 deems the Australian Capital Territory to be part of New South Wales and the Northern Territory to be part of South Australia for the purpose of calculating the second tier default benefit.