Second-tier default benefits

Page last updated: 27 March 2019

What are second-tier default benefits?

Second-tier default benefits provide patients treated in an eligible hospital that does not have a negotiated agreement with the patient’s insurer access to higher benefits than those that would otherwise be payable.

Second-tier default benefits are an amount no less than 85% of the average charge for the equivalent episode of hospital treatment, under an insurer’s negotiated agreements in force on 1 August of a given year with all comparable private hospitals in the same state as the hospital in which treatment occurs. Comparable hospitals are those hospitals in the same second-tier hospital category with negotiated rates for equivalent episodes of care.

To facilitate calculation of second-tier default benefits by insurers, from 1 January 2019, the department will categorise all declared private hospitals into the following categories:
  1. private hospitals that provide psychiatric care, including treatment of addictions, for at least 50% of the episodes of hospital treatment, and do not fall into category (g);
  2. private hospitals that provide rehabilitation care for at least 50% of the episodes of hospital treatment, and do not fall into categories (a) or (g);
  3. private hospitals that do not fall into categories (a), (b) or (g), with up to and including 50 licensed beds;
  4. private hospitals that do not fall into categories (a), (b) or (g), with more than 50 licensed beds and up to and including 100 licensed beds;
  5. private hospitals that do not fall into categories (a), (b) or (g), with more than 100 licensed beds, without an accident and emergency unit or a specialised cardiac care unit or an intensive care unit;
  6. private hospitals that do not fall into categories (a), (b) or (g), with more than 100 licensed beds, with either (or any combination of) an accident and emergency unit or a specialised cardiac care unit or an intensive care unit;
  7. private hospitals that provide episodes of hospital treatment only for periods of not more than 24 hours.

To check which category a hospital is in now, please refer to the department’s List of declared private hospitals by second-tier hospital category (Excel 67 KB).

Please note that inclusion on this list does not necessarily mean that a hospital is second tier eligible. It only means that it has been categorised for second tier purposes. To determine a hospital’s current second tier eligibility status, view the Department’s Hospital Declarations list on the Department's website.

How to apply for second-tier default benefits eligibility

The Department of Health will accept applications for second-tier default benefits eligibility from 1 January 2019.
    Applying for second-tier default benefits eligibility is optional for private hospitals. To be considered for second-tier default benefits eligibility, a hospital must:
    • complete the application form;
    • submit the completed form and all required attachments to PHIsecondtier@health.gov.au; and
    • pay an application fee of $850 (GST exempt) to the department.
    Applications may be submitted at any time of year, but hospitals seeking to renew existing second-tier eligibility should submit an application at least 60 days prior to expiry. A separate application and fee is required for each hospital seeking eligibility.

    The department will assess applications against the following assessment criteria:
    1. be a private hospital;
    2. be accredited;
    3. not bill patients directly for the minimum benefit payable by the patient’s insurer;
    4. make provision for informed financial consent; and
    5. submit Hospital Casemix Protocol Data to health insurers electronically with every claim for second-tier default benefits.

    Hospitals may apply for second-tier default benefits eligibility at the same time as seeking declaration as a private hospital.

    The department will invoice applicants for second-tier eligibility upon receipt of an application. The department will not commence assessment of applications until the application fee has been received by the department.

    Hospitals will be notified of the outcomes of applications within 60 calendar days of the department receiving a complete application, including payment of the associated application fee.

    Hospitals assessed as meeting the assessment criteria will be awarded second-tier default benefits eligibility, effective from the day of approval until 60 calendar days after the day that the hospital’s accreditation against the National Safety and Quality Health Service Standards expires.

    Cost recovery

    The department is fully cost recovering its assessment of applications for second-tier default benefits eligibility and publishing of a list of hospitals and their second-tier eligibility status. The department maintains a Cost Recovery Implementation Statement for this activity, which provides information about how the department implements cost recovery for administration of second-tier default benefits eligibility.

    Links and downloads

    Second-tier Default Benefits Guidelines

    Second-tier Default Benefits Guidelines (PDF 218 KB)
    Second-tier Default Benefits Guidelines (Word 232 KB)

    Application form

    Application form (Word 134 KB)

    List of declared private hospitals by second-tier hospital category

    List of declared private hospitals by second-tier hospital category (Excel 67 KB)

    Cost Recovery Implementation Statement

    Cost Recovery Implementation Statement (PDF 181 KB)
    Cost Recovery Implementation Statement (Word 50 KB)

    Private Health Insurance

    Private Health Insurance (Health Insurance Business) Rules 2018
    Private Health Insurance (Benefit Requirements) Rules 2011

    Contact

    Questions about second-tier default benefits should be emailed to PHIsecondtier@health.gov.au.