Politics Taken Out of Hospital Funding: National Health Reform

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PDF printable version of Politics Taken Out of Hospital Funding: National Health Reform (PDF 15 KB)

24 August 2011

In a watershed moment for national health reform, Minister for Health and Ageing Nicola Roxon today introduced legislation to establish the Independent Hospital Pricing Authority and explained the new legislation will help to deliver a more sustainable, efficient and transparent health system for Australians.

“By establishing the Independent Hospital Pricing Authority and introducing activity based funding we are taking the politics out of hospital funding,” Minister Roxon said.

“For too long, blank cheques were handed over to state health systems, usually following a lot of argy bargy between the Commonwealth and the States and Territories.

“Now, a strong and independent Authority will, at arms length from Government, determine the efficient price for hospital services.

“Just as the Reserve Bank has provided stability and robustness to Australian monetary policy, so too will the Independent Hospital Pricing Authority deliver for Australian hospitals.

“And, unlike Mr Abbott who ripped a billion dollars out of our hospitals, the Gillard Government is committing to be a true partner in our hospital system by funding 50 per cent of the growth of hospital services.

Minister Roxon said activity-based funding and efficient pricing would improve hospital funding for fast growing areas of the country as well as driving better performance from hospitals.

“Activity-based funding will be critical for growing areas of Australia such as Western Sydney and South East Queensland, where the old public funding system has not been able to catch up with changing demands at the local level.

“National health reform will ensure hospital funding can quickly adjust to changes in population, demographics and changing costs.

“Importantly, these reforms represent a major microeconomic reform. They will help identify underperforming hospitals so Local Hospital Networks can work to improve health services.”

The introduction of activity-based funding was a key recommendation of the National Health and Hospitals Reform Commission, who concluded that the introduction of activity-based funding would result in efficiencies of between $500 million and $1.3 billion—the equivalent of hundreds of extra hospital beds.

The Authority will also have a role in determining amounts for block funding—which will be used in hospitals that have low levels of activity and, therefore, would not be able to meet their community service obligations on activity-based funding alone. This will provide important protection for regional hospitals, and for specialised units such as bone banks.

Last Friday, COAG agreed on two important appointments to the Authority—the Chair who will be Mr Shane Solomon and the Deputy Chair who will be Mr Jim Birch. Both have extensive experience in health administration and in activity based funding in Victoria and South Australia respectively. Further announcements regarding the appointments to the Authority will be made in due course.

In total, national health reform will mean an additional $19.8 billion for hospitals over the next decade, with $1 billion already delivered—meaning more beds and better care for Australian families.

For more information, contact the Minister's Office on (02) 6277 7220