yourHealth - Schedule A – Sustainability of Funding for Public Hospital Services

National Health Reform Agreement

Schedule A – Sustainability of Funding for Public Hospital Services

Commonwealth Funding

A1. Under this Agreement, Commonwealth National Health Reform funding will replace the National Healthcare SPP in Schedule D of the IGA FFR from 1 July 2012. The Commonwealth will fund:

hospital services provided to public patients in a range of settings and funded on an activity basis;

hospital services provided to eligible private patients in public hospitals;

hospital services provided to patients in public hospitals better funded through block grants, including relevant services in rural and regional communities;

teaching and training functions funded by States undertaken in public hospitals or other organisations (such as universities and training providers);

research funded by States undertaken in public hospitals; and

public health activities managed by States.

A2. From 1 July 2012, funding will be provided on the basis of activity through ABF wherever practicable.

A3. From 1 July 2014, the Commonwealth will fund 45 per cent of efficient growth of activity based services, increasing to 50 per cent from 1 July 2017. Efficient growth consists of:

the national efficient price for any changes in the volume of services provided (the role of the national efficient price and how it will be determined is set out in Schedule B); and

the growth in the national efficient price of providing the existing volume of services.

A4. Where services or functions are more appropriately funded through block grants and for teaching, training and research, the Commonwealth will fund 45 per cent of growth in the efficient cost of providing the services or performing the functions from 1 July 2014, increasing to 50 per cent from 1 July 2017. The efficient cost will be determined annually by the IHPA, taking account of changes in utilisation, the scope of services provided and the cost of those services to ensure the Local Hospital Network has the appropriate capacity to deliver the relevant block funded services and functions.

A5. The Commonwealth will provide at least $16.4 billion in additional funding through these revised funding arrangements between 2014-15 and 2019-20, compared with the funding that would have been provided through the former National Healthcare SPP.

A6. The Commonwealth will also continue to support private health services through the Medicare Benefits Schedule (MBS), the Pharmaceutical Benefits Scheme (PBS) and Private Health Insurance Rebate. Subject to any exceptions specifically made in this Agreement or through variation to this Agreement, the Commonwealth will not fund patient services through this Agreement if the same service, or any part of the same service, is funded through any of these benefit programs or any other Commonwealth program.

A7. The parties agree that the following Commonwealth benefits constitute exceptions to the principle outlined at clause A6:

MBS payments covered by a determination made by the Commonwealth Health Minister, or a delegate of the Minister, under s19(2) of the Health Insurance Act 1973;

MBS payments relating to services provided to eligible admitted private patients in public hospitals;

PBS benefits dispensed under Pharmaceutical Reform Arrangements agreed between the Commonwealth and the relevant State; and

the default bed day rate (or equivalent payment) supported through the private health insurance rebate.

A8. Commonwealth funding for public hospital services and functions under this Agreement is dependent on the provision of data requested by the National Bodies outlined in Schedule B, including in relation to services to patients, information identifying the patient to whom the services were provided, the public or private status of the patient, the nature of the service and the facility providing the service.

Hospital Services and Functions eligible for Commonwealth Funding on an Activity Basis or Block Funded Basis

Scope of ‘Public Hospital Services’

A9. States will provide health and emergency services through the public hospital system, based on the Medicare principles set out at clause 4 and interpreted consistently with this section (clauses A10-A26).

A10. Unless a State chooses to reach bilateral agreement with the Commonwealth under clauses A18 to A22 on this matter, the scope of public hospital services funded on an activity or block grant basis that are eligible for a Commonwealth funding contribution will include:

all admitted services, including hospital in the home programs;

all emergency department services provided by a recognised emergency department service; and

other outpatient, mental health, subacute services and other services that could reasonably be considered a public hospital service in accordance with clauses A11 to A17.

A11. States will provide the IHPA with recommendations for other services that could reasonably be considered to be a public hospital service and which are not captured by clause A10(a) and A10(b) that they consider should be eligible for a Commonwealth funding contribution.

A12. The IHPA will develop and publish criteria for assessing services for inclusion on a general list of hospital services eligible for Commonwealth growth funding. The IHPA will consider each State’s recommendations against the published criteria and establish a general list of other services eligible for a Commonwealth funding contribution.

A13. The Standing Council on Health may then:

until 30 June 2013, direct the IHPA with regard to specific inclusions or exclusions of services to or from the general list; and

request the IHPA to reconsider its determination of services included on or excluded from the general list. If the IHPA considers the service should continue to be included or excluded, it will publicly release its determination and the basis of that determination.

A14. The IHPA may update the criteria and will update the general list based on any updated criteria, or as required to reflect innovations in clinical pathways. States may request the IHPA to update the list or to assess specific services against the criteria for inclusion on the general list.

A15. In establishing the published criteria a primary consideration will be whether the service could reasonably be considered to be a public hospital service during 2010.

A16. Services named on the general list will attract a Commonwealth funding contribution if provided by any Local Hospital Network as agreed between the State and that Local Hospital Network.

A17. A service not already captured within the general list and which is not eligible for Commonwealth funding under clause A10 will be eligible for Commonwealth funding for a specific hospital if that service was purchased or provided by that hospital during 2010. States will provide the IHPA with a list of such services provided by each hospital during 2010. This may include services, if not captured by the general list, provided by hospitals in rural and remote areas, hospital avoidance programs, particular existing services provided by outpatient clinics, and existing outreach services such as renal dialysis, chemotherapy, palliative care, rehabilitation and mental health crisis intervention teams. The IHPA may request additional information to confirm the services were provided during 2010.

A18. A State Health Minister and Treasurer and the Commonwealth Health Minister and Treasurer may enter into a bilateral agreement to determine the scope of public hospital services funded on an activity or block grant basis that are eligible for a Commonwealth funding contribution.

A19. The scope of public hospital services under a bilateral agreement will include:

all admitted services, including hospital in the home programs;

all emergency department services provided by a recognised emergency department service;

all other services agreed between Ministers as being provided or purchased by a public hospital within the State during 2010; and

any other services, agreed between Ministers, provided or purchased by public hospitals in Australia.

A20. Unless otherwise agreed by Ministers, the bilateral agreement will include lists of services which will be funded by the Commonwealth if provided by individual hospitals, and lists of services which will be funded by the Commonwealth if provided at any hospital in the State, or by types of hospital in the State.

A21. If the State Ministers and the Commonwealth Ministers have not reached a bilateral agreement by 1 May 2012, the scope of public hospital services within the State which will be eligible for a Commonwealth funding contribution will be determined using the process in clauses A10 to A17.

A22. A bilateral agreement will be reviewed every two years to reflect changing patterns of service delivery, and may be varied at any other time by mutual consent.

A23. Public hospital services which attract a Commonwealth funding contribution will continue to be eligible for Commonwealth funding, even if they are subsequently provided outside a hospital in response to changes in clinical pathways.

A24. States agree they will not change the management, delivery and funding of health and related services for the dominant purpose of making that service eligible for Commonwealth funding.

A25. Should the IHPA identify anomalies in service volumes or other data which suggest that services have been transferred from the community to public hospitals, the IHPA will analyse those services. In performing the analysis the IHPA will consult with the relevant State, Medicare Local, and other stakeholders. Following an appropriate consultation period, the IHPA may determine that those particular services provided by that hospital have been transferred for the dominant purpose of making that service eligible for Commonwealth funding and those particular services provided by that hospital will be no longer be eligible for Commonwealth funding.

A26. The Commonwealth agrees that it will not change the management, delivery and funding of health and related services for the dominant purpose of directing services from the community into the hospital setting.

Block Funding

A27. From 2013-14, the process for determining the discrete amounts for block funding is set out below:

the IHPA, in consultation with jurisdictions, develops Block Funding Criteria and identifies whether hospital services and functions are eligible for block funding only or mixed ABF and block funding;

States, during the consultation period, assess their hospital functions and services against the Block Funding Criteria and, if necessary, provide advice to the IHPA on the potential impact of the criteria;

the IHPA provides the Block Funding Criteria to COAG for endorsement; and

COAG considers the Block Funding Criteria proposed by the IHPA and either:
1. endorses the recommendation; or
2. requests the IHPA to refine the Block Funding Criteria and bring it back to COAG.

A28. States provide advice to the IHPA on how their hospital services and functions meet the Block Funding Criteria on an annual basis. For small rural and small regional hospitals, this advice can be provided once every six years, or more frequently at the discretion of the State.

A29. On the basis of this advice, the IHPA will determine which hospital services and functions are eligible for Commonwealth funding on a block grant basis.

A30. Using the IHPA’s determination the Administrator of the National Health Funding Pool (the Administrator) will then calculate the Commonwealth’s funding contribution for block funded services and functions.

A31. In 2015-16 and every three years thereafter, COAG will reconsider those aspects of the IHPA’s Block Funding Criteria that require revision and reapply the process detailed in clause A27.

Transition from the National Healthcare SPP (2012-13 and 2013-14)

A32. For 2012-13, the Commonwealth will provide funding equivalent to the amount that would otherwise have been payable through the National Healthcare SPP. This amount will be divided into the following funding streams:

an amount for public health activities calculated as the sum of amounts identified under the NHA relating to national public health, youth health services and essential vaccines (service delivery) in 2008-09 ($244.0 million), indexed by the former National Healthcare SPP growth factor;

a proportion of the total amount for hospital services to patients in public hospitals better funded through block grants and in respect of teaching, training and research functions funded by States undertaken in public hospitals, with the distribution of funds between these block funded elements based on State advice;

the proportion will be agreed between the Commonwealth Health Minister and each State Health Minister by 31 December 2011, to ensure that where it is possible to do so Commonwealth funding is provided on an ABF basis, taking into account the overall policy objective of funding on an activity basis wherever practicable;

the residual amount will be divided between the following interim ABF service categories based on State advice:
1. acute admitted public patients;
2. eligible private patients;
3. emergency department services; and
4. eligible non-admitted patient services.

A33. For 2013-14, the Commonwealth will provide funding equivalent to the amount that would otherwise have been payable through the National Healthcare SPP. This amount will be divided into the following funding streams:

the amount for public health activities in 2012-13 indexed by the former National Healthcare SPP growth factor;

discrete amounts, calculated by the Administrator based on the IHPA’s determination at clause A27, as agreed by COAG for:

block funded public hospital services provided at each relevant Local Hospital Network;

teaching and training functions performed at each relevant Local Hospital Network or other organisations (such as universities and training providers); and

research functions performed at each relevant Local Hospital Network;

the residual amount will be divided between the following ABF service categories based on advice from the IHPA:

acute admitted public patients;

eligible private patients;

emergency department services;

mental health services (not already captured by clause A33(c)(i));

eligible non-admitted patient services; and

sub-acute admitted public patients.
1. The amounts referred to in clause A33(c) will be divided by the volume of weighted services for the relevant ABF service categories specified in the Service Agreements within each State multiplied by the national efficient price to derive the provisional Commonwealth percentage funding contribution rate for each ABF service category in 2013-14. The final Commonwealth percentage funding contribution rate will be recalculated once actual service volumes are known.

Payments for Services Funded on an Activity Basis

A34. In 2014-15, 2015-16 and 2016-17, the Commonwealth’s funding for each ABF service category will be calculated individually for each State by summing:

previous year amount: the Commonwealth’s percentage funding rate for the relevant State in the previous year multiplied by the volume of weighted services provided in the previous year multiplied by the national efficient price in the previous year;

price adjustment: the volume of weighted services provided in the previous year multiplied by the change in the national efficient price relative to the previous year multiplied by 45 per cent; and

volume adjustment: the net change in volume of weighted services to be provided in the relevant State (relative to the volume of weighted services provided in the previous year) multiplied by the national efficient price multiplied by 45 per cent.

A35. The Commonwealth percentage funding rate for each ABF service category in each State will be calculated by dividing the sum of clause A34 by the relevant year’s total volume of weighted services multiplied by the national efficient price.

A36. The Administrator will provide the Commonwealth and States with a formal forecast of the Commonwealth’s funding contribution for each ABF service category before the start of each financial year. The formal forecast will be provided within 14 calendar days of receipt of both:

service volume information for all Local Hospital Networks within a State, as provided in Service Agreements; and

the forecast national efficient price from the IHPA.

A37. The Administrator will also provide informal estimates of the Commonwealth’s funding contribution to States where requested, should a State provide estimated service volume information for all Local Hospital Networks within that State.

A38. For 2017-18 and later years, the Commonwealth’s funding for each ABF service category will be calculated as per clause A34 but replacing the 45 per cent rate specified in clauses A34(b) and A34(c) with 50 per cent.

A39. The methodologies set out in clauses A34, A35 and A38 relate to the calculation of preliminary payment entitlements. Final payment entitlements will be made after the reconciliation adjustments specified in clause B59-61 have been completed.

A40. If the IHPA makes any significant changes to the ABF classification systems or costing methodologies, the effect of such changes must be back-cast to the year prior to their implementation for the purpose of the calculations set out in clauses A34, A35 and A38. The IHPA will consider transitional arrangements when developing new ABF classification systems or costing methodologies.

A41. ABF payments for eligible private patients must utilise the same ABF classification system as for public patients with the cost weights for private patients being calculated by excluding or reducing, as appropriate, the components of the service for that patient which are covered by:

Commonwealth funding sources other than ABF;

patient charges including:
1. prostheses; and
2. accommodation and nursing related components/charge equivalent to the private health insurance default bed day rate (or other equivalent payment).

A42. ABF will be implemented through a phased approach:

the implementation of nationally consistent ABF approaches for acute admitted services, emergency department services and non-admitted patient services (initially using the Tier 2 outpatient clinics list) will commence on 1 July 2012; and

the implementation of nationally consistent ABF approaches for any remaining non-admitted services, mental health and sub-acute services will commence on 1 July 2013.

Public Health Activities

A43. Payments for public health activities for 2014-15 will be equal to the previous year’s payment indexed by the former National Healthcare SPP growth factor.

A44. Unless otherwise agreed, beyond 2014-15 the Commonwealth’s commitment to public health will continue to grow by the former National Healthcare SPP growth factor.

A45. States will have full discretion over the application of public health funding to the outcomes set out in the NHA.

A46. The mechanism for delivering Commonwealth funding for public health activities to States in 2015-16 and future years will be re-considered by the Commonwealth and States in the context of a review of the National Partnership Agreement on Preventive Health, which expires in 2014-15.

Teaching, Training and Research

A47. Payments for 2014-15, 2015-16 and 2016-17 will consist of the previous year’s payment plus 45 per cent of the growth in the efficient cost of providing the relevant function calculated in accordance with clause A4.

A48. Payments for 2017-18 and later years will consist of the previous year’s payment plus 50 per cent of the growth in the efficient cost of providing the relevant function, calculated in accordance with clause A4.

A49. The IHPA will provide advice to the Standing Council on Health on the feasibility of transitioning funding for teaching, training and research to ABF or other appropriate arrangements reflecting the volumes of activities carried out under these functions by no later than 30 June 2018.

Block Funded Services

A50. Payments for 2014-15, 2015-16 and 2016-17 will consist of the previous year’s payment plus 45 per cent of the growth in the efficient cost of providing the services, adjusted for the addition or removal of block services as provided in clauses A27-A30 (calculated in accordance with clause A4).

A51. Payments for 2017-18 and later years will consist of the previous year’s payment plus 50 per cent of the growth in the efficient cost of providing the services, adjusted for the addition or removal of block services as provided in clauses A27-A30 (calculated in accordance with clause A4).

Private or Not-For Profit Provision of Public Hospital Services

A52. Where a State contracts with a private or not-for-profit provider to operate a public hospital, that hospital will be treated as a public hospital for the purposes of this Agreement, and may be, or form part of, a Local Hospital Network in accordance with clause D23(c). This arrangement will apply to existing contracts and contracts entered into after the Agreement commences.

A53. Hospitals owned by charitable organisations which are recognised as public hospitals, whether by legislation or by other arrangements, will be treated as a public hospital for the purposes of this Agreement, and may be, or form part of, a Local Hospital Network in accordance with clause D23(c).

A54. Other public hospital services provided by the private or not-for-profit sector can be contracted for in the following ways:

the State contracts centrally and establishes a notional ‘contracted services Local Hospital Network’ which is not required to meet the governance arrangements set out in clauses D11 to D21. All other clauses will apply to this Local Hospital Network; or

Local Hospital Networks may enter into individual contracts with the private or not-for-profit sectors.

A55. For any notional contracted services Local Hospital Network, the State will provide information on forecast and actual contracted activity to the Administrator, and this will include the same type, level and specificity of data on the contracted activity as required of other Local Hospital Networks under this Agreement.

A56. The Commonwealth will provide funding in respect of the contracted activity through the National Health Funding Pool to the State. IHPA determined loadings will apply in respect of patient characteristics, and service location.

A57. Public hospital services provided under contract by the State with the private sector or not-for-profit sector will be treated as being provided by public hospitals and will be treated consistently with the approach in clauses A10 to A17 to determine eligibility for a Commonwealth funding contribution.

Veteran Entitlements

A58. Arrangements for funding and provision of health care for entitled veterans are the subject of a separate Commonwealth-State agreement. Nothing in any separate agreement will interfere with the rights of entitled veterans to access public hospital services as public patients.

Determining the State Funding Contribution

A59. The State contribution to the funding of public hospital services and functions will be calculated on an activity basis or provided as block funding in accordance with the process outlined above in the eligibility clauses A10-A17.

A60. States will determine the amount they pay for public hospital services and functions and the mix of those services and functions, and will meet the balance of the cost of delivering public hospital services and functions over and above the Commonwealth contribution.

A61. Variations in the State funding contribution in respect of individual Local Hospital Networks for services and functions funded under this Agreement may be required to enable States to play their role of system managers of the public hospital system. States may use their own proportion of public hospital funding, or Commonwealth block funding paid to the States (other than funding for teaching, training or research), to retain some funding from Local Hospital Networks and use it to adjust service levels across the State, and to respond to unforeseen events and other contingencies as set out at clause B55.

A62. This Agreement does not preclude exploration and trial of new and innovative approaches to public hospital funding on a limited basis, to improve efficiency and health outcomes. Under the exploration and trial, a State would need to notify the Commonwealth in advance and continue to acquit and report Commonwealth funding on an ABF or a block funded basis as appropriate, as provided for in this Agreement. The outcomes would be provided to IHPA and discussed between the Standing Council on Health.

A63. State funding paid on an activity basis to Local Hospital Networks will be based for each service category on:

the price set by that State (which will be reported in Service Agreements); and

the volume of weighted services as set out in Service Agreements.

A64. It is expected that these arrangements will create incentives for Local Hospital Network efficiency. If a Local Hospital Network is able to operate more efficiently than the level of funding set by the State under the Local Hospital Network Service Agreement, the Local Hospital Network will be able to retain and reinvest the benefits accruing from efficiency in service delivery and in accordance with State policy and practice, as guided by the Service Agreement.

A65. There will be no requirement for Local Hospital Networks to be paid the full national efficient price if the State considers that a lower payment is appropriate, having regard to the actual cost of service delivery and the Local Hospital Network’s capacity to generate revenue from other sources.

A66. To improve transparency and national comparability, States will provide to the Administrator and the IHPA:

the price per weighted service they determine;

the volume of weighted services as set out by the national ABF classification scheme; and

any variations to service loadings from the national ABF classification schemes.

Funding Guarantee

A67. No State will be worse off in the short or long term, as set out in clause 15.

A68. Consistent with this guarantee, if a State’s funding entitlement calculated in accordance with clauses A1-A57 for a particular year is less than the amount of funding the State would have received under the former National Healthcare SPP for that year, the Commonwealth will provide top-up funding to ensure that the State receives at least the amount of the funding it would have received under the former National SPP.

A69. The Commonwealth also guarantees that its increased contribution to efficient growth funding (defined as the amount paid in excess of what the States in aggregate would have received under the former National Healthcare SPP) will be no less than $16.4 billion between 2014-15 and 2019-20.

A70. The Commonwealth will provide top-up funding to meet any shortfall against the $16.4 billion guarantee.

A71. The States may use top-up funding for any health service that will assist in ameliorating the growth in demand for hospital services, including chronic disease management programs; preventive health programs; mental health programs; hospital admission avoidance programs; hospital early discharge programs; or other health services as jointly agreed by the Commonwealth and the relevant State.

Calculation of the Funding Guarantee

A72. A proportion of the $16.4 billion guarantee will be guaranteed on a state-specific basis as outlined in the following table:

	2014-15	2015-16	2016-17	2017-18	2018-19	2019-20
State specific guarantee amounts ($m)	575	1,225	1,500	2,000	2,000	2,200
Projected annual growth funding amounts ($m)	574	1,231	1,983	3,012	4,161	5,433
Percentage of projected growth funding amounts guaranteed	100%	100%	76%	66%	48%	40%

A73. The state-specific guaranteed amount will be allocated among the States on an equal per capita (EPC) basis to provide each State with a specific guarantee (in addition to the amount it would have received under the National Healthcare SPP).

A74. Any top-up funding required under the state-specific guaranteed amount will be paid annually, but retrospectively, after reconciliation to actual activity levels for the relevant year and will be required to be used for the purposes specified in clause A71.

A75. By July 2017, Heads of Treasuries will review the need for further top-up funding against the national $16.4 billion guarantee. Where Heads of Treasuries agree that top-up funding is likely to be required in order to meet the $16.4 billion guarantee, it will recommend instalments to be advanced in addition to any top-up funding paid under the state-specific guarantees.

A76. Heads of Treasuries will then consider the need for continued instalments of top-up funding against the national guarantee on an annual basis each year until the end of the guarantee period.

A77. Top-up funding under the national guarantee will be distributed amongst the States on an EPC basis. Any over-payments of instalments advanced against the national guarantee will be repaid to the Commonwealth once final growth funding entitlements are determined after the end of 2019-20, or earlier if mutually agreed between the relevant parties.

A78. Any top-up funding provided under the state-specific guaranteed amounts will count toward the $16.4 billion national guarantee.

A79. If a State plans for activity lower than the state-specific guarantee and invests potential gap payments elsewhere, the State accepts the risk of additional activity up to the level of the state-specific guarantee. Activity above the state-specific guarantee is funded by the Commonwealth according to the principles of efficient growth funding.

Maintenance of Effort

A80. The maintenance of effort mechanisms for State expenditure will operate as follows:

the benchmarks for assessing maintenance of effort will:
1. for 2011-12 and 2012-13, be based on previously budgeted forward estimates of State recurrent health expenditure in place prior to the National Health and Hospitals Network Agreement; and
2. for 2013-14, grow by at least 5.25 per cent in 2013-14 relative to the outcome in 2012-13 for recurrent expenditure.
States will provide to Heads of Treasuries:
1. data in respect of the benchmarks in clause A80(a)(i); and
2. within four months of the end of the financial year, report on expenditure undertaken in the financial year against these benchmarks and provide an explanation for any failure to achieve the benchmarks;
Heads of Treasuries will assess the information provided by the States and provide a report for consideration by the Standing Council on Federal Financial Relations (SCFFR); and

the SCFFR will provide advice to the Commonwealth on:
1. whether an adjustment should be made to the baseline against which future growth funding entitlements will be calculated, having regard to any explanation for failure to achieve the benchmarks; and
2. a decision by a jurisdiction to constrain general growth in government expenditure would be an acceptable reason for failure to achieve the benchmarks, provided that the slowing in expenditure growth is not specific to the health system and that any slower growth in health expenditure is sustained beyond the end of the transition period.

A81. Heads of Treasuries will also consider and report to the SCFFR on the extent to which the Commonwealth has maintained its overall level of health expenditure over the same period (2011-12 to 2013-14).

Treatment of National Partnership Funding for Calculation of Growth

A82. The review of the National Partnership Agreement on Improving Public Hospital Services will be completed with decision by COAG by December 2013. This timing reflects the need for certainty of arrangements for the States given the current expiry of funding by the end of 2013-14.

A83. COAG, through the Heads of Treasuries, has agreed a process for the consideration of National Partnerships, and this will frame the review of the National Partnership Agreement on Improving Public Hospital Services.

A84. Key features of the review process include:

State Treasurers being able to advise the Commonwealth Treasurer of their views in terms of whether funding should continue, for consideration in the Commonwealth Budget process;

the SCFFR being able to make recommendations to COAG, which may include recommendations on the form and scope of proposed ongoing funding, including assessing whether the National Partnership Agreement on Improving Public Hospital Services should be incorporated into the growth funding base, continued or terminated;
1. The SCFFR does not itself have the authority to make funding decisions and the recommendations made by the SCFFR to COAG must be supported by funding decisions made as part of the Commonwealth Budget process.

A85. Criteria considered in framing recommendations will draw on those agreed by COAG, including:

the success of the National Partnership Agreement on Improving Public Hospital Services in achieving its objectives, outcomes and outputs and consideration as to whether ongoing funding is required to maintain the outcomes;

whether funding, objectives or outcomes are ‘ongoing’ in nature because they support longstanding services or because the National Partnership Agreement on Improving Public Hospital Services has been used to lift standards that the Commonwealth and States agree should be maintained; and

in considering the merits of rolling the National Partnership Agreement on Improving Public Hospital Services into the funding base, whether the expiring Agreement falls within the policy objectives of the NHA.

A86. In considering such issues, the review will identify:

the impact on the level of activity (including but not limited to beds, services, and staffing) which may have arisen from the funding;

the projected impact on the health system and patient care of any discontinuation of funding; and

the baseline activity levels against which future service growth should be measured for the purpose of calculating Commonwealth growth funding, should the National Partnership funding be discontinued.

A87. Where the review identifies evidence of increased activity levels attributable to the National Partnership Agreement on Improving Public Hospital Services under clauses A86(a) and A86(b), the Commonwealth agrees in principle to making an appropriate baseline adjustment to reflect the share of the ongoing cost of those additional services. The baseline adjustment will have regard to the actual volume of additional services provided in the relevant State, and the level of Commonwealth operational funding for services provided in the original National Partnership Agreement on Improving Public Hospital Services.

Cross-border Arrangements

A88. The treatment of cross-border hospital activities will be governed by the following principles:

the State where a patient would normally reside should meet the cost of services (exclusive of the Commonwealth contribution discussed below) where its resident receives hospital treatment in another jurisdiction;

payment flows (both Commonwealth and State) associated with cross-border services should be administratively simple, and where possible consistent with the broader arrangements of this Agreement;

the cross-border payment arrangements should not result in any adverse GST distribution effects;

States recognise their commitment under the Medicare principles which require medical treatment to be prioritised on the basis of clinical need;

both States should have the opportunity to engage in the setting of cross-border activity estimates and variations, in the context that this would not involve shifting of risk; and

there should be transparency of cross-border flows.

Funding Flows

A89. Commonwealth funding contributions will flow to the provider jurisdiction through the National Health Funding Pool. Steps will be taken to prevent Commonwealth payments made in accordance with these arrangements being subject to equalisation by the Commonwealth Grants Commission to avoid financially disadvantaging one State.

A90. Funding contributions by the resident State will be made to the provider State through the National Health Funding Pool, either:

on a regular basis throughout the year, reflecting activity estimates between the parties as scheduled through a Cross-border Agreement with subsequent reconciliation for activity; or

on an ad-hoc basis reflecting actual activity.

Agreement around Activity

A91. Cross-border Agreements will be developed between jurisdictions which experience significant cross-border flows, where one of the parties requests a Cross-border Agreement be in place.

A92. Cross-border Agreements will set out estimated activity levels providing the capacity for both parties to contribute to planning of cross-border activity.

A93. Cross-border Agreement disputes will be dealt with as part of the IHPA dispute resolution process.

Pricing

A94. Prices will be set at the national efficient price, as determined by the IHPA including adjustments for any loadings for the provider Local Hospital Network, unless otherwise agreed by the parties to the Cross-border Agreement.

A95. Capital will not be explicitly priced by the IHPA, however cross-border dispute resolution can include disputes in relation to the resident State’s contribution to capital funding.

A96. The Commonwealth and States agree that they will accept and implement any recommendations made by the IHPA in relation to cross-border disputes under clause B3(k), and will provide additional funding to the other party in a dispute if this is required.

A97. If, three months after the IHPA has made a recommendation under clause B3(k), a State has not complied with any element of the recommendation requiring it to make payments toanother State, the IHPA may at the request of the second State, advise the Commonwealth Treasurer of any adjustments to Commonwealth payments to the National Health Funding Pool required to give effect to the recommendation. States agree to fund from their own resources any reduction in Commonwealth payments to Local Hospital Networks.

Nationally Funded Centres

A98. These arrangements may have an impact on nationally funded centres. This will be considered further by the Standing Council on Health.

Cost-shifting

A99. Jurisdictions may make submissions to the IHPA requesting it advise whether a party to this Agreement has shifted costs onto another jurisdiction in a manner which is contrary to the intent of this Agreement.

A100. The IHPA will provide the other party a copy of the submission and request a responding submission to be provided within 60 days. The IHPA will provide this response to the initiating jurisdiction.

A101. The IHPA will then assess the submissions, consult further with affected jurisdictions and publicly release its assessment should it consider that cost-shifting has occurred.

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