New South Wales report, January 2017

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In this report

This report includes the following tables:

This report is issued by the Administrator of the National Health Funding Pool under section 240 of the National Health Reform Act 2011.

This report is prepared on a cash basis. It shows monthly and year-to-date (YTD) National Health Reform (NHR) funding and payments for New South Wales for January 2017 as part of the National Health Reform Agreement.

Local hospital networks and National Health Reform

A local hospital network (LHN) is an organisation that provides public hospital services in accordance with the Agreement. An LHN can contain one or more hospitals, and is usually defined as a business group, geographical area or community. Every Australian public hospital is part of an LHN.

Note: The term ‘local hospital network’ is a national term. Some states and territories use their own terminology to describe these networks, such as local health districts, health organisations, and hospital and health services.

Under the Agreement, LHNs receive funding for the following public hospital services:

  • All admitted and non-admitted services
  • All emergency department services provided by a recognised emergency department
  • Other outpatient, mental health, sub-acute services and other services that could reasonably be considered a public hospital service.

Note: LHNs also receive funding from other sources, including the Commonwealth, states and territories, and third parties for the provision of other specific functions and services outside the scope of the Agreement, for example dental services, primary care, home and community care, residential aged care and pharmaceuticals. For further information on total funding to a particular LHN, contact the NSW Ministry of Health to view the service agreement for that LHN.

Basis for National Health Reform payments – New South Wales, January 2017

For the basis of the Commonwealth contribution to NHR funding, see Basis of Commonwealth NHR funding, 2016-17.

The basis for NHR payments to local hospital networks (LHNs) in New South Wales was advised by the NSW Ministry of Health to be as follows:

Basis used to determine NHR payments to Local Health Networks (LHNs) – New South Wales

The process for determining 2016/17 NHR payments to LHNs encompassed three distinct elements of preparation for the individual LHN Service Agreements, including development of annual activity estimates, discussion/negotiation of activity levels with individual LHNs, and total state-wide activity across each activity type.

Consistent with last year’s methodology and pursuant with the National Health Reform Agreement (NHRA), the Ministry of Health has adopted the National Weighted Activity Unit (NWAU) as the currency for Activity Based Funding with the applicable version being NWAU16, which is different from the previous year.

The Independent Hospital Pricing Authority (IHPA) has issued the National Efficient Cost (NEC16) funding model that applies to small regional and remote hospitals. NSW has adopted the mechanics of this funding model expressed in the NEC16 matrix to determine the aggregate funding allocation to LHNs for these small hospitals within the NSW funding model parameters.

Ensuring access to health services for local populations is a key objective of NSW health policy. The Health Services Act 1997 stipulates that in determining LHN budgets, the Minister have regard to the size and health needs of the local population and provision of services to residents outside the local area. Accordingly, targets are adjusted considering factors appropriate to each LHN and service type, rather than simple extrapolation from historical activity data. The factors considered are reviewed on an annual basis.

In 2016/17, a series of elements will be applied to each in-scope service stream to ensure that activity targets are tailored to the requirements and patterns of each LHD/SHN. Activity targets are developed by the Ministry and LHDs/SHNs based on analysis of activity level drivers. This analysis was informed for 2016/17 by the following factors:

  • Weighted population change: providing an indication of expected 'natural' growth
  • Recent trends in activity growth for each LHD/SH
  • Rate of unplanned re-admissions within 28 days
  • Potentially preventable hospitalisations (PPH)
  • Relative Utilisation Rate adjusted for relevant demographic factors
  • Service quality and appropriateness performance in selected key area
  • Inter-district and cross-border flows (where relevant)
  • Current year activity relative to targets (for adjustment of baseline volumes, where relevant)
  • Known service changes and developments, including planned capacity increases.

Price weight adjustments which are being applied in 2016/17 include:

  • Paediatric Adjustment;
  • Specialist Psychiatric Age Adjustment;
  • Patient Remoteness Area Adjustment;
  • Indigenous Adjustment;
  • Radiotherapy Adjustment;
  • Dialysis Adjustment;
  • Intensive Care Unit (ICU) Adjustment for eligible facilities;
  • Private Patient Service Adjustment;
  • Private Patient Accommodation Adjustment;
  • Multidisciplinary Clinic Adjustment;
  • Emergency Care Age Adjustment.

Provisional activity estimates are created at a LHD level to provide the basis for discussion and negotiation with individual health services to determine agreed LHD level activity targets, with the activity volumes measured using the NWAU for each Service Category. Additionally, where applicable, activity estimation is split by financial class to allow differential funding mechanisms to be applied to the respective service groups to reflect the variation in funding source.

Provisional estimates and historical activity measures provide the basis for discussions with individual LHDs and subsequent negotiations for approval or adjustment.

The negotiation process allows for relevant local LHN service issues and activity impacts to be communicated with the NSW Ministry of Health (Ministry) to assess the potential impact on future year activity volumes and the relevance of related service strategies to address these. It is important that negotiation processes recognise that funding and purchasing are undertaken in the environment of a capped State / Commonwealth funding pool for 2016/17 and recognition that NSW contributes the larger portion of these funds as well as being responsible for management of the system as a whole. When negotiations have concluded, the Ministry incorporates the final activity targets in each LHN’s annual Service Agreement. Where an LHN achieves delivery of selected services through Affiliated Health Organisations or contracted services with a private provider these arrangements are to be specified in agreements between the LHN and the respective provider. Both the funding (and subsidy) and associated activity pertaining to such providers are included in the budget and the activity estimates appearing in the LHN’s annual Service Agreement.

Cash payments processed within the National Health Funding Pool (NHFP) Payments System and included within the Administrator’s monthly reports are based on the accrued budget for both ABF and in-scope block funding derived from the LHN Service Agreements after deducting an allowance to recognise own sourced revenue earned, and retained by the LHNs and liabilities for superannuation and long service leave which are accepted by the Crown.

The resultant cash value is processed through the state pool account (ABF) or the state managed fund (in-scope block). Although a consistent methodology has been applied, variations in cash prices between LHNs reflect the differing mix of the above components (own sourced revenue and Crown accepted liabilities) of each local hospital network’s accrued cost.

In addition to receiving weekly cash payments from the state pool account and the state managed fund, LHNs also receive direct State Government funding for 2016/17 for all “out of scope” services not subject to the National Health Reform Agreement arrangements as required under their 2016/17 Service Agreements.

Monthly reports– Basis on which payments were made

For NSW, all dollar values included in the tables issued by the Administrator are cash payments from either the NSW state pool account to LHNs and or cash payments from the state managed fund to LHNs. This includes cash payment to the Victorian Department of Health for Albury-Wodonga inter-jurisdictional agreement.

The weekly cash payment to an LHN reflects the estimated cost of patient related services anticipated to be delivered during the monthly cash payment period. The estimated monthly activity and the weekly cash payments are determined based on the annual LHN Service Agreements.

Cash payments from the NSW state pool account and from the state managed fund to LHNs are processed each Tuesday. Reporting by the Administrator is based on cash payments made during a given month and is therefore dependent on the number of Tuesdays in a particular month. During 2016/17, August 2016, November 2016, January 2017 and May 2017 each have five Tuesdays. If accrual accounting principles were being applied within the NHFA Payments System, the value of the reported cash payments would recognise only the number of calendar days in a particular month, not the 35 days (five weeks paid) or 28 days (four weeks paid), as reported by the Administrator.

In 2016/17 cash payments to LHNs from the NSW state pool account are generally calculated based on equal weekly instalments to health services unless otherwise negotiated.

State Managed Fund cash payments occur as cash is required and dependent on the LHD bank balance in accordance with NSW Treasury Circular TC15-01 Cash Management – expanding the Scope of the Treasury Banking System. As a result not all of the Commonwealth funding was paid to LHNs. The residual of $6.2M Commonwealth will be paid in August 2016.

Other payments will occur in 2016/17 that are outside the regular weekly (Tuesday) payment cycle for payments to other States/Territories for NSW residents treated in their public hospitals. Payments to LHNs may also vary where their cash entitlement alters during the financial year.

Monthly comparison of cash payments from the NSW state pool and state managed fund can vary month to month predominately due to these planned payments and cash requirements of an LHN.

The cash payments from the NSW state pool account or state managed fund do not reflect the full budgeted funding available to health services in NSW. Other sources of funds available to LHNs include separate payments from the Crown (for example, defined superannuation scheme and long service leave cash recovery) as well as own sourced revenues earned and retained by each LHN.

In the months of August 2016 to October 2016 NSW continued to pay its estimated cashflowed amount into the NHFP despite the increase in the Commonwealth contribution for those months. This resulted in an accumulated amount of $69M for the State contribution that was remaining in the account as at 31 October 2016. $30M of the accumulated State deposit was subsequently paid out to LHN’s in the first week of November 2016 and a further $13.7M was paid out in the last week of November 2016. A further additional state deposit was made in December of $13.7M and as at 31 December 2016 there is a residual of $39M which will be paid from the account during the year in accordance with NSW cashflow. There will be a zero balance of State contributions as at 30 June 2017.

For more information on budget allocations, see the 2016/17 LHN Service Agreements which are available on each NSW LHN website as the Chief Executive and Board of the LHN’s provide sign off.

Reference information

The financial information outlined in the following report is categorised as:

  • NHR funding – when the Commonwealth or state or territory government pays NHR funding into a state pool account or state managed fund.
  • NHR payments – when NHR funding that has been deposited into a state pool account or state managed fund is paid out of the state pool account by the Administrator, or is paid out of the state managed fund by the state or territory.

State pool account transactions

Table 1a – State pool account transactions – New South Wales, January 2017

This table shows funding paid into the New South Wales state pool account by the Commonwealth, New South Wales or other states/territories, and payments out of the state pool account to LHNs, the state managed fund, the NSW Ministry of Health or the state pool accounts of other states/territories for January 2017.

NHR funding by source Paid into state pool account Paid out of state pool account
To Local hospital networks To State
Managed Fund
To state
health department
To state pool (other State) Total paid out
($) ($) ($) ($) ($) ($)
Commonwealth
ABF funding
408,223,617 408,223,617 408,223,617
Commonwealth
Block funding
54,993,779 54,993,779 54,993,779
Commonwealth
Other funding
9,920,382 9,920,382 9,920,382
Total C'wealth
funding
473,137,779 408,223,617 54,993,779 9,920,382 473,137,779
NSW
funding
687,639,887 679,645,231 194,656 7,800,000 687,639,887
Other state/territory funding 1,600,000 0 1,600,000 1,600,000
Total 1,162,377,666 1,087,868,848 54,993,779 11,715,038 7,800,000 1,162,377,666

See definitions and explanatory notes following table 1b.

Table 1b – State pool account transactions YTD – New South Wales, January 2017

Following on from table 1a, this table shows year-to-date (YTD) funding paid into the New South Wales state pool account by the Commonwealth, New South Wales or other states/territories, and payments out of the state pool account to LHNs, the state managed fund, the NSW Ministry of Health or the state pool accounts of other states/territories as at January 2017.

NHR funding by source Paid into state
pool account
Paid out of state pool account
To Local hospital
networks
YTD
To State
Managed Fund
YTD
To state health
department
YTD
To state pool (other State)
YTD
Total paid out
YTD
($) ($) ($) ($) ($) ($)
Commonwealth
ABF funding
2,896,957,906 2,896,957,906 2,896,957,906
Commonwealth
Block funding
384,956,456 384,956,456 384,956,456
Commonwealth
Other funding
69,442,674 69,442,674 69,442,674
Total C'wealth
funding
3,351,357,036 2,896,957,906 384,956,456 69,442,674 3,351,357,036
NSW
funding
3,582,361,294 3,487,656,782 1,104,512 54,600,000 3,543,361,294
Other state/territory funding 11,200,000 0 11,200,000 11,200,000
Total 6,944,918,330 6,384,614,688 384,956,456 81,747,186 54,600,000 6,905,918,330

Commonwealth ABF funding represents Acute admitted, Non-admitted, Emergency department, Sub-acute, and Admitted mental health service categories, which are funded by the Commonwealth through the state pool account and subsequently paid to LHNs.

Commonwealth Block funding represents Non-admitted mental health, Small rural hospitals, Teaching, training & research, and Other non-admitted categories, which are funded by the Commonwealth and paid to the state managed fund.

Commonwealth Other funding represents other amounts funded by the Commonwealth, transacted through the state pool account and subsequently paid to state or territory health departments. This currently represents the Commonwealth contribution to public health.

NSW funding represents funding contributions paid by New South Wales into its own state pool account, and subsequently paid to LHNs within the state, to the New South Wales health department and/or to other state pool accounts.

Other state/territory funding represents contributions paid to New South Wales by other states and territories for cross-border activity.

Note: The grey shaded areas in these tables reflect cells that are not applicable for a particular 'paid out' column. For example, Commonwealth block funding is only paid to state managed funds and not to local hospital networks or state or territory health departments.

NHR funding and payments shown in these tables include GST where applicable.

For more information, see National Health Reform funding and payments.

State managed fund transactions

Table 2a – State managed fund transactions – New South Wales, January 2017

This table shows funding paid into the New South Wales state managed fund by the Commonwealth and New South Wales, and payments out of the state managed fund to LHNs and other provider organisations for January 2017.

NHR funding by source Paid into state managed fund Paid out of state managed fund
To local hospital networks To Other Total paid out
($) ($) ($) ($)
Commonwealth Block funding 54,993,779 54,993,779
State/territory Block funding 105,854,228 105,854,228
Total 160,848,007 160,848,007 0 160,848,007

See explanatory notes following table 2b.

Table 2b – State managed fund transactions YTD – New South Wales, January 2017

Following on from table 2a, this table shows year-to-date (YTD) funding paid into the New South Wales state managed fund by the Commonwealth and New South Wales, and YTD payments out of the state managed fund to LHNs and other provider organisations as at January 2017.

NHR funding by source Paid into state
managed fund
YTD
Paid out of state managed fund YTD
To local hospital
networks
YTD
To Other
YTD
Total paid out
YTD
($) ($) ($) ($)
Commonwealth Block funding 384,956,456 384,956,456
State/territory Block funding 543,933,922 543,933,922
Total 928,890,378 928,890,378 0 928,890,378

Block funding represents Non-admitted mental health, Small rural hospitals, Teaching, training & research, and Other non-admitted categories.

Commonwealth Block funding represents Commonwealth block funding contributions paid into the state managed fund from the state pool account, and block payments out of the state managed fund to LHNs and other provider organisations.

State/territory Block funding represents New South Wales block funding contributions into the state managed fund, and block payments out of the state managed fund to LHNs and other provider organisations.

Note: The grey shaded areas in these tables reflect that these block payments cannot at this stage be identified by source of funding (state, territory or Commonwealth contribution).

NHR funding and payments shown in these tables include GST where applicable.

For more, see National Health Reform funding and payments.

NHR funding and payments by service category

Table 3 – NHR funding and payments by service category – New South Wales, January 2017

This table shows NHR funding and payments by service category on both a monthly and year-to-date (YTD) basis for New South Wales for January 2017. NHR funding and payments are separated into the following service categories – activity-based funding (ABF), block funding, and other funding.

Service category NHR
funding
NHR
payments
NHR
funding YTD
NHR
payments YTD
($) ($) ($) ($)
ABF
Acute admitted 634,207,711 634,207,711 3,722,264,517 3,722,264,517
Admitted mental health 58,659,976 58,659,976 344,767,188 344,767,188
Sub-acute 73,089,001 73,089,001 429,169,680 429,169,680
Emergency department 131,569,636 131,569,636 771,189,365 771,189,365
Non-admitted 190,342,524 190,342,524 1,117,223,938 1,117,223,938
Total ABF (Pool) 1,087,868,848 1,087,868,848 6,384,614,688 6,384,614,688
Block
Small rural hospitals 78,115,375 78,115,375 495,913,019 495,913,019
Teaching, training & research 41,619,207 41,619,207 208,845,804 208,845,804
Non-admitted mental health 41,113,425 41,113,425 224,131,555 224,131,555
Other non-admitted services 0 0 0 0
Total Block (SMF) 160,848,007 160,848,007 928,890,378 928,890,378
Other
Public health funding 9,920,382 9,920,382 69,442,674 69,442,674
Overdeposit 0 0 0 0
Cross-border 9,400,000 9,400,000 65,800,000 65,800,000
Interest 194,656 194,656 1,104,512 1,104,512
Total Other (Pool) 19,515,038 19,515,038 136,347,186 136,347,186
Grand Total 1,268,231,894 1,268,231,894 7,449,852,252 7,449,852,252

Total ABF (Pool) is an aggregate of both Commonwealth and state or territory NHR funding and payments for activity-based funding (ABF) which is transacted through the state pool account.

Total Block (SMF) is an aggregate of both Commonwealth and state or territory NHR funding and payments for block funding which is transacted through the state managed fund (SMF).

Total Other (Pool) represents other funding and payments transacted through the state pool account, including public health funding, overdeposits, cross-border funding and payments, and interest.

State and territory cross-border payments can either be:

  • Paid to the relevant state or territory's LHNs - included within ABF and/or block payments in the above table, or
  • Reimbursed to the relevant state or territory where the state or territory's LHNs are already being funded for the cost of treating cross-border patients - shown in the Cross-border row under Other in the above table.

NHR funding and payments shown in these tables include GST where applicable.

For more information, see National Health Reform funding and payments.

NHR contributions by local hospital network

Table 4a – NHR contributions by local hospital network – New South Wales, January 2017

This table shows NHR contributions (from state, territory and Commonwealth sources) made to each LHN in New South Wales during January 2017.

NHR contributions to LHNs are separated into an activity-based funding (ABF) component and a block component.

Local hospital network (LHN) ABF component
(ex GST)
Block component
(ex GST)
Total NHR payment
(ex GST)
($) ($) ($)
Albury NSW Local Health District 3,053,493 989,341 4,042,834
Central Coast Local Health District 52,965,295 1,924,104 54,889,399
Contracted Services 227,791 227,791
Far West Local Health District 4,893,325 1,423,388 6,316,713
Hunter New England Local Health District 121,767,724 17,437,763 139,205,487
Illawarra Shoalhaven Local Health District 64,196,414 16,011,699 80,208,113
Justice Health & Forensic Mental Health Network 0 3,293,989 3,293,989
Mid North Coast Local Health District 43,145,706 3,924,840 47,070,546
Murrumbidgee Local Health District 25,565,328 9,882,839 35,448,167
Nepean Blue Mountains Local Health District 51,973,166 3,029,823 55,002,989
Northern NSW Local Health District 54,138,694 1,870,988 56,009,682
Northern Sydney Local Health District 89,528,080 12,078,257 101,606,337
South Eastern Sydney Local Health District 103,420,620 12,060,869 115,481,489
South Western Sydney Local Health District 118,467,262 6,557,338 125,024,600
Southern NSW Local Health District 23,890,654 2,644,558 26,535,212
St Vincent's Health Network 24,883,432 1,907,000 26,790,432
Sydney Children's Hospitals Network 48,952,031 2,659,332 51,611,363
Sydney Local Health District 97,021,839 8,404,327 105,426,166
Western NSW Local Health District 49,051,955 22,140,474 71,192,429
Western Sydney Local Health District 110,726,039 32,607,078 143,333,117
Total 1,087,868,848 160,848,007 1,248,716,855

See explanatory notes below table 4b.

Table 4b – NHR contributions by local hospital network YTD – New South Wales, January 2017

This table shows YTD NHR contributions (from state, territory and Commonwealth sources) made to each LHN in New South Wales as at January 2017.

NHR contributions to LHNs are separated into an activity-based funding (ABF) component and a block component.

Local hospital network ABF component YTD
(ex GST)
Block component YTD
(ex GST)
Total NHR payment YTD
(ex GST)
($) ($) ($)
Albury NSW Local Health District 25,970,559 6,925,387 32,895,946
Central Coast Local Health District 317,665,951 19,489,939 337,155,890
Contracted Services 1,011,931 1,011,931
Far West Local Health District 34,240,602 14,946,103 49,186,705
Hunter New England Local Health District 733,238,591 136,260,169 869,498,760
Illawarra Shoalhaven Local Health District 352,287,005 57,587,766 409,874,771
Justice Health & Forensic Mental Health Network 0 39,069,923 39,069,923
Mid North Coast Local Health District 236,131,734 20,829,374 256,961,108
Murrumbidgee Local Health District 147,561,745 123,587,397 271,149,142
Nepean Blue Mountains Local Health District 329,922,391 40,373,379 370,295,770
Northern NSW Local Health District 297,818,064 20,396,290 318,214,354
Northern Sydney Local Health District 523,439,905 58,938,348 582,378,253
South Eastern Sydney Local Health District 611,929,079 49,837,288 661,766,367
South Western Sydney Local Health District 713,344,562 32,808,890 746,153,452
Southern NSW Local Health District 144,558,607 31,700,737 176,259,344
St Vincent's Health Network 148,144,195 11,003,000 159,147,195
Sydney Children's Hospitals Network 261,427,907 18,001,623 279,429,530
Sydney Local Health District 575,254,646 68,916,109 644,170,755
Western NSW Local Health District 263,682,886 92,127,185 355,810,071
Western Sydney Local Health District 666,984,326 86,091,471 753,075,797
Total 6,384,614,688 928,890,378 7,313,505,066

NHR contributions in this table are GST exclusive to enable comparability of NHR payments in each LHN report.

Note: This table excludes GST.
The majority of government funding to LHNs is not subject to GST. However in some cases hospital funding to non-government entities does attract GST, for example, denominational hospitals, privately and commercially owned health facilities, or any other non-government third party provider of health services or related supplies.

For more information, see National Health Reform funding and payments.

Estimated monthly, YTD and annual activity

States and territories provide service volume estimates at the start of each financial year, and if required, can continue to refine these estimates during the course of the year. These estimates form the basis of monthly reporting of service volumes until actual service numbers become available. These estimates are expressed as National Weighted Activity Units (NWAU).

States and territories provide estimated annual NWAU to the Administrator as a basis for determining the Commonwealth activity-based funding. Current month NWAU estimates accumulate through the year-to-date (YTD) NWAU, to be equal to the annual NWAU at the end of the financial year.

States and territories may also provide activity information relating to the delivery of other public hospital functions funded.

Table 5 – Estimated monthly, YTD and annual NWAU by local hospital network – New South Wales, January 2017

This table shows estimated state or territory hospital activity for activity-based funding services expressed as NWAU for January 2017, the associated cumulative year-to-date (YTD), and total estimated annual NWAU for each LHN in New South Wales.

Local hospital network (LHN) Estimated NWAU delivered in current month Estimated NWAU delivered YTD Estimated annual NWAU 2016-17
Albury NSW Local Health District 1,608 11,254 19,911
Central Coast Local Health District 9,777 68,442 117,328
Contracted Services 338 2,363 4,050
Far West Local Health District 864 6,049 10,369
Hunter New England Local Health District 25,369 177,584 304,430
Illawarra Shoalhaven Local Health District 11,427 79,987 137,121
Mid North Coast Local Health District 7,963 55,740 95,554
Murrumbidgee Local Health District 4,700 32,901 56,402
Nepean Blue Mountains Local Health District 10,406 72,843 124,874
Northern NSW Local Health District 9,861 69,027 118,332
Northern Sydney Local Health District 16,929 118,504 203,150
South Eastern Sydney Local Health District 22,023 154,162 264,277
South Western Sydney Local Health District 23,528 164,699 282,342
Southern NSW Local Health District 4,546 31,819 54,547
St Vincent's Health Network 6,142 42,993 73,702
Sydney Children's Hospitals Network 8,251 57,754 99,008
Sydney Local Health District 20,288 142,019 243,462
Western NSW Local Health District 8,298 58,088 99,580
Western Sydney Local Health District 23,031 161,218 276,374
Total 215,350 1,507,447 2,584,814

An NWAU is a measure of health service activity expressed as a common unit. It provides a way of comparing and valuing each public hospital service, whether they are admissions, emergency department presentations or outpatient episodes, by weighting them for their clinical complexity. The average hospital service is worth one NWAU - the most intensive and expensive activities are worth multiple NWAU, the simplest and least expensive are worth fractions of an NWAU.

Monthly NHR payments relate to the cash needs of public hospitals and do not necessarily reflect the volume of services to be delivered in the month.

For more information on the NWAU calculation, see Calculation of NWAU.