New South Wales report, November 2016

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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 November 2016 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, November 2016

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. As at 30 November 2016 there is a residual of $25.3M 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, November 2016

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 November 2016.

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
407,995,826 407,995,826 407,995,826
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
472,909,988 407,995,826 54,993,779 9,920,382 472,909,988
NSW
funding
518,879,071 554,616,031 180,547 7,800,000 562,596,578
Other state/territory funding 1,600,000 0 1,600,000 1,600,000
Total 993,389,059 962,611,857 54,993,779 11,700,929 7,800,000 1,037,106,566

See definitions and explanatory notes following table 1b.

Table 1b – State pool account transactions YTD – New South Wales, November 2016

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 November 2016.

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
2,080,738,462 2,080,738,462 2,080,738,462
Commonwealth
Block funding
274,968,897 274,968,897 274,968,897
Commonwealth
Other funding
49,601,910 49,601,910 49,601,910
Total C'wealth
funding
2,405,309,269 2,080,738,462 274,968,897 49,601,910 2,405,309,269
NSW
funding
2,453,370,337 2,388,301,814 786,030 39,000,000 2,428,087,844
Other state/territory funding 8,000,000 0 8,000,000 8,000,000
Total 4,866,679,606 4,469,040,276 274,968,897 58,387,940 39,000,000 4,841,397,113

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, November 2016

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 November 2016.

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 113,255,974 113,255,974
Total 168,249,753 168,249,753 0 168,249,753

See explanatory notes following table 2b.

Table 2b – State managed fund transactions YTD – New South Wales, November 2016

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 November 2016.

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 274,968,897 274,968,897
State/territory Block funding 395,051,392 395,051,392
Total 670,020,289 670,020,289 0 670,020,289

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, November 2016

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 November 2016. 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 561,119,612 561,119,612 2,605,449,350 2,605,449,350
Admitted mental health 52,288,409 52,288,409 241,326,775 241,326,775
Sub-acute 64,761,973 64,761,973 300,456,657 300,456,657
Emergency department 115,913,361 115,913,361 539,658,551 539,658,551
Non-admitted 168,528,502 168,528,502 782,148,943 782,148,943
Total ABF (Pool) 962,611,857 962,611,857 4,469,040,276 4,469,040,276
Block
Small rural hospitals 87,698,868 87,698,868 370,652,474 370,652,474
Teaching, training & research 36,985,650 36,985,650 144,802,027 144,802,027
Non-admitted mental health 43,565,234 43,565,234 154,565,787 154,565,787
Other non-admitted services 0 0 0 0
Total Block (SMF) 168,249,753 168,249,753 670,020,289 670,020,289
Other
Public health funding 9,920,382 9,920,382 49,601,910 49,601,910
Overdeposit 0 0 0 0
Cross-border 9,400,000 9,400,000 47,000,000 47,000,000
Interest 180,547 180,547 786,030 786,030
Total Other (Pool) 19,500,929 19,500,929 97,387,940 97,387,940
Grand Total 1,150,362,540 1,150,362,540 5,236,448,505 5,236,448,505

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, November 2016

This table shows NHR contributions (from state, territory and Commonwealth sources) made to each LHN in New South Wales during November 2016.

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 49,974,532 3,304,727 53,279,259
Contracted Services 0 0
Far West Local Health District 6,664,681 1,710,800 8,375,481
Hunter New England Local Health District 114,839,773 24,146,088 138,985,861
Illawarra Shoalhaven Local Health District 47,775,841 17,850,023 65,625,864
Justice Health & Forensic Mental Health Network 0 4,094,908 4,094,908
Mid North Coast Local Health District 32,606,023 3,638,983 36,245,006
Murrumbidgee Local Health District 22,152,455 12,009,358 34,161,813
Nepean Blue Mountains Local Health District 48,807,647 458,794 49,266,441
Northern NSW Local Health District 40,976,438 3,696,514 44,672,952
Northern Sydney Local Health District 79,175,764 8,977,668 88,153,432
South Eastern Sydney Local Health District 92,722,796 7,870,087 100,592,883
South Western Sydney Local Health District 115,117,781 8,677,027 123,794,808
Southern NSW Local Health District 22,787,507 8,701,027 31,488,534
St Vincent's Health Network 24,853,429 1,895,000 26,748,429
Sydney Children's Hospitals Network 34,053,720 3,196,311 37,250,031
Sydney Local Health District 90,926,659 13,089,080 104,015,739
Western NSW Local Health District 34,298,805 21,231,397 55,530,202
Western Sydney Local Health District 101,824,514 22,712,620 124,537,134
Total 962,611,857 168,249,753 1,130,861,610

See explanatory notes below table 4b.

Table 4b – NHR contributions by local hospital network YTD – New South Wales, November 2016

This table shows YTD NHR contributions (from state, territory and Commonwealth sources) made to each LHN in New South Wales as at November 2016.

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 19,863,574 4,946,705 24,810,279
Central Coast Local Health District 222,620,854 14,161,651 236,782,505
Contracted Services 784,141 784,141
Far West Local Health District 24,674,757 12,154,075 36,828,832
Hunter New England Local Health District 515,675,982 99,429,902 615,105,884
Illawarra Shoalhaven Local Health District 243,392,830 37,987,716 281,380,546
Justice Health & Forensic Mental Health Network 0 32,142,295 32,142,295
Mid North Coast Local Health District 162,459,841 13,335,700 175,795,541
Murrumbidgee Local Health District 102,867,411 108,770,665 211,638,076
Nepean Blue Mountains Local Health District 236,947,146 36,992,632 273,939,778
Northern NSW Local Health District 205,130,855 15,680,261 220,811,116
Northern Sydney Local Health District 366,102,251 39,564,845 405,667,096
South Eastern Sydney Local Health District 429,842,798 31,480,349 461,323,147
South Western Sydney Local Health District 500,761,004 21,043,308 521,804,312
Southern NSW Local Health District 101,840,713 24,922,347 126,763,060
St Vincent's Health Network 103,245,542 7,580,000 110,825,542
Sydney Children's Hospitals Network 179,560,092 12,785,241 192,345,333
Sydney Local Health District 401,935,561 50,040,518 451,976,079
Western NSW Local Health District 181,188,108 58,276,249 239,464,357
Western Sydney Local Health District 470,146,816 48,725,830 518,872,646
Total 4,469,040,276 670,020,289 5,139,060,565

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, November 2016

This table shows estimated state or territory hospital activity for activity-based funding services expressed as NWAU for November 2016, 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 8,038 19,911
Central Coast Local Health District 9,777 48,887 117,328
Contracted Services 338 1,688 4,050
Far West Local Health District 864 4,321 10,369
Hunter New England Local Health District 25,369 126,846 304,430
Illawarra Shoalhaven Local Health District 11,427 57,134 137,121
Mid North Coast Local Health District 7,963 39,814 95,554
Murrumbidgee Local Health District 4,700 23,501 56,402
Nepean Blue Mountains Local Health District 10,406 52,031 124,874
Northern NSW Local Health District 9,861 49,305 118,332
Northern Sydney Local Health District 16,929 84,646 203,150
South Eastern Sydney Local Health District 22,023 110,115 264,277
South Western Sydney Local Health District 23,528 117,642 282,342
Southern NSW Local Health District 4,546 22,728 54,547
St Vincent's Health Network 6,142 30,709 73,702
Sydney Children's Hospitals Network 8,251 41,253 99,008
Sydney Local Health District 20,288 101,442 243,462
Western NSW Local Health District 8,298 41,492 99,580
Western Sydney Local Health District 23,031 115,156 276,374
Total 215,350 1,076,748 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.