New South Wales report, September 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 September 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, September 2017

For the basis of the Commonwealth contribution to NHR funding, see Basis of Commonwealth NHR funding, 2017-18.

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 2017/18 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 NWAU17, which is different from the previous year.

The Independent Hospital Pricing Authority (IHPA) has issued the National Efficient Cost (NEC17) funding model that applies to small regional and remote hospitals. However, NSW has introduced a better methodology to better account the significant challenges faced by small hospitals in rural settings and better integrate care between small regional and remote hospitals and ABF hospitals. The mechanics of the NSW funding model is used 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 2017/18, 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 2017/18 by the following factors:

  • Weighted population change: providing an indication of expected 'natural' growth
  • Recent trends in activity growth for each LHD/SHN
  • Relative Utilisation Rate adjusted for relevant demographic factors
  • 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 2017/18 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 2017/18 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 liabilities for superannuation and long service leave which are accepted by the Crown.

Based on the fact that not all cash related funding for in-scope services is flowed through the state pool account (ABF) or the state managed fund (in-scope block) and that those funds are retained by the LHD to contribute to the cost of service delivery, the Administrator’s reported level of commonwealth vs state cash paid through the pool does not truly reflect the full cash component funded by the State.

Further, although a consistent methodology has been applied, variations in cash prices between LHNs will also 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 2017/18 for all “out of scope” services not subject to the National Health Reform Agreement arrangements as required under their 2017/18 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 tables provided do not include the level of additional state funding derived from own source revenues and retained by LHN’s and acceptance of crown liabilities (eg LSL & Superannuation) that are also available to LHN’s monthly to meet the cost of services.

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 2017/18, August 2017, October 2016, January 2018 and May 2018 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 2017/18 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.

In respect to Albury Wodonga, the Victorian Department of Health has direct budget responsible for provision of services at Albury/Wodonga Health and the current and proposed IGA for Albury Wodonga, requires NSW to Pay the Victorian Department of Health.

The payment that NSW makes to Victoria Health includes ABF, Block and a share of Public/Population Health funds received under NHR plus the NSW funded component.

On this basis NSW makes a single total payment to Victorian Department of Health each month however for transparency of Commonwealth monies under the NHRA, NSW established an ABF virtual entity for the Albury component of the Commonwealth.

Other payments will occur in 2017/18 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.

For more information on budget allocations, see the 2017/18 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, September 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 September 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
431,600,354 431,600,354 431,600,354
Commonwealth
Block funding
59,704,661 59,704,661 59,704,661
Commonwealth
Other funding
10,329,342 10,329,342 10,329,342
Total C'wealth
funding
501,634,357 431,600,354 59,704,661 10,329,342 501,634,357
NSW
funding
461,268,517 443,767,163 151,354 17,350,000 461,268,517
Other state/territory funding 5,500,000 0 5,500,000 5,500,000
Total 968,402,874 875,367,517 59,704,661 15,980,696 17,350,000 968,402,874

See definitions and explanatory notes following table 1b.

Table 1b – State pool account transactions YTD – New South Wales, September 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 September 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
1,294,801,061 1,294,801,061 1,294,801,061
Commonwealth
Block funding
179,113,982 179,113,982 179,113,982
Commonwealth
Other funding
30,988,027 30,988,027 30,988,027
Total C'wealth
funding
1,504,903,070 1,294,801,061 179,113,982 30,988,027 1,504,903,069
NSW
funding
1,682,392,468 1,629,734,759 607,709 52,050,000 1,682,392,468
Other state/territory funding 16,500,000 0 16,500,000 16,500,000
Total 3,203,795,537 2,924,535,820 179,113,982 48,095,735 52,050,000 3,203,795,537

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, September 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 September 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 59,704,661 59,704,661
State/territory Block funding 71,285,808 71,285,808
Total 130,990,469 130,990,469 0 130,990,469

See explanatory notes following table 2b.

Table 2b – State managed fund transactions YTD – New South Wales, September 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 September 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 179,113,982 179,113,982
State/territory Block funding 292,656,990 292,656,990
Total 471,770,972 471,770,972 0 471,770,972

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, September 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 September 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 516,337,936 516,337,935 1,720,670,183 1,720,670,183
Admitted mental health 46,739,758 46,739,758 156,394,733 156,394,733
Sub-acute 56,852,103 56,852,103 189,564,158 189,564,158
Emergency department 106,894,202 106,894,204 356,547,799 356,547,800
Non-admitted 148,543,518 148,543,517 501,358,946 501,358,945
Total ABF (Pool) 875,367,517 875,367,517 2,924,535,820 2,924,535,820
Block
Small rural hospitals 59,192,292 59,192,292 255,362,033 255,362,033
Teaching, training & research 36,124,335 36,124,335 103,859,168 103,859,168
Non-admitted mental health 35,673,842 35,673,842 112,549,772 112,549,772
Other non-admitted services 0 0 0 0
Total Block (SMF) 130,990,469 130,990,469 471,770,972 471,770,972
Other
Public health funding 10,329,342 10,329,342 30,988,027 30,988,027
Overdeposit 0 0 0 0
Cross-border 22,850,000 22,850,000 68,550,000 68,550,000
Interest 151,354 151,354 607,709 607,709
Total Other (Pool) 33,330,696 33,330,696 100,145,735 100,145,735
Grand Total 1,039,688,683 1,039,688,683 3,496,452,527 3,496,452,527

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, September 2017

This table shows NHR contributions (from state, territory and Commonwealth sources) made to each LHN in New South Wales during September 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 3,172,144 1,015,693 4,187,837
Central Coast Local Health District 44,026,146 2,939,580 46,965,726
Contracted Services 781,689 781,689
Far West Local Health District 4,574,343 1,520,338 6,094,681
Hunter New England Local Health District 96,215,705 24,977,303 121,193,008
Illawarra Shoalhaven Local Health District 48,824,065 4,597,243 53,421,308
Justice Health & Forensic Mental Health Network 0 4,705,618 4,705,618
Mid North Coast Local Health District 33,426,673 2,349,654 35,776,327
Murrumbidgee Local Health District 20,877,129 7,564,356 28,441,485
Nepean Blue Mountains Local Health District 41,990,087 6,779,222 48,769,309
Northern NSW Local Health District 43,783,198 2,055,924 45,839,122
Northern Sydney Local Health District 72,973,334 14,842,154 87,815,488
South Eastern Sydney Local Health District 82,878,026 6,006,772 88,884,798
South Western Sydney Local Health District 100,410,244 6,644,392 107,054,636
Southern NSW Local Health District 21,331,108 3,032,016 24,363,124
St Vincent's Health Network 20,412,292 1,878,000 22,290,292
Sydney Children's Hospitals Network 35,235,284 2,775,484 38,010,768
Sydney Local Health District 81,650,979 15,069,523 96,720,502
Western NSW Local Health District 34,456,384 15,320,944 49,777,328
Western Sydney Local Health District 88,348,687 6,916,253 95,264,940
Total 875,367,517 130,990,469 1,006,357,986

See explanatory notes below table 4b.

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

This table shows YTD NHR contributions (from state, territory and Commonwealth sources) made to each LHN in New South Wales as at September 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 9,516,431 3,047,079 12,563,511
Central Coast Local Health District 142,444,600 10,604,869 153,049,469
Contracted Services 2,345,067 2,345,067
Far West Local Health District 14,154,935 4,982,692 19,137,627
Hunter New England Local Health District 312,430,901 68,390,492 380,821,393
Illawarra Shoalhaven Local Health District 165,017,140 16,443,547 181,460,687
Justice Health & Forensic Mental Health Network 0 12,809,445 12,809,445
Mid North Coast Local Health District 112,873,322 4,875,563 117,748,885
Murrumbidgee Local Health District 70,291,385 100,046,168 170,337,553
Nepean Blue Mountains Local Health District 192,217,301 16,055,014 208,272,315
Northern NSW Local Health District 146,369,666 7,067,433 153,437,099
Northern Sydney Local Health District 240,279,175 38,890,734 279,169,909
South Eastern Sydney Local Health District 269,204,250 17,990,871 287,195,121
South Western Sydney Local Health District 322,017,984 17,801,799 339,819,783
Southern NSW Local Health District 72,452,057 25,040,280 97,492,337
St Vincent's Health Network 66,339,949 6,102,000 72,441,949
Sydney Children's Hospitals Network 121,127,009 9,019,129 130,146,138
Sydney Local Health District 263,612,091 38,990,464 302,602,555
Western NSW Local Health District 117,107,411 51,382,893 168,490,304
Western Sydney Local Health District 284,735,144 22,230,500 306,965,644
Total 2,924,535,820 471,770,972 3,396,306,792

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, September 2017

This table shows estimated state or territory hospital activity for activity-based funding services expressed as NWAU for September 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 2017-18
Albury NSW Local Health District 1,687 2,319 20,031
Central Coast Local Health District 9,870 29,611 122,703
Contracted Services 339 1,014 3,790
Far West Local Health District 856 2,571 9,876
Hunter New England Local Health District 25,553 76,659 302,344
Illawarra Shoalhaven Local Health District 11,636 34,909 141,493
Mid North Coast Local Health District 8,160 24,480 95,037
Murrumbidgee Local Health District 4,879 14,638 62,237
Nepean Blue Mountains Local Health District 10,587 31,760 131,313
Northern NSW Local Health District 10,391 31,173 126,505
Northern Sydney Local Health District 17,046 51,135 216,357
South Eastern Sydney Local Health District 21,986 65,957 261,773
South Western Sydney Local Health District 23,852 71,557 293,223
Southern NSW Local Health District 4,573 13,720 56,435
St Vincent's Health Network 6,194 18,581 69,197
Sydney Children's Hospitals Network 8,257 24,769 107,378
Sydney Local Health District 20,750 62,251 252,297
Western NSW Local Health District 8,431 25,293 98,996
Western Sydney Local Health District 23,409 70,225 255,098
Total 218,456 652,622 2,626,084

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.