New South Wales report, September 2018

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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 2018 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 2018

For the basis of the Commonwealth contribution to NHR funding, see Basis of Commonwealth NHR funding, 2018-19.

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 2018/19 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 NWAU18, which is different from the previous year.

The Independent Hospital Pricing Authority (IHPA) has issued the National Efficient Cost (NEC18) 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 2018/19, 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 2018/19 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 2018/19 include:

  • Paediatric Adjustment;
  • Specialist Psychiatric Age Adjustment;
  • Patient Residential 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 2018/19 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 2018/19 for all “out of scope” services not subject to the National Health Reform Agreement arrangements as required under their 2018/19 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 2018/19, August 2018, November 2018, January 2019 and May 2019 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 2018/19 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 2018/19 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 July 2018 there was a carry over amount of cash of $8.6M from 2017/18 to be used as a source of funds in 2018/19 to cover any liability to the NHFB for final reconciled prior year activity.

For more information on budget allocations, see the 2018/19 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 2018

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 2018.

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
453,528,441 453,528,441 453,528,441
Commonwealth
Block funding
72,103,763 72,103,763 72,103,763
Commonwealth
Other funding
10,870,152 10,870,152 10,870,152
Total C'wealth
funding
536,502,355 453,528,441 72,103,763 10,870,152 536,502,355
NSW
funding
458,788,565 441,356,604 146,962 17,285,000 458,788,565
Other state/territory funding 5,650,000 0 5,650,000 5,650,000
Total 1,000,940,921 894,885,044 72,103,763 16,667,114 17,285,000 1,000,940,921

See definitions and explanatory notes following table 1b.

Table 1b – State pool account transactions YTD – New South Wales, September 2018

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 2018.

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
1,360,585,322 1,360,585,322 1,360,585,322
Commonwealth
Block funding
216,311,288 216,311,288 216,311,288
Commonwealth
Other funding
32,610,457 32,610,457 32,610,457
Total C'wealth
funding
1,609,507,066 1,360,585,322 216,311,288 32,610,457 1,609,507,066
NSW
funding
1,624,754,815 1,572,377,010 522,806 51,855,000 1,624,754,815
Other state/territory funding 16,950,000 0 16,950,000 16,950,000
Total 3,251,211,881 2,932,962,331 216,311,288 50,083,262 51,855,000 3,251,211,881

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 2018

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 2018.

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 72,103,763 72,103,763
State/territory Block funding 112,051,690 112,051,690
Total 184,155,453 184,155,453 0 184,155,453

See explanatory notes following table 2b.

Table 2b – State managed fund transactions YTD – New South Wales, September 2018

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 2018.

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 216,311,288 216,311,288
State/territory Block funding 475,888,138 475,888,138
Total 692,199,426 692,199,426 0 692,199,426

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 2018

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 2018. 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 517,619,168 517,619,168 1,696,092,237 1,696,092,238
Admitted mental health 47,413,708 47,413,708 155,097,451 155,097,451
Sub-acute 58,024,195 58,024,195 190,359,721 190,359,721
Emergency department 109,761,749 109,761,749 360,313,091 360,313,089
Non-admitted 162,066,224 162,066,224 531,099,831 531,099,832
Total ABF (Pool) 894,885,044 894,885,044 2,932,962,331 2,932,962,331
Block
Small rural hospitals 93,802,185 93,802,185 418,366,777 418,366,777
Teaching, training & research 39,213,598 39,213,598 115,588,257 115,588,257
Non-admitted mental health 50,368,586 50,368,586 156,204,453 156,204,453
Other non-admitted services 771,084 771,084 2,039,938 2,039,938
Total Block (SMF) 184,155,453 184,155,453 692,199,426 692,199,426
Other
Public health funding 10,870,152 10,870,152 32,610,457 32,610,457
Overdeposit 0 0 0 0
Cross-border 22,935,000 22,935,000 68,805,000 68,805,000
Interest 146,962 146,962 522,806 522,806
Total Other (Pool) 33,952,114 33,952,114 101,938,262 101,938,262
Grand Total 1,112,992,611 1,112,992,611 3,727,100,020 3,727,100,020

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 2018

This table shows NHR contributions (from state, territory and Commonwealth sources) made to each LHN in New South Wales during September 2018.

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 3,355,421 1,009,879 4,365,300
Central Coast Local Health District 43,319,648 5,361,681 48,681,329
Contracted Services 749,458 0 749,458
Far West Local Health District 4,793,825 1,334,012 6,127,837
Hunter New England Local Health District 102,137,560 33,643,810 135,781,370
Illawarra Shoalhaven Local Health District 48,686,448 12,436,500 61,122,948
Justice Health & Forensic Mental Health Network 0 6,100,000 6,100,000
Mid North Coast Local Health District 32,622,272 5,386,275 38,008,547
Murrumbidgee Local Health District 22,150,060 10,343,745 32,493,805
Nepean Blue Mountains Local Health District 45,963,390 1,359,659 47,323,049
Northern NSW Local Health District 44,023,078 7,320,732 51,343,810
Northern Sydney Local Health District 72,459,459 16,376,460 88,835,919
South Eastern Sydney Local Health District 83,776,818 12,277,146 96,053,964
South Western Sydney Local Health District 107,655,460 11,768,398 119,423,858
Southern NSW Local Health District 21,722,508 1,277,956 23,000,464
St Vincent's Health Network 22,915,128 1,270,000 24,185,128
Sydney Children's Hospitals Network 35,157,205 3,326,308 38,483,513
Sydney Local Health District 82,818,551 16,475,436 99,293,987
Western NSW Local Health District 34,177,383 17,505,252 51,682,635
Western Sydney Local Health District 86,401,372 19,582,204 105,983,576
Total 894,885,044 184,155,453 1,079,040,497

See explanatory notes below table 4b.

Table 4b – NHR contributions by local hospital network YTD – New South Wales, September 2018

This table shows YTD NHR contributions (from state, territory and Commonwealth sources) made to each LHN in New South Wales as at September 2018.

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 10,066,263 3,086,991 13,153,254
Central Coast Local Health District 143,030,239 10,965,669 153,995,908
Contracted Services 2,248,374 0 2,248,374
Far West Local Health District 14,329,814 15,422,178 29,751,992
Hunter New England Local Health District 329,653,562 86,607,266 416,260,828
Illawarra Shoalhaven Local Health District 164,408,202 29,544,899 193,953,101
Justice Health & Forensic Mental Health Network 0 11,666,952 11,666,952
Mid North Coast Local Health District 110,100,399 18,914,202 129,014,601
Murrumbidgee Local Health District 74,815,275 112,327,007 187,142,282
Nepean Blue Mountains Local Health District 148,749,201 43,014,616 191,763,817
Northern NSW Local Health District 147,505,817 18,568,323 166,074,140
Northern Sydney Local Health District 241,633,150 40,190,760 281,823,910
South Eastern Sydney Local Health District 273,667,493 25,977,452 299,644,945
South Western Sydney Local Health District 343,825,161 34,797,042 378,622,203
Southern NSW Local Health District 72,637,411 44,748,952 117,386,363
St Vincent's Health Network 74,474,166 4,124,000 78,598,166
Sydney Children's Hospitals Network 120,707,563 10,810,501 131,518,064
Sydney Local Health District 265,551,423 41,353,870 306,905,293
Western NSW Local Health District 116,589,696 93,463,395 210,053,091
Western Sydney Local Health District 278,969,124 46,615,351 325,584,475
Total 2,932,962,331 692,199,426 3,625,161,757

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 2018

This table shows estimated state or territory hospital activity for activity-based funding services expressed as NWAU for September 2018, 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 2018-19
Albury NSW Local Health District 1,725 5,174 20,697
Central Coast Local Health District 10,998 32,994 131,978
Contracted Services 316 948 3,790
Far West Local Health District 896 2,689 10,756
Hunter New England Local Health District 26,150 78,451 313,806
Illawarra Shoalhaven Local Health District 12,297 36,890 147,561
Mid North Coast Local Health District 8,245 24,735 98,940
Murrumbidgee Local Health District 5,530 16,591 66,364
Nepean Blue Mountains Local Health District 11,620 34,861 139,443
Northern NSW Local Health District 11,103 33,308 133,230
Northern Sydney Local Health District 18,258 54,774 219,095
South Eastern Sydney Local Health District 22,423 67,268 269,073
South Western Sydney Local Health District 25,887 77,661 310,645
Southern NSW Local Health District 4,893 14,679 58,715
St Vincent's Health Network 6,233 18,700 74,801
Sydney Children's Hospitals Network 8,679 26,038 104,152
Sydney Local Health District 21,957 65,870 263,482
Western NSW Local Health District 8,463 25,388 101,551
Western Sydney Local Health District 21,187 63,562 254,248
Total 226,861 680,582 2,722,327

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.