What types of NHR funding are there?

Under the National Health Reform Agreement (the Agreement or NHRA), the states, territories and the Commonwealth are jointly responsible for funding public hospital services, using activity based funding (ABF) where practicable and block funding in other cases. (NHRA 7a)

For more information:

  • Activity based funding (ABF)

    Activity based funding (ABF)

    Activity based funding is a system for funding public hospital services based on the number of services provided to patients and the price to be paid for delivering those services. Activity based funding uses national classifications, cost weights and state, territory and Commonwealth prices to determine the amount of funding for each activity or service.

    The Commonwealth's activity based funding contribution to local hospital networks is based on an efficient price per service known as the national efficient price, for as many services as are agreed to be provided (and later, when data is available, for services actually provided). The national efficient price is independently determined by the Independent Hospital Pricing Authority.

    The Agreement envisages that each state or territory's activity based funding contribution to local hospital networks will be based on a price per service determined by the state, known as the state price, for services agreed to be provided.

    States and territories are required to outline how they calculated the state contribution to each local hospital network's annual funding, including an explanation of the factors taken into account.

    Under the Agreement, the following categories of patient service were activity based funded for 2012-13:

    • Acute admitted patient services
    • Non-admitted services
    • Emergency department services

    For 2013-14 and 2014-15, the following activity based funded categories of patient service are:

    • Acute admitted patient services
    • Non-admitted services
    • Emergency department services
    • Admitted mental health
    • Sub-acute services
  • Block funding

    Block funding

    Block funding is provided to support teaching and research undertaken in public hospitals and for some public hospital services where it is more appropriate, and particularly for smaller rural and regional hospitals.

    A considerable amount of hospital work is block funded, and many small hospitals are entirely block funded. Small hospitals in rural areas often have fluctuating activity that would result in unpredictable revenue if funded on the basis of activity. The Agreement specifically provides for small rural hospitals to be block funded to ensure certainty of funding irrespective of activity.

    Under the Agreement, the following services were block funded rather than funded on the basis of activity for 2012-13:

    • Small rural hospitals
    • Mental health services
    • Sub-acute services
    • Teaching, training and research
    • Other

    For 2013-14 and 2014-15, the block funded services are:

    • Small rural hospitals
    • Non-admitted mental health services
    • Teaching, training and research
    • Other non-admitted services
  • Public health funding

    Public health funding

    Under the Agreement, a component of the National Health Reform funding is identified as public health funding, to be paid by the Commonwealth into the National Health Funding Pool, and from there to state or territory health departments.

    States and territories have full static-list-itemretion over the application of public health funding to the outcomes set out in the Agreement. This amount represents the sum of amounts identified under the (former) National Healthcare Agreement relating to national public health, youth health services and essential vaccines (service delivery) in 2008-09, indexed by the former National Healthcare SPP growth factor.

  • Cross-border activity based funding

    Cross-border activity based funding

    When a resident of one state receives hospital treatment in another state, the 'resident state' compensates the treating or 'provider state' for the cost of that care via a 'cross-border' payment.

    Commonwealth activity based funding contributions through the National Health Funding Pool to each state or territory are on a 'provider state' basis and hence already reflect the Commonwealth share of the costs of this cross-border activity.

    For state and territory activity based funding contributions, the 'resident state' is required to meet the state portion of the cost of services where its resident receives hospital treatment in another state or territory. The resident state makes 'cross-border' funding contributions to the provider state's pool account, and these funds are used by the provider state as part of its activity based funding payments to local hospital networks. Cross-border agreements, including the scope of services and payment arrangements, can occur bilaterally between all states. (NHRA A88a, A89, A90)

  • Interest


    When a state pool account has an overnight credit balance, interest accrues on the account, and is paid periodically by the Reserve Bank of Australia (RBA) to the state or territory account holder. Several options are available to the state or territory for the payment of this interest – if the interest is paid into the pool account, it can be used as a component of state funding.

  • Over deposit

    Over deposit

    If more money is deposited into the state pool account than required, this money can either be earmarked as an 'over deposit' and paid back to the state health department, or can be used for the next payment to local hospital networks.