Funding types | National Health Funding Body

Each funding type has a specific criteria set for what services are appropriate, with the preference to use Activity Based Funding wherever possible.

Activity Based Funding (ABF)

ABF is a funding method for public hospital services based on the number of weighted services provided to patients, and the price to be paid for delivering those services. The method uses national classifications for service types, price weights, the National Efficient Price (NEP) that is independently determined by the IHACPA, and the level of activity as represented by the National Weighted Activity Unit (NWAU) (i.e. the NEP is the price per NWAU).

A NWAU represents a measure of health service activity expressed as a common unit of resources. This provides a way of comparing and valuing each public hospital service (whether it is an emergency department presentation, admission or outpatient episode), by weighting it for clinical complexity. States and Territories are required to outline their basis of payments to each LHN, including an explanation of the factors taken into account. The following service categories were ABF funded in 2023-24:

Block funding

Block funding supports teaching, training and research in public hospitals, and public health programs. It is also used for certain public hospital services where Block funding is more appropriate, particularly for smaller rural and regional hospitals. Categories of Block funding in 2023-24 included:

Public hospitals, or public hospital services, are eligible for Block funding if the requirement for ABF cannot be satisfied. They may also be eligible when economies of scale are not present, meaning the provision of services is not financially viable under ABF. Block funding is set in these circumstances based on a scale of NWAU levels for the relevant hospitals.
Non-admitted home ventilation services are where the patient received ventilatory support (self-administered by the patient or the patient’s carer). Ventilatory support is a process by which gases are moved into the lungs by a device that assists respiration by augmenting or replacing the patient’s own respiratory effort.
These are any non-admitted services not covered under other Block funded categories, such as chronic disease management programs or falls prevention services.
Highly Specialised Therapies Under the Addendum, all Australian Governments agreed funding arrangements for new high cost, Highly Specialised Therapies (HSTs), recommended for delivery in a public hospital setting by the Medical Services Advisory Committee (MSAC). Since the Addendum was signed, four HSTs have been recommended by MSAC:
Kymriah — for the treatment of acute lymphoblastic leukaemia in children and young adults
Kymriah or Yescarta (DLBCL) – for the treatment of diffuse large B-cell lymphoma, primary mediastinal large B-Cell lymphoma and transformed follicular lymphoma
Luxturna – for the treatment of inherited retinal disease
Qarziba – for the treatment of high risk neuroblastoma
Tecartus - for the treatment of relapsed or refractory mantle cell lymphoma.

Other funding types

Public Health funding

Public Health funding is paid into the Pool by the Commonwealth as a contribution to funding population health activities within each State and Territory, directed at improving the overall health of the population and seeking to prevent the development of poor health. These activities include national public health, youth health services and essential vaccines (service delivery). States and Territories have full discretion over the application of Public Health funding to the outcomes set out in the NHR Agreement.

Out-of-scope

Public hospitals 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 NHR Agreement (e.g., pharmaceuticals, primary care, dental services, other hospital services, home and community care, residential aged care and disability services).

Cross-border funding

When a resident of one State or Territory receives hospital treatment in another State or Territory, the ‘resident’ State or Territory compensates the ‘provider’ State or Territory for its share of the cost of the service. This is known as a cross‑border payment. The Commonwealth’s share of the cost of these services is made directly to the ‘provider’ State or Territory. Cross-border agreements, including the scope of the services and payment arrangements, can occur bilaterally between all States and Territories.

Interest

When a State Pool Account has an overnight credit balance, interest accrues into the account and is paid periodically by the RBA to the State or Territory account holder. Interest paid into the State Pool Account can be used for State and Territory funding.

Over deposit

Excess funding deposited into the State Pool Account can be earmarked as an ‘over deposit’ or 'withdrawal of ABF in excess of funding obligations' and paid to the State or Territory health department, or be used as part of a subsequent payment to LHNs. In 2021-22 and 2022-23, Victoria were the only State to make over deposits.