To meet the reporting requirements of Section 240 of the National Health Reform Act 2011, the Administrator is to include the basis of each State and Territory's National Health Reform (NHR) funding and payments.

To provide consistency in methodology and with the Addendum to the National Health Reform Agreement 202025, in 2022-23 Victoria receives Commonwealth Activity Based Funding (ABF) contributions as calculated by the National Funding Model using the National Efficient Price (NEP22) and National Weighted Activity Unit (NWAU22) as the currency for Victorian Local Hospital Networks (LHNs). The National Efficient Cost (NEC22) Block funding model is used for calculating Commonwealth funding contributions to Block funded hospitals and Block funded services as summarised below.

NHR payments in Victoria are based upon the activity and budgets set out in Statements of Priorities (Service Agreements). Statements of Priorities are annual accountability agreements between Victorian public healthcare services and the Minister for Health. Further information on system-wide terms and conditions can be found in the Policy and Funding Guidelines (www.health.vic.gov.au/funding-performance-accountability/funding-policy). 

In conjunction with the Policy and Funding Guidelines, the Statements of Priorities for Victorian public healthcare services, outline:

  • the schedule of services to be delivered by or on behalf of the LHN and the funding to be provided in relation to the provision of those services
  • Block funding to be provided to:
    • Small rural hospitals, standalone hospitals providing specialist mental health services and eligible community mental health services
    • health services for: 
      • Teaching, training and research
      • Non-admitted mental health
      • Non-admitted child and adolescent mental health services (CAMHS)
      • Non-admitted home ventilation
      • high cost, Highly Specialised Therapies
      • Victorian Virtual Emergency Department program (other public hospital programs)
      • other non-admitted services (as set out in the National Efficient Cost Determination)
  • operational and Block grants to the LHN covering services provided and activities undertaken that are not within scope for ABF, for example, alcohol and drug services, dental services, child health and parenting services, primary care, home and community care
  • Supplementation Grants at the ABF stream level in recognition that the LHN has reported average costs greater than the NEP
  • standards of patient care and service delivery
  • performance standards, service delivery targets and performance measures for the LHN
  • requirements for the LHN to report on its performance, as required or otherwise
  • a performance management process that is to be in continuous operation in respect of the LHN.

The ABF funded facilities’ service profiles are developed in negotiation with the LHN as follows:

  • acute admitted and sub-acute and non-acute service activity volumes are modelled based on historical activity data and agreed growth rates and adjusted for known service capacity and profile changes
  • emergency department and outpatient service volumes are modelled based on agreed growth rates and other known factors
  • Clinical teaching, training and research, home ventilation services are modelled based on historical expenditure profiles and adjusted for known changes
  • small regional and remote hospitals are modelled based on the small hospital NEC result
  • standalone hospitals providing specialist mental health services (admitted and non-admitted) and modelled based on historical activity volumes and expenditure profiles and adjusted for known changes in service delivery and capacity
  • non-NHRA and non-hospital services are Block funded and modelled based on historical expenditure profiles and other known growth factors
  • the Supplementation Grant at the ABF stream level is based on the prior year National Hospital Cost Data Collections ABF stream cost ratio
  • other funding required for system management of the public hospitals.

Further information regarding the Basis for National Health Reform payments in both 2022-23 and previous financial years is included at www.publichospitalfunding.gov.au