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.

State funding is paid on an activity basis to Local Hospital Networks based on the price set by the State (which is reported in Service Agreements) and the volume of weighted services as set out in Service Agreement for each service category.

To provide consistency in methodology and with the Addendum to the National Health Reform Agreement 2020-25, in 2023-24 Victoria receives Commonwealth Activity Based Funding (ABF) contributions as calculated by the National Funding Model using the National Efficient Price (NEP23) and National Weighted Activity Unit (NWAU23) as the currency for Victorian Local Hospital Networks (LHNs). The National Efficient Cost (NEC23) 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).

The Minister for Health and the Secretary of the Department of Health issued Statements of Priorities in April 2024 and May 2024 for each of the Local Hospital Networks (LHNs). As at 30 June 2024, the SOPs for two LHNs had not been finalised.

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, public health, dental services, maternal, child health and parenting services, primary care and community health, ageing and aged care, home and community care
  • non-price grants where local service delivery does not support activity based funding
  • 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, 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.
  • 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
  • non-price grants to support specific programs and local service delivery
  • other funding required for system management of the public hospitals.

Further information regarding the Basis for National Health Reform payments in both 2023-24 and previous financial years is included at www.publichospitalfunding.gov.au.