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The Pricing Framework for Australian Public Hospital Services 2016-17

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Independent Hospital Pricing Authority

The Pricing Framework for Australian Public Hospital Services 2016-17

Independent Hospital Pricing Authority
The Pricing Framework for Australian Public Hospital Services 2016-17

© Commonwealth of Australia 2015

This work is copyright. You may download, display, print and reproduce the whole or part of this work in unaltered form for your own personal use or, if you are part of an organisation, for internal use within your organisation, but only if you or your organisation do not use the reproduction for any commercial purpose and retain this copyright notice and all disclaimer notices as part of that reproduction. Apart from rights to use as permitted by the Copyright Act 1968 or allowed by this copyright notice, all other rights are reserved and you are not allowed to reproduce the whole or any part of this work in any way (electronic or otherwise) without first being given the specific written permission from the Independent Hospital Pricing Authority to do so.
The Hon Jack Snelling

Chair, COAG Health Council

GPO Box 2555


Dear Minister

On behalf of the Independent Hospital Pricing Authority (IHPA), I am pleased to present the Pricing Framework for Australian Public Hospital Services 2016-17.

The Pricing Framework emphasises the commitment by IHPA to transparency and accountability and it is the key strategic document underpinning the National Efficient Price (NEP) and National Efficient Cost (NEC) Determinations for the financial year 2016-17. The NEP Determination will be used to calculate Commonwealth payments for in-scope public hospital services that are funded on an activity basis, whilst the NEC Determination covers the services which are block funded.

This is the fifth Pricing Framework issued by IHPA. The nature of the comments received in response to the Consultation Paper on the Pricing Framework for 2016-17 demonstrates that IHPA has developed a clear and stable methodology that guides the annual determination of the NEP and NEC.

IHPA will continue to develop and refine its classification systems, counting rules, data, coding and costing standards which underpin the national activity based funding system.

Finally, I would like to affirm the commitment of IHPA to transparency and continuous improvement in how it undertakes its delegated functions, grounded in an open and consultative approach to working with the health sector in the implementation of activity based funding for public hospital services.

Yours sincerely
Shane Solomon


Independent Hospital Pricing Authority

Table of Contents

Glossary 6

1. Introduction 8

2. Pricing Guidelines 9

2.1 Understanding this element of the Pricing Framework 9

Feedback received 9 IHPA’s decision 9 Next steps and future work 9

3. In-scope public hospital services 12

3.1 Overview 12

3.2 Scope of public hospital services and general list of eligible services 12 Feedback received 13 IHPA’s decision 13 Next steps and future work 13

3.3 Pricing posthumous organ donation activity 13

Feedback received 14 IHPA’s decision 15 Next steps and future work 15 All admitted programs, including hospital in the home programs and forensic mental health inpatient services. 15 This listing of in-scope non-admitted services is independent of the service setting in which they are provided (e.g. at a hospital, in the community, in a person's home). This means that in scope services can be provided on an outreach basis. 15 To be included as an in scope non-admitted service, the service must meet the definition of a ‘service event’ which is: 15 There are two broad categories of in-scope, public hospital non-admitted services: 16 A.Specialist Outpatient Clinic Services 16 B.Other Non-admitted Patient Services 16 Category A: Specialist outpatient clinic services – Tier 2 Non-admitted Services Classification – Classes 10, 20 and 30 16 This comprises all clinics in the Tier 2 Non-Admitted Services classification, classes 10, 20 and 30, with the exception of the General Practice and Primary Care (20.06) clinic, which is considered by the Pricing Authority as not to be eligible for Commonwealth funding as a public hospital service. 16 Category B: Other non-admitted patient services and non-medical specialist outpatient clinics (Tier 2 Non-Admitted Services Class 40) 16 To be eligible for Commonwealth funding as an Other Non-admitted Patient Service or a Class 40 Tier 2 Non-admitted Service, a service must be: 16 Jurisdictions have been invited to propose services that will be included or excluded from Category B “Other Non-admitted Patient Services”. Jurisdictions will be required to provide evidence to support the case for the inclusion or exclusion of services based on the three criteria above. 16 The following clinics are considered by the Pricing Authority as not to be eligible for Commonwealth funding as a public hospital service under this category: 16 Interpretive guidelines for use 16 In line with the criteria for Category B, community mental health, physical chronic disease management and community based allied health programs considered in-scope will have all or most of the following attributes: 16 Home ventilation 17 A number of jurisdictions submitted home ventilation programs for inclusion on the General List. The Pricing Authority has included these services on the General List in recognition that they meet the criteria for inclusion, but will review this decision in the future once the full scope of the National Disability Insurance Scheme is known. 17

4. Classifications used by IHPA to describe public hospital services 18

4.1 Overview 18

4.2 Classification systems 18

4.3 Australian-Refined Diagnosis Related Groups classification 18

Feedback received 18 IHPA’s decision 18 Next steps and future work 18

4.4 Australian National Subacute and Non-Acute Patient

classification 19 Feedback received 19 IHPA’s decision 20 Next steps and future work 20

4.5 Tier 2 Non-admitted Services classification 20

Feedback received 21 IHPA’s decision 21 Next steps and future work 21

4.6 Emergency care classification 21

Feedback received 22 IHPA’s decision 22 Next steps and future work 22

4.7 Teaching, training and research 22

Feedback received 23 IHPA’s decision 23 Next steps and future work 23

4.8 Australian Mental Health Care Classification 23

4.8.1 Pricing mental health services 24 Feedback received 24 IHPA’s decision 25 Next steps and future work 25

5. Costing and counting rules 26

5.1 National Hospital Cost Data Collection 26

Feedback received 26 IHPA’s decision 26 Next steps and future work 26

6. The National Efficient Price for Activity Based Funded Public Hospital Services 27

6.1 Technical improvements 27

6.1.1 Alternative geographical classification systems 27 Feedback received 27 IHPA’s decision 28 Next steps and future work 28

6.2 Adjustments to the National Efficient Price 28

6.2.1 Overview 28 6.2.2 Adjustments to be evaluated for NEP16 and feedback received 29 Patients with an intellectual disability 29 Feedback received 29 Culturally and linguistically diverse patients 29 Feedback received 29 Remoteness area adjustment 30 Feedback received 30 Emergency care age adjustment 30 Feedback received 30 Feedback received on other adjustments 31 6.2.3 Stability of adjustments 32 IHPA’s decision 33 Next steps and future work 33

7. Setting the National Efficient Price for private patients in public hospitals 35

7.1 Overview 35

7.2 Costing private patients 35 Feedback received 35 IHPA’s decision 36 Next steps and future work 36

8. Treatment of other Commonwealth programs 37

8.1 Overview 37

Feedback received 37 IHPA’s decision 37 Next steps and future work 38

9. Bundled pricing 39

9.1 Overview 39

9.2 Bundled pricing in future years 39 Feedback received 40 IHPA’s proposed approach to bundled pricing 40 Bundled pricing options 41 Implementation considerations 42 IHPA’s decision 42 Next steps and future work 42

10. Pricing for safety and quality 43

10.1 Overview 43

10.2 IHPA and the Commission collaboration 43 Feedback received 44 IHPA’s decision 44 Next steps and future work 44

11. The Evaluation of the Impact of the Implementation of National Activity Based Funding for Public Hospital Services 45

11.1 Overview 45

Feedback received 46 Next steps and future work 46

12. Setting the National Efficient Cost 47

12.1 National Efficient Cost 2016-17 47

12.2 Block funded services in Activity Based Funded hospitals 48 IHPA’s decision 48 Next steps and future work 48

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