IHACPA's role is to determine the annual national efficient price and national efficient cost to enable activity based funding for public hospital services.
Activity based funding (hospitals) Activity based funding in the healthcare sector is a way of funding hospitals whereby they get paid for the number and mix of patients they treat. If a hospital treats more patients, it receives more funding. Because some patients are more complicated to treat than others, activity based funding also takes this in to account.
National efficient price The national efficient price (NEP) is based on the average cost of a hospital admission across Australia. NEP is a factor, along with the volume of services delivered, of the government’s funding contribution to public hospitals.
National efficient cost The national efficient cost (NEC) represents the average cost of government funding contributions for services that are not suitable for activity based funding, such as small rural and regional hospitals. The fixed-plus-variable structure enables changes in activity delivered in small rural hospitals to be reflected in funding and ensures there is no disincentive for states to provide services in rural areas.
Sustainable growth in hospital costs The national weighted activity unit (NWAU) is a measure of health service activity expressed as a common unit, against which the national efficient price is determined.