Assessment 1 (Critical Analysis Report)

Executive Summary
Independent Hospital Pricing Authority (IHPA) was developed to reform the Australian public hospitals through its various components. One of the important components is the implementation of national Activity Based Funding for Australian public hospital. The main purpose of the IHPA is to develop National Efficient Price (NEP) to promote the efficiency and access to public hospital. To develop the NEP, the National Hospital Cost Data Collection was used. The NEP is used to calculate the ABF across the Australian public hospitals services which funded by Commonwealth. It was decided that to outline and count the acute admitted patient activity in the hospital, the Australian refined diagnosis related groups (AR-DRG) classification will be used. The ABF depends on multiple factors and that is the reason it varies among the hospital setup across the Australia. The IHPA is setting the adjustments to reflect reasonable and inevitable variations in the cost of health care service delivery. Government of Australia was looking for more transparency and accountability in the process of health funding in the public hospitals throughout the country. As an initiative of that process, National Health Reform Agreement delegated the responsibility to IHPA to develop a strategy which will be more transparent and through which public can access the services more easily.

Table of Contents

Content | Page No | The Independent Hospital Pricing Authority (IHPA) | 6 | National Efficient price | 7 | The prices differences | 7 | Comparison of the Australian ABF with Pay for Performance based funding programs in Hong Kong | 9 | Conclusion | 11 | References | 11 |

Independent Hospital Pricing Authority (IHPA):
Independent Hospital Pricing Authority (IHPA) was established as part of the National Health Reform agenda of the National Health Reform Act 2011(Independent Hospital Pricing Authority, 2013). IHPA was developed to reform the Australian public hospitals through its various components. One of the important components is the implementation of national Activity Based Funding for Australian public hospital. The main purpose of the IHPA is to develop National Efficient Price (NEP) to promote the efficiency and access to public hospital. To develop the NEP, the National Hospital Cost Data Collection was used (Independent Hospital Pricing Authority, 2013).

According to Council of Australian Governments meeting report, 2011, the “IHPA will set the national price for public hospital services and will develop a national activity-based funding system” (Council of Australian Governments, 2011, p.5)
According to the report of The Independent Hospital Pricing Authority (2012), the Pricing Authority is established under the National Health Reform Act 2011 (Cth) (Act), and by virtue of section 131(1) of the Act is invested with the following functions relevant to this National Efficient Price Determination. Following are the Determination for 2012-2013: a. to define the NEP for health care services provided by public hospitals * where the services are funded on an activity basis; * where the services are block funded; b. to develop a classification systems for health care and other services ; c. to determine the national efficient price adjustments to genuine and obvious variations in the health care services delivery costs; d. to decide the public hospital functions that are to be funded in the State by the Commonwealth, except where otherwise agreed between the Commonwealth and a State; and e. to publish a yearly NEP report and any other information that would support the effective funding of public hospitals.
This introductory determination is the preliminary output of the performance of those functions by the Pricing Authority.

National Efficient Price (NEP):
The NEP is a fixed amount of fund/money which is used to calculate