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02 Apr 2015

Dear Editor,

In response to the article ‘Hospital funding squeeze intensifies’ in the March 2015 edition of Australian Medicine which referenced the National Efficient Price Determination for 2015-16, the Independent Hospital Pricing Authority (IHPA) determines the National Efficient Price (NEP) based on activity and costing data obtained from jurisdictions.

The NEP is then used to support the nationally consistent system of Activity Based Funding (ABF) agreed to by all Australian governments in the National Health Reform Agreement in 2011.

Your article refers to the decrease in the NEP between 2014-15 and 2015-16 of 0.7 per cent. This was based on the fact that the average cost per National Weighted Activity Unit (NWAU), which measures units of public hospital activity, had decreased across Australian hospitals in recent years as efficiencies were realised in public hospitals across the nation.

In your article, you raised concerns over IHPA’s practice of back-casting. This is the process in which IHPA adjusts the previous year’s NEP for any methodological changes introduced in the most recent years.

This process is transparent to all nine Australian governments, a range of national stakeholders, including the Australian Medical Association, and the general public.

Once the NEP is adjusted for year-on-year methodological change, there has been a 3.0% increase between the 2014-15 and 2015-16 NEP. This is an accurate reflection of the increase in the efficient cost of public hospitals throughout Australia.


Yours sincerely,
Shane Solomon
Independent Hospital Pricing Authority

Published: 02 Apr 2015