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.

Following the expansion of IHACPA’s role in 2022, IHACPA now provides costing and pricing advice to support aged care reform. While IHACPA’s role is to provide pricing advice to the Minister for Health and Aged Care, it is the government who determines the price for aged care services.

Pricing framework for Australian residential aged care The annual pricing framework underpins IHACPA’s approach to providing residential aged care pricing and costing advice to the government.

Pricing framework for the Support at Home service list Ahead of implementation of the Support at Home program from 1 July 2025, IHACPA will develop a pricing framework for Australian Support at Home aged care services.

Residential aged care accommodation fees IHACPA is also responsible for assessing applications from approved providers of residential aged care services seeking approval to charge refundable accommodation deposit amounts that are above the maximum amount determined by the Minister for Health and Aged Care, or approval to charge an increase to extra service fees at their service.

Australian National Aged Care Classification The Australian National Aged Care Classification (AN-ACC) is the new funding model for aged care services and replaced the Aged Care Funding Instrument (ACFI) from 1 October 2022. All permanent aged care residents will receive funding according to the AN-ACC funding class they are assigned, which is based on their assessed care needs.

Under the Australian National Aged Care Classification (AN-ACC) funding model, activity data from residential aged care providers will be reported to the government. This will include data on the assessed AN-ACC classes of the residents as well as demographic and facility data.

Aged care pricing advice – IHACPA’s role IHACPA’s aged care pricing advice includes work across policy, pricing and costing, data collections, working groups and committees.