The Independent Hospital Pricing Authority (IHPA) is an independent government agency established by the Commonwealth as part of the National Health Reform Act 2011 to contribute to significant reforms to improve Australian public hospitals.

Vision
To design pricing systems that promote safe, efficient public hospital care for all Australians.

Purpose
To promote improved efficiency in, and access to, safe and high-quality public hospital services, primarily through setting National Efficient Price and levels of block funding for public hospital activities.

Organisational values
IHPA’s organisational values shape the culture of the organisation and form the basis for stakeholder engagement to achieve its vision. Our core values are as follows:

• We act with independence, transparency, fairness, respect, accuracy, and accountability.
• We value collaboration, and demonstrate our values in the way we interact internally, and with our stakeholders and the broader community.
• We value the work, talent and contribution of our staff and create organisation‑wide development strategies to maintain and grow expertise and intellectual capital.
• Our staff act ethically, support a collaborative culture and take pride in their work.

Functions
Pursuant to the National Health Reform Act 2011, the primary functions of IHPA are as follows:

• to determine the National Efficient Price for health care services provided by public hospitals where the services are funded on an activity basis
• to determine the National Efficient Cost for health care services provided by public hospitals where the services are block funded
• to publish the National Efficient Price, National Efficient Cost and other information each year for the purpose of informing decision‑makers in relation to the funding of public hospitals.

IHPA was established to promote improved efficiency in, and access to, public hospital services through the provision of independent advice to Australian governments. IHPA achieves this by developing and implementing robust systems to support activity based funding for those services (see Pricing for public hospital funding).

In undertaking its work, IHPA is required to consider the actual cost of delivering public hospital services in as wide a range of hospitals as practicable. It is also required to take into account any legitimate and unavoidable variations in costs due to hospital characteristics and patient complexity. IHPA balances a range of national policy objectives, guided by principles contained in the National Health Reform Agreement and its amendments.

Pricing and funding for safety and quality

Pricing and funding for safety and quality work originated from the April 2016 Council of Australian Governments’ Heads of Agreement on Public Hospital Funding.

In 2017, all Australian governments signed an addendum to the National Health Reform Agreement that emphasised a commitment to develop and implement reforms to improve the health outcomes of Australians through funding and pricing for safety and quality. These pricing and funding approaches intend to complement existing strategies to improve safety and quality in public health care.

Under the Addendum, IHPA is required to advise on options for a comprehensive and risk‑adjusted model to determine how funding and pricing could be used to improve patient outcomes across three key areas: sentinel events, hospital acquired complications and avoidable hospital readmissions.

The implementation of pricing and funding for safety and quality has been rolled out in stages as follows:

• Sentinel events: Sentinel events are a subset of adverse patient safety events that are wholly preventable and result in serious harm to, or death of, a patient.
  
  Since 1 July 2017, no Commonwealth funding has been provided for any public hospital episode that includes a sentinel event. This policy applies to both activity based and block funded hospitals.

• Hospital acquired complications: A hospital acquired complication refers to a complication for which clinical risk mitigation strategies may reduce (but not necessarily eliminate) the risk of that complication occurring. IHPA has worked with Australian Commission on Safety and Quality in Health Care and other stakeholders to develop an agreed list of hospital acquired complications.
  
  From 1 July 2018, funding is reduced for any episode of admitted acute care where hospital acquired complications such as falls, infections or pressure injuries occur during a hospital stay.

• Avoidable readmissions: Unplanned hospital readmissions are a measure of potential issues with the quality, continuity and integration of care provided to patients during or subsequent to their original hospital stay.
  
  The Addendum requires that IHPA develop pricing and funding adjustments to target avoidable hospital readmissions, which arise from complications of the management of the patient’s original hospital admission.
  
  From 1 July 2019, IHPA has commenced shadowing funding options for a 24‑month period.