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Results against performance criteria are as follows:

Activity 1: Perform IHPA pricing functions

IHPA’s primary function is to produce the National Efficient Price Determination and the National Efficient Cost Determination each year. The Pricing Framework for Australian Public Hospital Services forms the policy basis for the Determinations. The Pricing Framework outlines the principles, scope and methodology to be adopted by IHPA in the setting of the National Efficient Price and National Efficient Cost for public hospital services in the next financial year.

During 2019–20, IHPA undertook further technical development to improve the price‑setting process and continue to refine the models used to determine the National Efficient Price and National Efficient Cost.

Performance criteria

  1. Publish the Pricing Framework for Australian Public Hospital Services 2019–20 by 31 December 2019.
  2. Publish the National Efficient Price and National Efficient Cost Determinations by 31 March 2020.
  3. Reduce the number of local hospital networks that record costs per National Weighted Activity Unit significantly above the National Efficient Price.
  4. Provide a further increase in the proportion of funding for public services using activity based funding as reported by the Administrator of the National Health Funding Pool.


  • 2019–20 Corporate Plan — Strategy 1
  • 2019–20 Portfolio Budget Statement Program 1.1

Results against performance criteria

  1. The Pricing Framework for Australian Public Hospital Services 2020–21 was published on 5 December 2019.
  2. The National Efficient Price and National Efficient Cost Determinations 2020–21 were published on 2 March 2020.
  3. The range between the 50th and 90th percentile decreased from $1,070 in 2016–17 to $926 in 2016–17, representing a reduction of $144.
  4. During 2019–20, 82.63% of funding for public services paid by the Administrator of the National Health Funding Pool was based on activity based funding. This is a decrease of 0.63% compared to June 2019.
Proportion of funding for public hospital services using activity based funding


Per cent















Activity 2: Refine and develop national classification systems

Activity based funding requires robust classification systems on which pricing can be based. Classifications aim to provide the healthcare sector with a nationally consistent method of classifying all types of patients, their treatment, and associated costs. IHPA has already determined the national classification systems for public hospital services, including admitted acute, non‑admitted, emergency, admitted subacute and non-acute, and mental health care.

Classifications are reviewed regularly and updated periodically to ensure that they remain clinically relevant and resource homogeneous within a service category. Such modifications are based on robust statistical analysis and include specialist input from clinicians.

During 2019, IHPA commissioned a review of the processes involved in the development of the activity based funding classifications for acute care. The review highlighted some key opportunities for improvement, including a move to a three-year development cycle. IHPA has started to implement opportunities highlighted by the review, including the extended development cycle. IHPA continued to further develop the classifications for admitted subacute and non‑acute care, non‑admitted patient care and mental health care.

In addition, to implement the measures under the National Partnership on COVID-19 Response, IHPA updated the national activity based funding classifications and data reporting requirements to accommodate the emerging situation with COVID-19. Accurately capturing hospital activity associated with the COVID-19 outbreak will also be critical for other purposes, such as epidemiological studies.

Performance criteria

  1. Continue refinement of the Australian Mental Health Care Classification, specifically the refinement of the first level of the classification—the mental health phase of care.
  2. Complete development of the classification for teaching and training.
  3. Develop a new classification system for emergency care services.
  4. Continue development of the admitted subacute and non-acute care classification using reported data and clinical advice.
  5. Continue development work on the new classification for non-admitted care by preparing for a nationwide costing study.
  6. Continue development work on the International Statistical Classification of Diseases and Related Health Problems, Tenth Revision, Australian Modification, Australian Classification of Health Interventions, Australian Coding Standards, Twelfth Edition, for implementation on 1 July 2022. Collectively this classification system is known as ICD-10-AM/ACHI/ACS.
  7. Continue development work on the Australian Refined Diagnosis Related Groups Version 11.0 (AR-DRG V11.0) for release mid-2022 and implementation 1 July 2023.


  • 2019–20 Corporate Plan — Strategy 2
  • 2019–20 Portfolio Budget Statement Program 1.1

Results against performance criteria

  1. In 2019–20, the Mental Health Phase of Care Clinical Refinement project final report was published. The report captured clinical evidence and initial recommendations of proposed mental health phase of care options. IHPA continues to work with jurisdictions to refine the Australian Mental Health Care Classification.
  2. IHPA released the Australian Teaching and Training Classification Version 1.0 in 2018–19. During 2019–20, IHPA continued to build the reporting systems to collect teaching and training activity and cost data to support the implementation of the classification.
  3. The development of the new Australian Emergency Care Classification was completed in 2018–19, based on analysis of the emergency care costing study data and feedback from public consultation. This classification places greater emphasis on patient factors such as diagnosis and complexity. It also has greater capacity to incorporate additional factors that drive patient complexity and cost The Australian Emergency Care Classification is being shadow priced for 2020–21.
  4. Development of a new version of the admitted Australian National Subacute and Non-Acute Patient classification continued in 2019–20 using reported data and clinical advice.
    The development project involves a thorough review of all current variables and thresholds, as well as assessments of potential new variables to make the end classes more clinically relevant and resource homogenous.
  5. Work on the development of the new Australian Non‑Admitted Care Classification continued. During 2019–‍20, IHPA finalised project set-up and site selection, and commenced data collection for a national non-admitted costing study to inform the development of the classification. Data collection for the main costing study commenced in October 2019 but has been suspended due to the need for hospitals to focus on the response to the COVID-19 outbreak. It is anticipated that the data collection will recommence when activity undertaken by hospital non-admitted services has normalised and refined service delivery models have been established.
  6. The ICD‑10‑AM/ACHI/ACS Eleventh Edition was implemented on 1 July 2019. Development of ICD‑10‑AM/ACHI/ACS Twelfth Edition commenced in July 2019, for implementation on 1 July 2022.
    AR-DRG V10.0 was released in 2019 and used to price admitted acute episodes of care from 1 July 2020. Development of AR-DRG V11.0 commenced in 2019 for release in 2022.
    ​Refinements to the ICD-10-AM/ACHI/ACS and AR-DRG classifications were undertaken following clinical and statistical analysis and consultation with clinicians, jurisdictions and other stakeholders to ensure that the classifications remain current, clinically relevant, and adequately explain the costs of providing admitted acute hospital care.

​Activity 3: Refine and improve hospital costing

Hospital costing focuses on the cost and mix of resources used to deliver patient care, and plays a vital role in activity based funding. Costing informs the development of classification systems and provides valuable information for pricing purposes.

A key output for IHPA is to coordinate the annual National Hospital Cost Data Collection, which is the primary input into the National Efficient Price. This includes the development of national costing standards, collection, validation, quality assurance, analysis and reporting, and benchmarking. The cost collection is undertaken in conjunction with states and territories, and private hospitals.

Performance criteria

  1. Continue to maintain the Australian Hospital Patient Costing Standards (AHPCS) Version 4.0.
  2. Ensure effective collection and processing of costing information to support activity based funding outcomes.
  3. Produce informative and authoritative information of hospital costs.
  4. Evaluate compliance with new aspects incorporated in the AHPCS Version 4.0.


  • 2019–20 Corporate Plan — Strategy 3
  • 2019–20 IHPA Work Program — Activity 5(a)

Result against performance criteria

  1. Worked with jurisdictions to implement the Australian Hospital Patient Costing Standards Version 4.0.
  2. The National Hospital Cost Data Collection (NHCDC) Round 23 (financial year 2019–20) data set was collected.
  3. In 2019–20, IHPA adapted the NHCDC report into a set of accessible infographics and thematic articles designed to reach a wider audience.
  4. The annual NHCDC Independent Financial Review evaluated jurisdictions’ compliance with new aspects of the AHPCS.

Activity 4: Develop hospital data requirements and collect data

Timely, accurate and reliable public hospital data is vital to both the development of classifications for hospital services, and to determining the National Efficient Price of those services. IHPA has developed a rolling Three Year Data Plan to communicate to the Australian Government and states and territories the data requirements, data standards and timelines that IHPA will use to collect data over the coming three years. To ensure greater transparency, IHPA publishes data compliance reports on a quarterly basis that indicate jurisdictional compliance with the specifications in the rolling Three Year Data Plan.

Performance criteria

  1. Update rolling Three Year Data Plan and publish on the IHPA website by June 2020.
  2. Publish a report on a quarterly rolling basis, outlining compliance with the data requirements and data standards specified in the rolling Three Year Data Plan.
  3. Develop appropriate data specifications, and ensure information provided for decision making meets those specifications.
  4. Maintain internal data assessment and compliance.
  5. Receive assurance from jurisdictions regarding data quality/accuracy.
  6. Protect privacy and ensure data security.


  • 2019–20 Corporate Plan — Strategy 4
  • 2019–20 Portfolio Budget Statement Program 1.1

Result against performance criteria

  1. The updated Three Year Data Plan was published on the IHPA website in June 2020.
  2. The quarterly data compliance reports were developed in consultation with jurisdictions and published on the IHPA website.
  3. Activity based funding data submissions were assessed based on the published data standards, such as data set specifications and data request specifications.
  4. The IHPA Data Compliance Policy was used to assess jurisdictional compliance ratings.
  5. Jurisdictions were required to sign off their final data submission to IHPA, to ensure that data conforms as closely as is achievable in regard to its quality and accuracy. A Statement of Assurance, which provides detailed information about data quality and limitation, accompanies final data submission.
  6. IHPA will continue to develop the secure data management system to support its core technical functions, while ensuring the current high standards of data security are maintained.

​Activity 5: Resolve disputes on cost‑shifting and cross‑border issues

IHPA has a role to investigate and make recommendations concerning cross-border disputes between states and territories, and to make assessments of cost‑shifting disputes.

Performance criteria

  1. Review and publication of updated Cost‑shifting and Cross-border Dispute Resolution Framework.
  2. Investigation of cost-shifting or cross‑border disputes and provision of recommendations or assessment within six months of receipt of the request.


  • 2019–20 Portfolio Budget Statement Program 1.1

Result against performance criteria

  1. An updated Cost-shifting and Cross‑border Dispute Resolution Framework (Version 3.3) was approved for publication in July 2019.
  2. In 2019–20, IHPA did not receive any requests relating to this function.

Activity 6: Independent and transparent decision‑making and engagement with stakeholders

IHPA works in partnership with the Australian Government, state and territory governments and other stakeholders. IHPA conducts its work independently from governments, which allows the agency to deliver impartial, evidence‑based decisions. It is transparent in its decision‑making processes, and consults extensively across the health industry.

Extensive consultation with governments and stakeholders informs the methodology that underpins IHPA’s decisions and work program. IHPA has a formal consultation framework in place, to ensure that it draws on an extensive range of expertise in undertaking its functions. Input from stakeholders, through IHPA’s multiple committees and working groups, ensures that IHPA’s work is informed by expert clinical advice, which helps to establish and consolidate IHPA’s credibility throughout the industry.

Performance criteria

  1. Appropriate committees and working groups maintained to support IHPA’s functions.
  2. Public consultation processes conducted in accordance with the National Health Reform Act 2011.
  3. All stakeholder input is appropriately considered.
  4. Inbox enquiries responded to within a two‑week timeframe.
  5. Annual national conference hosted for a broad audience in the health industry.


  • 2019–20 Corporate Plan
  • 2019–20 Work Program

Results against performance criteria

  1. In 2019–20 IHPA maintained up to 18 committees and working groups, to provide expert advice and to ensure the transparency and integrity of the organisation. During the reporting period, IHPA held 78 meetings with the various committees and working groups.
  2. IHPA conducted two public consultation processes in 2019–20, each in accordance with the National Health Reform Act 2011. These included:
    1. Pricing Framework for Australian Public Hospital Services 2020–21 (July 2019)
    2. IHPA Work Program 2020–21 (May 2020)
  3. All submissions received by IHPA, as part of consultation processes, were presented to the Pricing Authority for consideration and published on the IHPA website.
  4. IHPA received 194 inbox enquiries during the reporting period. IHPA responded to 51% within two weeks and to 37% of those on the day of receipt.

    Response rate to enquiries 1 July 2019 – 30 June 2020

    Total request

    Same day response

    1–7 days

    7–14 days

    15+ days






  5. Delegates at the Activity Funding Conference in 2019 indicated a biennial rather than annual conference would be better suited with their personal and organisational needs. IHPA has taken their feedback on board and decided to hold the event biennially. The next conference will be held in May 2021.