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Our role in Australia’s health system was the result of significant public hospital funding reforms agreed by the Commonwealth and all States and Territories in August 2011, forming the NHR Agreement.

The NHR Agreement outlines the shared responsibility of the Commonwealth, State and Territory governments to work in partnership to improve health outcomes for all Australians and ensure the sustainability of the health system.

On 29 May 2020, the Commonwealth, States and Territories entered into a new agreement through the Addendum to the National Health Reform Agreement 2020–21 to 2024–25 (see page 14). The new Addendum maintains a commitment to ensuring equitable access to public hospitals for all Australians, and provides certainty for the role of the Administrator and the NHFB into the future.

The new Addendum also includes a commitment by all Australian governments to a shared long-term vision for health reform, with reforms aimed to make it easier to provide flexible, high-quality care that meets the needs and preferences of Australians, and reduces pressure on hospitals.

Overview of health care agreements


Prior to the NHR Agreement, State and Territories were paid a contribution for public hospital services from the Commonwealth via ‘block grants’ under the National Healthcare Specific Purpose Payment arrangements. These grants were calculated based on historical costs, negotiation and government decisions, with little transparency of the actual services delivered for the funding provided.


In August 2011, the Council of Australian Governments (COAG) agreed to major changes in how public hospitals were to be funded by Commonwealth, State and Territory governments, including the move from block grants to an ‘activity–based’ funding system. These changes, detailed in the NHR Agreement, included establishing the Administrator and the NHFB to improve transparency of public hospital funding arrangements.


In July 2017, amendments were introduced to the NHR Agreement through a time–limited Addendum. This reaffirmed universal health care for all Australians as a shared priority and committed parties to public hospital funding from 1 July 2017 to 30 June 2020. It also focused on reducing unnecessary hospitalisations and improving patient safety and service quality.


In May 2020, through the signing of the new Addendum, Commonwealth, State and Territory governments agreed to four strategic priorities to further guide health system reform:

  • Improving efficiency and ensuring financial sustainability;
  • Delivering safe, high-quality care in the right place at the right time;
  • Prioritising prevention and helping people manage their health across their lifetime; and
  • Driving best practice and performance using data and research.

The Addendum will see over $131 billion in Commonwealth funding to public hospitals over the five years of the agreement.

In conjunction with the new agreement, the Commonwealth Government provided a funding guarantee (2019-20 and 2020-21) to all States and Territories to ensure no jurisdiction is left worse off as a result of the COVID-19 pandemic.

In addition, the Commonwealth Government provided funding ($2.995 billion in 2019-20) to all States and Territories under the National Partnership on COVID-19 Response.

Challenges and opportunities

Challenges facing the public hospital system

Challenges and opportunities Health Pandemic Ageing Population High Cost of Technology
Challenges facing the public hospital system


Australia’s health system and the national economy both face significant challenges in response to COVID-19. The pandemic will impact the public hospital system with increased COVID-19 support, as well as additional services following elective surgery pauses.

The changing demographic of patients and increased access to information through personal devices and digital platforms will continue to raise consumer expectations of the health system to attend to their needs. Furthermore, technological innovations are likely to further raise, rather than lower costs.

To fulfil our duties and preserve our role in the health system into the future, we must provide best practice financial administration that is accurate, timely and independent. Delivering on our commitments to strengthen the CCM, enhance our funding integrity capabilities and improve access to information provides our stakeholders with confidence in the funding system and in our capabilities to deliver on our mandate.


Our successful modernisation and digital transformation agenda have positioned us well to fulfil our role in Australia’s health system. Ongoing efforts to increase access to high–quality data via stable and reliable infrastructure, as well as enhanced availability through our improved website and other communication channels are key for us to be able to deliver on our vision.

Achieving our vision also requires us to improve how we use our finite resources and develop our core capabilities. We will focus on improving governance, risk management, productivity and financial performance. By developing our people and cultivating productive relationships we will remain a highly effective agency delivering benefits for all Australians.


The Commonwealth, States and Territories agreed the following four strategic priorities will guide further reform of the health system between 2020 and 2025:

  • Improving efficiency and ensuring financial sustainability.
  • Delivering safe, high-quality care in the right place at the right time, including long-term reforms in:
    • Nationally cohesive health technology assessment
    • Paying for value and outcomes
    • Joint planning and funding at a local level
  • Prioritising prevention and helping people manage their health across their lifetime, including long-term reforms in:
    • Empowering people through health literacy
    • Prevention and wellbeing
  • Driving best practice and performance using data and research, including long-term reforms in enhanced health data.


The NPCR was agreed to and signed by COAG on Friday, 13 March 2020. The NPCR was subsequently amended and agreed to in April 2020 to include a provision for private hospital financial viability payment.

The objective of the NPCR is to provide financial assistance to States and Territories for the additional costs incurred in responding to COVID-19. Under the NPCR, there are a range of responsibilities and functions to be performed by the Administrator supported by the NHFB and other portfolio agencies (e.g. the IHPA).

In March 2020, the NHFB established a new funding account in the Payments System to facilitate payments to all States and Territories. For the period to 30 June 2020 a total of $2.955 billion in Commonwealth COVID-19 funding was paid to States and Territories:

  • Hospital Service Payments for COVID-19 related hospital activities, with the Commonwealth funding 50%;
  • State Public Health Payments for public health activities associated with addressing the pandemic, with the Commonwealth funding 50%; and
  • Private Hospital Capacity and Viability Payment which was paid to enable private hospitals to retain capacity, with the Commonwealth funding 100%.

Further detail on COVID-19 funding in 2019-20 is available from the National Health Funding Pool Annual report.