Direction to the Independent Hospital Pricing Authority on the performance of its functions under section 226 of the National Health Reform Act 2011 - No. 1/2014

Overview

The National Health Reform Act 2011 was enacted by the Parliament of Australia to overhaul the country's health system by promoting efficiency, effectiveness, and equity in healthcare service delivery. One of the key mechanisms introduced by the Act is the establishment of the Independent Hospital Pricing Authority (IHPA) to determine the national efficient price for healthcare services. This legislation aims to address gaps in the transparency and consistency of pricing for healthcare services, particularly those funded on an activity basis, by ensuring that prices are set in a fair and evidence-based manner. The Act also provides a framework for the Minister to give directions to the IHPA in the performance of its functions, which is aimed at achieving better alignment with health policy objectives and national health priorities. This legislative instrument, F2015L00076, made under the authority of the National Health Reform Act 2011, directs the IHPA to determine the costs associated with conducting clinical trials in Australia, beyond the standard costs of care. This direction responds to a recommendation from the Standing Council on Health to develop a standardised cost table for clinical trials, helping to assess the true cost of clinical trial activities. The direction ensures that the IHPA considers the actual activity of clinical trial items and cost-recovery principles in its determinations. This measure supports better planning and negotiation for future clinical trials by providing an invaluable guide for sponsors and public institutions, while ensuring compliance with the Act's stipulations on the nature and scope of the direction.

Scope and Application

The National Health Reform Act 2011, as elaborated upon by the Direction to the Independent Hospital Pricing Authority on the performance of its functions under section 226, applies to the IHPA, which is tasked with determining the national efficient price for health care services provided by public hospitals where the services are funded on an activity basis. This legislation primarily concerns the determination of costs associated with conducting clinical trials in Australia, beyond the standard costs of care, with the objective of assessing the true cost of clinical trial activities. The IHPA is directed to consider the actual activity of a clinical trial item and cost-recovery principles in its determination of standard costs. This direction is of a general nature and does not mandate specific changes to particular national efficient prices or costs for health care services provided by public hospitals. The Act extends across the Commonwealth of Australia, and its application is overseen by the Minister for Health, who must consult with the Council of Australian Governments Health Council before issuing a direction. Notably, this legislative instrument is not subject to disallowance under section 44 of the Act and is not required to prepare a Regulation Impact Statement as it does not have a regulatory nature. The Direction comes into effect the day after its registration on the Federal Register of Legislative Instruments.

Key Provisions

The National Health Reform Act 2011 (the Act) enables the Minister for Health to issue directions to the Independent Hospital Pricing Authority (IHPA) regarding the performance of its functions and the exercise of its powers, as per subsection 226(1) (section 226). This particular legislative instrument, made under this subsection, directs the IHPA to determine the costs associated with conducting clinical trials in Australia, beyond the standard costs of care, thereby aiding in the assessment of the true cost of clinical trial activities (section 226(3)). This direction is general in nature and does not alter particular national efficient prices or efficient costs for health care services provided by public hospitals (section 226(3)(a) and (b)). The IHPA is required to consider the actual activities of a clinical trial item and cost-recovery principles when determining these costs (section 226(3)(a)). The Minister must consult with the Standing Council on Health (now known as the Council of Australian Governments Health Council) before issuing such a direction (subsection 226(2)). The Minister has already communicated his intention to issue this direction to the State and Territory health ministers. It is important to note that this Instrument pertains only to the functions and duties of the IHPA and is not of a regulatory nature, thus exempt from requiring a Regulation Impact Statement. In terms of compliance and obligations, the IHPA must adhere to this direction as per subsection 226(4) of the Act. The costs determined will serve as a guide for contract negotiations between hospitals and sponsors. There are no specific offences, penalties, or civil/criminal consequences mentioned in the Act for non-compliance with this direction. However, the legislative instrument is not subject to disallowance under section 44 of the Act, and it is a legislative instrument for the purposes of the Legislative Instruments Act 2003. The Instrument comes into effect the day after its registration on the Federal Register of Legislative Instruments.